A completed transaction would result in two Rhode Island safety net hospitals transferring to The Centurion Foundation.
Los Angeles-based Prospect Medial Holdings has been given the go-ahead by Rhode Island Attorney General Peter Neronha to sell two safety net hospitals to The Centurion Foundation, but only if the organization jumps through a number of hoops.
Specifically, Neronha has outlined 40 conditions for Prospect to meet to close the deal, which include the paying of all the hospitals’ unpaid bills and investing in repairs that allow the facilities to comply with regulatory standards. The significant caveats put private equity-backed Prospect under pressure to leave the hospitals in an acceptable state before it exits Rhode Island.
The hospitals, Our Lady of Fatima and Roger Williams Medical Center, are owned and operated by Prospect’s subsidiary, CharterCARE Health Partners, and are being bought by Atlanta-based nonprofit The Centurion Foundation.
Neronha told The Boston Globe that Prospect is “an owner that doesn’t want to own hospitals.”
“I wouldn’t lose any sleep if, under the right circumstances, they were gone,” he said of Prospect. “In fact, I would cheer it.”
After Prospect acquired full ownership of the hospitals in 2021, Neronha required the organization to satisfy a set of conditions and put $80 million in escrow to keep the facilities running.
However, Prospect has since racked up $24 million in unpaid bills, according to Neronha. On June 12, before Neronha approved Prospect’s sale application, Rhode Island Superior Court Judge Brian Stern ordered Prospect to pay $17.3 million of its unpaid bills within 10 days.
Jeffrey Liebman, the CEO of CharterCARE Health Partners, told the Globe: “I think we’re doing fine. I think the hospitals are doing OK.” Liebman did call the sale to Centurion “a better way.”
Neronha said to the Globe: “I just have no confidence in Liebman’s leadership at all. The truth is, we’re fighting for a better future for these hospitals than he is. That says a lot to me.”
The situation marks the latest tug-of-war over hospitals owned by private equity.
A recent report by the Private Equity Stakeholder Project revealed more bankruptcies in healthcare are involving private equity-owned companies, with 17 such instances in 2023, accounting for 21% of all bankruptcies in the industry.
Jay Asser is the contributing editor for strategy at HealthLeaders.
KEY TAKEAWAYS
Rhode Island Attorney General Peter Neronha has set 40 conditions for Prospect Medical Holdings to satisfy for the completion of its sale of two safety net hospitals to The Centurion Foundation.
Neronha wants private equity-backed Prospect to pay the unpaid bills owed by the two hospitals’ operator, CharterCARE Health Partners, totaling $24 million.
The approach by Neronha and the state comes during a time when private equity’s role in the industry is drawing increased scrutiny.