Prospect Medical given conditions to sell 2 CharterCare hospitals

Prospect Medical Holdings can move ahead with plans to sell two CharterCare hospitals in Rhode Island — if the for-profit system satisfies dozens of conditions. 

Rhode Island Attorney General Peter Neronha granted conditional approval Thursday for the proposed transfer of Providence-based Roger Williams Medical Center and North Providence-based Our Lady of Fatima Hospital to nonprofit ownership under the Centurion Foundation. The foundation works with nonprofit organizations to develop, arrange financing and lease facilities.

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Nonprofit hospitals receive tax breaks with the expectation they will give back to the communities they serve by providing free care or organizing wellness programs.

Neronha laid out 40 conditions for the deal to proceed, including Prospect correcting facility violations; Prospect and Centurion hiring a turnaround consultant and committing $80 million in debt-financed capital and an additional $66.8 million to support the newly created nonprofit system; and the new system adopting better governance practices with community input and meeting industry standards for charity care.

Last week, a judge ordered Prospect to pay $17.3 million for overdue bills to vendors at the two hospitals within 10 days.

Los Angeles-based Prospect took full ownership of the two safety-net hospitals in 2021 when it acquired private equity company Leonard Green & Partners' stake. The attorney general's office also placed financing conditions on that transaction.

The hospitals' financial woes continued after the change in ownership.

Prospect applied to sell the hospitals in May 2023, but state regulators rejected the application. Prospect successfully submitted another application in November.

"Despite their rosy promises, [Prospect has] continued to be exceedingly poor stewards for these hospitals," Neronha said in a news release. "This decision ensures ... that Prospect cannot walk away from these hospitals until they have met their baseline obligations."

The Rhode Island Department of Health is expected to issue its own decision, according to the release.