PROVIDENCE – State regulators on Monday released new details about the proposed sale of two Rhode Island hospitals that would establish a new nonprofit health system in the state.
The R.I. Department of Health and R.I. Attorney General Peter F. Neronha's office – the agencies that oversee hospital conversions in the state – have made the application for The Centurion Foundation’s proposed purchase of Roger Williams Medical Center in Providence and Our Lady of Fatima Hospital in North Providence from Prospect Medical Holdings public.
Since November 2022 Centurion, an Atlanta-based nonprofit, has sought to purchase both hospitals from Prospect, a California-based private equity company. But the process was riddled with delays as state regulators deemed the Hospital Conversion Act applications incomplete twice in 2023.
In December, however, the application was finally considered complete and is now available on both state regulator's websites. RIDOH and Nerohna's office have until June 11 to either approve, deny or approve the proposed transaction with conditions.
The two hospitals currently operate under the CharterCARE Health Partners system, which is owned by Prospect. If the transaction is approved Centurion plans to keep this name as a newly formed nonprofit CharterCARE Health of Rhode Island Inc. that will serve as parent company of the new proposed health system referred to in the application as the “New CharterCARE System.”
Further, the proposed sale will return both hospitals to nonprofit status with a focus on “...providing the local community, including the underserved populations, with access to high quality care.”
The nonprofit approach will allow both hospitals to refocus operations back to patients and local communities much more effectively than under the for-profit model, according to the application. This return to nonprofit status is also expected to generate an economic benefit of up to $20 million in reduced expenses and increased capital from access to grants and research funding.
The proposed transaction comes as Prospect, which took over both hospitals in 2014, has been facing financial troubles in recent years. PBN previously reported the company had taken on increasing debt that threatened its financial position, selling and leasing back hospitals. In three years the company went from having $67 million more in assets than liabilities, with liabilities exceeding assets by $1 billion.
In November 2023, Neronha's office sued Prospect for violating conditions set in 2021, including failure to pay vendors that provide supplies, equipment and staff at the two hospitals in Providence on a timely basis. As of Oct. 31, the two hospitals owed a combined total of more than $24 million in accounts payable to vendors that were 90 days or more past due, PBN reported.
The price for Centurion to acquire the hospitals as well as other physician groups and offices Prospect operates is set at $160 million. But Centurion was able to negotiate paying $80 million in cash, which is the same as 80 days cash on hand, according to the application. If the transaction is approved Centurion indicates it plans on placing $80 million on CharterCARE Health of Rhode Island’s balance sheet, which will allow it to operate as a “...stand-alone self-sustaining health system…”
To finance the transaction, Centurion plans on issuing taxable and tax-exempt bonds. The $80 million would allow for much-needed investments into Rhode Island including an emergency room overhaul at Our Lady of Fatima Hospital, new imaging and robotic surgery equipment, parking lot improvements and hiring an additional 200 employees. By filling these positions, the new CharterCARE system is expected to add approximately $19.5 million in salary income in the state, according to the application.
The proposed transaction will create jobs by returning previously outsourced positions like billing, human resources and other administrative functions to the local level and there are no plans to reduce staffing levels, according to the application.
Jeffrey H. Liebman, current CEO of the two hospitals, would become CEO of the New CharterCARE System and Centurion indicated it is focused on retaining the leadership and senior management of the hospitals if the transaction is approved.
CharterCARE Health of Rhode Island will be managed by a board of directors made up of community members and Centurion representatives. Also, each of the hospitals will be managed by advisory boards of directors made up of local community members and stakeholders.
Plans also include “expansion and improvement of existing services” like home health, behavioral health, surgery center and emergency department services.
For patients seeking financial assistance, those whose annual household income is at or below 200% of the current Federal Poverty Income Guidelines, will be eligible for full financial assistance as long as they don’t have other sources for payment like insurance or Medicaid. Partial financial assistance will be available for those with an annual household income between 201-300% of the FPIG and is available regardless of whether a patient has other sources for payment.
The next steps in the review process includes soliciting feedback through two public hearings. The meetings will be held in person and virtually and the dates, times and locations will be announced in the near future.
Katie Castellani is a PBN staff writer. You may contact her at Castellani@PBN.com.
