The entrance to Roger Williams Medical Center in Providence is shown. The hospital together with Our Lady of Fatima Hospital in North Providence have more than 400 hospital beds, and 550 medical staff, according to CharterCARE’s website. (Michael Salerno/Rhode Island Current)
The owner of two Roger Williams Medical Center and Our Lady of Fatima Hospital has declared bankruptcy but maintains the move won’t hold up the pending sale of the facilities.
Prospect Medical Holdings, the California-based hospital chain operator that owns both urban, safety net hospitals confirmed it had filed for Chapter 11 bankruptcy in a statement late Saturday night. The declaration and accompanying filings in federal bankruptcy court in Texas were already anticipated amid worsening financial straits, including missed payments to its landlord for several of its hospital properties nationwide, The Wall Street Journal first reported on Jan. 8.
CharterCARE Health Partners, Prospect’s Rhode Island subsidiary, is among the offshoots included in the bankruptcy filing. Yet Prospect said it plans to proceed with the pending sale of Roger Williams and Fatima to The Centurion Foundation “in an expedited time frame.”
The $80 million sale was initially set to close in January, following a yearslong search and application process, overseen by state regulators. The Rhode Island Office of the Attorney General and Rhode Island Department of Health finally gave the go-ahead for the transaction to move forward in June 2024, attaching 85 conditions to the sale.
Attorney General Peter Neronha Sunday pointed to these and existing conditions set by his office — requiring Prospect to set aside money in escrow to cover daily hospital operations, for example — as evidence of the state’s preparedness for the financial upset.
“For the immediate future, we expect our Rhode Island hospitals to operate as normal,” Neronha said in a statement on Sunday.” I know that the word ‘bankruptcy’ can be frightening to many, especially when paired with a potentially unknown future of two hospitals that are integral to the survival of Rhode Island’s healthcare system. But I’ll say again what I said earlier this week: this Office is prepared for all scenarios. The possibility of this filing is not new to us; in fact it has been looming for some time. And we have stepped up our preparations as the filing seemed to become more likely.”
Otis Brown, a spokesperson for CharterCARE, also confirmed that the bankruptcy filings will have no immediate impact on Rhode Island hospital operations.
“Our hospitals, programs, and physician practices are fully operational, busy, and actively treating patients, from emergency services to cancer care,” Brown said in a statement Sunday night. “Rhode Islanders should have confidence that they can continue to seek high quality, nationally recognized care across our system of hospitals and outpatient services.
The Atlanta nonprofit that agreed to buy the community hospitals reaffirmed its commitment.
“This latest development in no way diminishes our interest or enthusiasm,” Ben Mingle, The Centurion Foundation president, said in a statement Sunday. “We will work closely with all parties, including through the bankruptcy process, to advance the sale. It is our hope that the court will expeditiously approve our transaction in light of the fact that the agreement has received approval by the Rhode Island Department of Health and Rhode Island Attorney General.”
In a separate email Friday to CharterCARE employees obtained by Rhode Island Current, CEO Jeffrey Liebman described the pending sale as a benefit to the safety net hospital employees, operations and services.
“All parties are working diligently to advance the sale closure as quickly as possible,” Liebman wrote. “As you also know, we have a detailed transition plan that will return us to independence and nonprofit status while providing a clear pathway to financial stability.”
Liebman would remain head of local hospital operations under Centurion.
Prospect owes more than 100,000 creditors, including its landlord, Medical Properties Trust, and the state of Connecticut, where it owns three hospitals also under a pending sale. No Rhode Island entities were listed among the top 30 creditors, according to the court filings.
A recent U.S. Senate Budget Committee report focused on Prospect and its former private equity owner, Leonard Green, as a case study in the dangers of private ownership in health care.
U.S. Sen. Sheldon Whitehouse, a Rhode Island Democrat who co-led the bipartisan investigation that yielded the report, reiterated the conclusions of the report in reaction to Prospect’s bankruptcy filing in a statement Sunday.
“On the Budget Committee, we investigated what happens when private equity companies and health care operators like Prospect take over facilities and bleed them dry, and the end result is almost always harmful both to patients and to hardworking hospital staff,” Whitehouse said. “The positive news for Rhode Islanders is that the conversion process for local Prospect-owned hospitals was already well under way, and disruption to the state’s health care system can be minimized. But as we make decisions about our health care system moving forward, we need to be very clear that the priorities for a hospital must be its patients and workers — not greedy private equity investors.”
By the time Leonard Green sold its majority stake in Prospect in 2021, the company faced more than $1 billion in liabilities, relative to its assets. Prospect didn’t perform much better without Leonard Green, continuing to post annual losses at its Rhode Island hospitals while letting $24 million pile up in unpaid vendor bills in 2023, alongside federally documented health and safety violations. Prospect paid $17 million in overdue bills in July 2024 after Neronha’s office took the company to court.
Prospect had between $1 and $10 billion in assets, and the same range in liabilities, at the time it filed for bankruptcy, according to court documents.
Despite Prospect’s well-documented pattern of mismanagement, the union which represents more than 1,200 employees who work for CharterCARE has been critical of the sale to Centurion. Its opposition centers on Centurion’s lack of experience in hospital operations, as well as the use of debt financing to fund the deal.
Lynn Blais, president for the United Nurses and Allied Professionals and a nurse at Fatima, called on state leaders to keep the hospitals running “regardless of what happens with the bankruptcy.”
“It will be an all out catastrophe for Rhode Island’s health care system if Prospect shutters these important community hospitals and health care facilities,” Blais said. “Our system doesn’t have the capacity to treat the patients who would be displaced in the event of closure, and Rhode Island’s other hospitals would be completely overwhelmed with a flood of new patients. Hundreds of nurses and other health professionals would lose their jobs.”
Roger Williams and Fatima together have more than 400 hospital beds, and 550 medical staff, according to CharterCARE’s website.
Neronha pledged to make sure the interests of Rhode Islanders are represented in federal bankruptcy proceedings. An initial hearing is scheduled for 1:30 p.m, Central Time, Tuesday, Jan. 14, in the U.S. Bankruptcy Court for the Northern District of Texas in Dallas on the company’s request for $100 million in financing to cover short-term operational costs.
SUBSCRIBE: GET THE MORNING HEADLINES DELIVERED TO YOUR INBOX