PROVIDENCE – The owner of two safety net hospitals in Rhode Island has filed for bankruptcy, though state and company officials expect them to continue operating.
Prospect Medical Holdings, a California-based private equity company that operates Roger Williams Medical Center and Our Lady of Fatima Hospital, announced it filed for Chapter 11 bankruptcy Jan. 11 in a federal court in Texas.
The 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, which is also selling facilities in Pennsylvania, says it plans to proceed with the transactions in an “expedited timeframe.”
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.
Both the R.I. Department of Health and Attorney General Peter F. Neronha’s office approved the transaction in June 2024 – so long as Prospect and Centurion met dozens of conditions. Among the conditions is the requirement that Prospect set aside millions in escrow to keep the hospitals running.
In a statement Sunday, Neronha said he expects Prospect’s Rhode Island hospitals to continue operating as usual. Also, his office is prepared for all scenarios and will have staff in Texas to represent Rhode Island’s interest.
“I want to make one thing clear: the only thing that has changed here is the circumstances,” Neronha said. “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.”
The United Nurses and Allied Professionals, a union representing almost 1,000 employees at Prospect’s Rhode Island Hospitals, have called on state leaders and Prospect to make a plan to keep the facilities operating.
“It will be an all out catastrophe for Rhode Island’s health care system if Prospect shutters these important community hospitals and health care facilities,” said Lynn Blais, president of UNAP and a registered nurse at Fatima Hospital. “Our union will do all we can to secure the future of these health care facilities, ensure we protect these jobs and continue providing critical care for the families who depend on them.”
Blais noted hundreds of health care professionals would lose their jobs. On top of this, Rhode Island’s health care system doesn’t have the capacity to take on the patients who would be displaced if Prospect’s facilities closed.
Otis Brown, a spokesperson for CharterCARE, did not immediately respond to PBN’s request for comment Monday. Though he told told WPRI-TV CBS 12 Sunday the bankruptcy filing will not impact the day-to-day operations at both hospitals.
“Our hospitals, programs, and physician practices are fully operational, busy, and actively treating patients, from emergency services to cancer care,” Brown told WPRI-TV CBS 12. “Rhode Islanders should have confidence that they can continue to seek high quality, nationally recognized care across our system of hospitals and outpatient services.”
The filing is not surprising as media outlets reported that Prospect was working with restructuring advisors to find a way to address the company’s ongoing financial challenges. In response to this news Centurion has said it remains committed to its agreement to purchase CharterCARE Health Partners.
“We continue to work closely with all parties to advance the sale closure in the very near future,” said Brown, who also represents Centurion, in a statement Jan. 10.
Prospect has more than 100,000 creditors and between $1 billion and $10 billion in both assets and liabilities, according to court filings.
Indeed, Prospect, which has owned Rhode Island facilities for more than a decade has a long history of financial challenges.
In 2017, the value of the company’s assets nationwide exceeded its liabilities by about $67 million, PBN reported in a June 2024 cover story. By 2020, Prospect was in dire straits, with liabilities exceeding assets by $1 billion. On top of this, records show Roger Williams Medical Center and Fatima Hospital were losing millions annually from 2021 to 2023. On top of this, court filings show Prospect’s facilities deteriorated and the company was behind on payments to vendors.
Prospect paid off $17 million in overdue bills in July 2024 after Neronha’s office filed a motion to hold the company in contempt of a court ruling ordering it to pay the bills.
Prospect has previously said paying off its bills could force the company – which has previously revealed it was under investigation by the U.S. Department of Justice – into bankruptcy.
The first hearing on the bankruptcy is scheduled for Jan. 14 in the U.S. Bankruptcy Court for the Northern District of Texas at 1:30 p.m.
Katie Castellani is a PBN staff writer. You may contact her at Castellani@PBN.com.