Delays in the sale of Roger Williams Medical Center and Our Lady of Fatima Hospital have led the owner of both hospitals to propose two new alternatives: transferring the facilities to state ownership, or closing them.
In a motion filed in federal bankruptcy court Thursday, attorneys for Prospect Medical Holdings sought court permission for its new backup plan. The LA-based hospital chain operator, which filed for Chapter 11 bankruptcy in January, had hoped to onload its Rhode Island facilities onto a new, nonprofit owner. But prospective buyer The Centurion Foundation still can’t sell the bonds needed to finance its purchase, and Prospect has had enough.
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“Now, more than eight months after approval of the Centurion Sale, and six months after that promised closing date, the Debtors can no longer afford to fund the RI Hospitals on the hope that Centurion may finally obtain adequate financing to close the Centurion Sale,” states the motion filed in U.S. Bankruptcy Court for the Northern District of Texas.
Otis Brown, a spokesperson for The Centurion Foundation, did not immediately respond to inquiries for comment on Friday.
The 346-page document includes a tranche of exhibits documenting the history of the drawn-out sale, from the initial, conditional approval by state regulators in June 2024, to the series of revisions granted to ease the financial terms of the transaction. Centurion has struggled to secure investors to back the $150 million in taxable and tax-exempt bonds needed to finalize its purchase amid unfavorable credit ratings and a bleak outlook for health care facilities nationwide under federal budget cuts.
Despite these obstacles, proponents, including R.I. Attorney General Peter F. Neronha, insist that the Atlanta-based nonprofit is the best hope for saving the critical, safety net hospitals from closure.
“Given the developments over the past few weeks, we are not surprised by this development and have been preparing for it,” Neronha said in an emailed response Friday. “We will oppose this motion in court in the coming days and will continue to do everything we can to keep these hospitals open and operating for the foreseeable future.”
However, Neronha’s office has refused Prospect’s request to repurpose $51.5 million already held in escrow for hospital operations to cover Prospect’s losses, according to the court document. The escrow account was set up in 2021, paid for by private equity firm Leonard Green as part of its exit from the local hospitals ownership.
Neronha has remained insistent that the money remain available for hospital operations, while blasting the corporate owners for financial mismanagement.
But Prospect, which continues to face short-term cash flow woes as its assets are sold off through federal bankruptcy proceedings to pay its creditors, can’t afford to keep waiting. The six-month delay in closing has caused the company to incur an additional $18.7 million in losses, with another $6 million loss by the end of November, the motion states.
“The Debtors cannot continue to operate the RI Hospitals indefinitely,” the motion states. “Continued operations at these facilities past Dec. 31, 2025 would risk further administrative insolvency of these chapter 11 cases. It is particularly inequitable to burden the Debtors’ creditors with these losses under the current circumstances, where the Debtors will receive little, if any, consideration from the transfer of these assets.”
It seeks a federal bankruptcy judge’s permission to start the process to transfer the hospitals to state ownership or to begin their “orderly closure.”
The company has proposed a Dec. 31 closure date, noting that it will adjust the end of clinical operations ‘if necessary to ensure safe patient care.”
The closure plan also details the timing of layoff notices for the 2,400 affected employees and patient discharges, along with transferring and storing medical records and getting rid of medical waste and hazardous materials.
The two hospitals offer 500 beds between them, including 104 beds for behavioral health patients, equal to more than 20% of behavioral health beds. They accounted for more 50,000 emergency room visits in 2024.
The United Nurses and Allied Professionals, the union representing almost 1,200 employees at Our Lady of Fatima Hospital, Roger Williams Medical Center, and Prospect Home Health and Hospice, on Friday called on CharterCARE Foundation to pony up the $6 million in charitable assets they are holding in order to help close the Centurion deal.
“We are also again calling on CharterCARE Foundation to pony up the $6 million in charitable assets they are holding in order to help close the Centurion deal,” said Chris Callaci, UNAP’s general counsel. “There is no more time for deliberation. It’s time to put the self-interest aside and move this money now. The fate of these hospitals, 2,500 health care jobs, and tens of thousands of Rhode Island patients is depending on it.”
(UPDATE: Statement from hospital employees union added in 15th, 16th and 17th paragraphs.)
Nancy Lavin is a staff writer for the Rhode Island Current.
