The two hospitals currently under bankruptcy facing significant operational challenges.
The Rhode Island Attorney General has updated the sale conditions for Our Lady of Fatima and Roger Williams Medical Center as they face financial challenges under bankrupt owners. The Centurion Foundation aims to acquire the hospitals but struggles to meet the financial obligations. The revised terms include lowered cash requirements and obligations to secure further funds to ensure operations. Local leaders express concern over the hospitals’ viability and the impact on community healthcare services.
Providence, Rhode Island – The Rhode Island Attorney General has modified conditions for the sale of two struggling hospitals, Our Lady of Fatima and Roger Williams Medical Center, both currently under the control of bankrupt owners, Prospect Medical Holdings. This move comes as the facilities continue to face significant financial challenges following Prospect Medical Holdings’ Chapter 11 bankruptcy filing in January 2023.
Since late 2022, Prospect Medical Holdings has been seeking investors for the acquisition of these hospitals, but the potential buyer, the Centurion Foundation, is struggling to meet the financial requirements initially set by state authorities. The Centurion Foundation is expected to finalize the purchase, but they have not raised the full $160 million in bonds that are due in May 2024.
In an effort to make the sale more appealing, Attorney General Peter F. Neronha has revised the financial conditions for Centurion’s takeover. Under the new guidelines, Centurion must now have $45 million in cash, a decrease from the original requirement of $80 million. Furthermore, they are obligated to secure up to $35 million within 90 days of the sale’s closing to ensure stable operations moving forward.
Neronha has expressed uncertainty about the future viability of the hospitals, emphasizing the challenges they face as they navigate their financial struggles. The revised conditions also stipulate that Centurion must not contest a petition to appoint a receiver in case they fail to make principal or interest payments related to future bond financing.
Prospect Medical Holdings, headquartered in California, has been involved in operational management of safety-net hospitals but has been plagued by financial instability that ultimately led to its bankruptcy. Since June 2024, Rhode Island state regulators had already approved the sale terms with 85 conditions designed to protect hospital operations and prevent profit-making by Prospect during the transition.
To facilitate the acquisition, the Rhode Island Health and Educational Building Corp. authorized the sale of up to $165 million in bonds. However, S&P Global Ratings issued a concerning BB- rating on this bond sale, indicating that there is a relatively high level of financial risk associated with the new ownership’s anticipated stability.
Financial projections suggest that the hospitals are likely to continue incurring operational losses for at least the next two fiscal years, with recovery not expected until fiscal year 2026, making the situation increasingly precarious.
Our Lady of Fatima and Roger Williams Medical Center have significant impacts on the local healthcare landscape, accounting for more than 50,000 emergency room visits annually and providing a substantial portion of Rhode Island’s behavioral health beds. This raises additional alarm among local municipal leaders who are concerned about the potential loss of financial support from new ownership and its impact on community budgets.
Operational challenges persist, with both hospitals receiving C grades in safety assessments across multiple rounds, pointing to an ongoing need for improvement. Attorney General Neronha has underscored that operating healthcare services in Rhode Island remains exceedingly difficult, signaling a challenging road ahead for the future of these hospitals amidst ongoing financial uncertainties.
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