Ten months of waiting for the prospective buyer of Roger Williams Medical Center and Our Lady of Fatima Hospital to close the deal is enough for Chief Judge Stacey Jernigan of the U.S. Bankruptcy Court for the Northern District of Texas.
“It’s very upsetting, but eventually – I hate to say something so callous – but fish or cut bait,” Jernigan said during a hearing in Dallas federal bankruptcy court Tuesday morning. “We’re sort of in that position.”
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Bankrupt hospital owner Prospect Medical Holdings thought it caught a solid buyer in The Centurion Foundation, an Atlanta nonprofit. The Rhode Island Office of Attorney General and the Department of Health conditionally approved the deal in June 2024. Then, Prospect filed for Chapter 11 bankruptcy in January, but the sale was back on, with Jernigan’s permission, by February.
“I didn’t think there was anything remaining required at that point,” Jernigan said. “We know that a sale of a health care business can take a very long time, but usually what I hear in this court is ‘we’re still waiting on regulatory approval.’ We entered this case with regulatory approval. That’s one reason I’m so frustrated.”
Yet Centurion remains unable to finance its purchase, blaming its difficulty securing investor-backed bonds on Prospect’s mismanagement and, more recently, the state’s courtship of an alternative buyer.
Prime Healthcare, which owns Landmark Medical Center in Woonsocket among 50 other hospitals nationwide, has been considering a purchase for months at the behest of Gov. Daniel J. McKee’s administration.
There’s still no offer from Prime, though the California company was identified by name in court for the first time Tuesday. Attorneys used indirect references to Prime in previous hearings.
Thomas Califano, an attorney with Sidney Austin LLP representing Prospect, said he was “cautiously optimistic” that Prime would come through with something concrete by Dec. 5 –one week before the confirmation hearing on a bankruptcy restructuring agreement, and less than one month before hospital funding runs dry.
Noel True, a Prime spokesperson, had no additional information to share Tuesday regarding the company’s interest in buying the hospitals.
“We remain honored by the trust placed in the Prime Healthcare Foundation to explore how we may help ensure these essential hospitals continue serving their communities despite significant challenges that have developed over many years,” True said in an email.
‘These resolutions take time’
Verbal promises can no longer satisfy the 100,000-plus Prospect creditors waiting to cut the Rhode Island hospitals loose and move on. The bankruptcy estate is scheduled to present a formal restructuring plan at a Dec. 12 court hearing.
“The one issue that would prevent confirmation is a resolution for Rhode Island,” Califano told Jernigan on Tuesday. “We need a line of sight to a resolution. Even though we have funding through December, these resolutions take time.”
In other words, sell now, or close the hospitals.
Prospect laid its cards on the table in October, signaling intent to close the facilities by the end of the year. A short-term cost-sharing agreement with R.I. Attorney General Peter F. Neronha’s office offered a temporary lifeline.
Andrew Troop, a New York attorney representing Neronha’s office in bankruptcy court, assured Jernigan that state regulators were in talks with Prime, while also keeping open the conditional approval already granted to Centurion.
Not welcome news to Centurion CEO Ben Mingle, who in a series of private emails earlier this month asked state regulators to cease negotiations with Prime. Mingle argued the state’s overtures to Prime undermined Centurion’s ability to close the sale, while simultaneously asking for more time and more flexibility on the deal.
A spokesperson for Centurion did not immediately return requests for comment Tuesday.
David Wender, an attorney representing Centurion, did not address Mingle’s request in court Tuesday. Instead, Wender focused on the nonprofit’s continued commitment to reviving the two Rhode Island hospitals under its ownership.
“We are still here in pursuit,” Wender said. “We have pressed, and they’re still pressing.”
Wender concluded with an open-ended promise for an update, either through investor-backed bonds or, alternatively, a short-term bank loan that could let it close the deal by early or mid-December.
Troop maintained a neutral stance on the competing buyers on Tuesday.
“We are committed, as we’ve always been, to try and get this done,” Troop said.
While he acknowledged that selling the hospitals does not put money back in Prospect creditors’ pockets, Troop pointed out that there are indirect benefits, such as releasing the bankruptcy estate from the administrative expenses and liabilities of running the health care facilities.
For Rhode Island, the benefits are obvious: keeping critical emergency rooms, mental health care and specialty surgical treatments available for patients and jobs for 2,500 employees.
Closing the hospitals, with 500 beds between them and 50,000 emergency room visits in 2024, could send Rhode Island’s fragile health care system over the edge, advocates and state officials warn.
Jernigan empathized.
“I am still steaming over what happened in Pennsylvania,” she said, referring to the closure of two Prospect-owned hospitals in Delaware County earlier this year.
Of the Rhode Island hospitals she said, “Is it worth it? Of course, for the community, it’s worth it. Of course, for the employees, it’s worth it. But, you know, we’ve run out of estate money. I have a duty, if you will, to make sure the pre-petitioned creditors aren’t worse off at the end of the day than they were before the bankruptcy was filed. At some point, I’ve got to stop that.”
Jernigan punctuated the brief conference with attorneys Tuesday with a warning.
“If we show up on Dec. 5 and there is any desire to go another day, or much longer, waiting for this to maybe play out, we’re going to need witnesses at that point to convince me that this is worth waiting it out a little longer,” she said. “I need reasonable assurances that this is going to happen, and it’s going to happen in December.”
Nancy Lavin is a senior staff writer for the Rhode Island Current.
