PROVIDENCE – Days after filing for bankruptcy, the owner of two safety net hospitals in Rhode Island was granted access to up to $100 million in new loans Tuesday.
Prospect Medical Holdings Inc., which owns Roger Williams Medical Center and Our Lady of Fatima Hospital, can access $29 million immediately, Chief Judge Stacey G.C. Jernigan ruled during the case’s first hearing.
Prospect, a California-based private equity company, filed for Chapter 11 bankruptcy Jan. 11 in the U.S. Bankruptcy Court for the Northern District of Texas.
The filing is not surprising, as media outlets reported that Prospect was working with restructuring advisers to find a way to address the company’s ongoing financial challenges.
Otis Brown, a spokesperson for Prospect’s Rhode Island operations, said two spine cases were rescheduled to Jan. 20 without any issues. This was because a vendor unexpectedly requested prepayment and Prospect is working with them to resolve it.
Two neurosurgical procedures
scheduled for Tuesday at Fatima Hospital were also canceled after a hospital supplier wouldn’t deliver equipment because of a lack of prepayment, said Brad Dufault, spokesperson for United Nurses and Allied Professionals, a union representing almost 1,000 employees at Prospect’s Rhode Island hospitals. The procedures have not been rescheduled, according to the union.
Indeed, the $100 million of access to new loans is crucial not only to Prospect’s restructuring but also to “maintain the health and safety of their patients,” Paul Rundell, Prospect’s chief restructuring officer said in court documents.
Prospect operates 16 hospitals across the country, including the two in Rhode Island, that serve about 2,500 patients each day and employ 12,500 people.
Without the financing, Prospect would be forced to begin shutting down its hospitals and “wind down all operations in the near term,” Rundell said. This means Prospect would not be able to take on new patients and be forced to transition their patients to other hospitals.
Prospect has more than 100,000 creditors and between $1 billion and $10 billion in both assets and liabilities, according to court filings. As of Jan. 10, Prospect had about $3.4 million of cash on hand, and without the financing, the company wouldn’t be able to meet payroll.
Prospect also wouldn’t have funds to appropriately shut down their procedures, according to federal, state and local requirements, which would “imperil patient safety,” Rundell said.
The financing is available to Prospect through debtor-in-possession financing from JMB Capital Partners Lending LLC. Jernigan also granted Prospect interim approval to get a line of credit up to $90 million from eCapital Healthcare Corp and authorized the company to pay employees without interruptions.
Prospect said this financing, along with cash generated from its ongoing operations, is expected to provide enough funds to cover its obligations and operations during the bankruptcy process.
“We are pleased to have received prompt Bankruptcy Court approval of these first-day motions, which will enable Prospect Holdings to continue operating and serving patients in the normal course,” said Von Crockett, Prospect’s CEO.
The bankruptcy filing comes as Prospect is in the process of selling Roger Williams Medical Center and Our Lady of Fatima Hospital to The Centurion Foundation. Prospect has said it plans to proceed with the transactions in an “expedited time frame.”
Prospect’s sale of the Rhode Island hospitals, which are operated under the subsidiary CharterCARE Health Partners, was set to close this month after a multiyear process.
It wasn’t immediately clear how access to the financing would affect Prospect’s Rhode Island facilities. Prospect declined to provide further comment on Jernigan’s ruling beyond a press release issued Wednesday.
R.I. Attorney General Peter F. Neronha expects Prospect’s Rhode Island hospitals to continue operating as usual.
“I want to make one thing clear: the only thing that has changed here is the circumstances,” Neronha said in a Jan. 12 statement. “We will continue to help facilitate the responsible transfer of these hospitals to new ownership, leaving behind the dark days of private equity ownership, which is inherently destructive, and moving towards a future where we give our safety net hospitals a fighting chance.”
Prospect said its hospitals, medical centers and physicians offices will remain open throughout the bankruptcy process and patient care and services will continue uninterrupted.
The next hearing on the bankruptcy is scheduled for Feb. 12 in the U.S. Bankruptcy Court for the Northern District of Texas at 1:30 p.m.
(UPDATE: Adds two canceled neurosurgical procedures at Fatima Hospital were scheduled for Tuesday in 6th paragraph.)
Katie Castellani is a PBN staff writer. You may contact her at Castellani@PBN.com.