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June 21, 2024

CT hospital operator Prospect wins approval to sell 2 RI hospitals

Google Earth Roger Williams Medical Center in Providence, R.I.

As Prospect Medical Holdings fights in court to complete the sale of its Connecticut hospitals to Yale New Haven Health, the Los Angeles-based company won approval this week to sell two hospitals in Rhode Island.

On Thursday, R.I. Attorney General Peter F. Neronha announced a decision to conditionally approve the sale of Roger Williams Medical Center in Providence and Our Lady of Fatima Hospital in north Providence to The Centurion Foundation. 

The two facilities are safety-net hospitals that are legally obligated to provide healthcare for low-income, uninsured and vulnerable populations. The hospitals are owned and operated by Prospect's CharterCARE Health Partners, which is based in Providence.

Atlanta-based Centurion is a nonprofit 501(c)(3) corporation that finances, owns and operates healthcare facilities. It formed CharterCARE Health of Rhode Island as a nonprofit organization to acquire CharterCARE from Prospect.

To complete the sale, Neronha said in a news release, Prospect must comply with "40 unique conditions across seven areas," which he described as “particularly critical to ensure the viability of the system and its hospitals.” 

The conditions include “ensuring payment of outstanding accounts payable owed to vendors.” Prospect was ordered by a judge on June 12 to pay unpaid vendors more than $17.3 million within 10 days.

The conditions also include that both Prospect and Centurion must commit $80 million in cash financing to the new CharterCARE System, “regardless of any failure to secure that amount through bond transaction.” 

In 2021, Neronha required the hospitals to meet several conditions in a deal approved under Rhode Island’s Hospital Conversion Act. Those conditions included requiring Prospect to place $80 million in escrow or via a letter of credit to ensure operations for the two hospitals. 

Neronha, however, filed a subsequent lawsuit in 2023 claiming that Prospect owed more than $24 million to hospital vendors by November of that year. 

Prospect and Centurion also are required to add another $66.8 million to a dedicated fund that Prospect can use to pay outstanding escrow from a 2021 agreement with Neronha.

“Beyond the numbers, figures, and provisions that make up a transaction are the communities, patients, and providers that these hospitals serve and employ,” Neronha said. “Our conditions aim to ensure that these hospitals continue to deliver quality, accessible, and affordable healthcare, gainfully employ thousands of Rhode Islanders, and successfully operate long into the future.”

Prospect also has an agreement in Connecticut to sell three hospitals — Waterbury Hospital, Manchester Memorial Hospital and Rockville General Hospital in Vernon — to Yale New Haven Health (YNHH), but that deal is now mired in a legal battle. 

YNHH asked the Connecticut Superior Court to be let out of its $435 million contract with Prospect, after failing to renegotiate a lower price following a cyberattack that devastated operations at the three hospitals, as well as revelations that Prospect owed tens of millions of dollars to vendors, physicians, and local and state taxes. 

Prospect has countersued, claiming YNHH has breached its contract and failed to make “reasonable best efforts” to complete the deal.

On June 14, Hartford Superior Court Judge Barbara N. Bellis granted a joint motion from the two sides to consolidate the lawsuits and place them on the complex litigation docket.

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