Dive Brief:
The fate of bankrupt Prospect Medical Holdings’ two Rhode Island hospitals hangs in a precarious balance this week, as the health system and the state’s attorney general clash in court over Prospect’s desire to close the facilities by year end.
Prospect sought court approval to close the two safety-net hospitals on Thursday, saying in court documents that the facilities are losing millions each month and that sale conditions imposed by state regulators make a deal untenable.
The Centurion Foundation, the hospitals’ proposed buyer, and attorney general Peter Neronha opposed the motion in their own filings on Monday. Neronha warned closures would be “catastrophic” for patients.
Dive Insight:
Prospect and Centurion have been working on a deal to sell Roger Williams Medical Center and Our Lady of Fatima Hospital — collectively CharterCARE Health Partners — for three years. Prospect’s Chapter 11 bankruptcy filing in January only increased pressure on the parties to get the deal done.
Both the federal bankruptcy court overseeing Prospect’s restructuring and Rhode Island regulators have already greenlit the sale. However, the attorney general’s office imposed 40 conditions on the sale, including requirements that Prospect make repairs to the facilities. Regulators loosened some of those conditions this July in an effort to help parties finalize the deal.
Still, in court filings Prospect said it was being “held hostage” by the remaining sale conditions, as well as Centurion’s “inability to raise the necessary financing.”
“The major barrier to closing the Centurion Sale (and also any potential sale to another hypothetical buyer) are the financial requirements imposed by the Rhode Island Attorney General and [the Rhode Island Department of Health], as well as the buyer’s failure to raise sufficient funds,” Prospect wrote in its filing.
Prospect says the hospitals are operating at significant losses, and that keeping the hospitals open past May, when the deal was originally slated to close, has already cost roughly $18.7 million. The operator warned it could lose an additional $11 million on the hospitals by year end.
Georgia-based nonprofit Centurion tells a different story. Although Centurion has struggled to raise the bond financing required to complete the deal, attorneys say they are committed to finalizing the deal and keeping the hospitals open.
“The hospitals have been losing money for years under [Prospect’s] ownership, and they cannot now claim surprise at continued losses or use those losses as justification for abandoning the sale,” attorneys for Centurion told the court Monday.
Still, “Centurion has remained unwavering in its commitment to preserving these vital healthcare facilities despite extraordinary challenges, many of which stem from [Prospect’s] own actions,” the attorneys added.
Meanwhile, Neronha raised the possibility of Prospect selling to another buyer if Centurion proves unable to buy the facilities. The attorney general said Prospect had begun conducting due diligence ahead of an acquisition with another unnamed buyer.
“Prospect should pursue this alternative (or others) aggressively,” the attorney general said.
Closing the facilities, which mostly serve low-income patients, would be disastrous for patients, the regulator warned.
“The vital services provided by [these] hospitals are not quickly or easily replaced or moved,” the attorney general told the court.
