Dear Neighbors:
I hope you had a sweet Valentine’s Day. In this letter, I discuss the State’s plan to ensure the continued operation of the Roger Williams Medical Center and Our Lady of Fatima Hospital.
1. The Hospitals’ Historic Role
The Roger Williams Medical Center and Our Lady of Fatima Hospital (“the Hospitals”) are essential parts of our State’s medical safety net. Last year, their facilities and staff provided medical care for 9,672 inpatient admissions, 17,070 surgical procedures, 54,165 emergency room visits, 63,678 patient days and 363,222 outpatient visits. The Hospitals rely largely upon limited Medicare and Medicaid funding.
2. The Private Equity Fund Purchase And Resulting Bankruptcy
In 2014, a private equity firm named Prospect Medical purchased the Hospitals from the nonprofit system CharterCare. In the years that followed, Prospect weakened the Hospitals’ finances by borrowing $900 million, from which it issued a $457 million dividend to its private investors. When Prospect Medical sought to restructure ownership in 2021, Attorney General Neronha required them to create an $80 million escrow fund to cover possible future shortfalls. Those shortfalls followed, as the Hospitals’ debt burden and neglect by their owners led to years of inadequate investment in the facilities and equipment, as well as operating deficits. Prospect declared bankruptcy in 2024, since which time the Hospitals’ operations have been subject to Bankruptcy Court supervision. On a temporary basis, the Hospitals remained open with support from the escrow fund, but this was not sustainable over time. This created a risk that the Hospitals would close, creating a service gap that Rhode Island’s remaining hospitals could not fill.
3. Creating A Viable Path Out Of Bankruptcy
The Centurion Foundation is a nonprofit organization that finds ways to allow nonprofit hospitals to sustain operations, focusing on the subsidies and cost savings associated with nonprofit status. After more than a year, Centurion assembled enough anticipated bond financing to allow it to purchase the Hospitals from bankruptcy with the help of two additional funding sources. The first is the remaining approximately $50 million from the escrow account established by the Attorney General. The second is an additional $18 million stabilization fund the General Assembly approved this past Tuesday. The Bankruptcy Court will review the possible transaction for approval in the coming weeks.
While the State has little choice but to find a way to continue the operations of these “safety net” hospitals, the new operator (Centurion) appears to have the right skills and priorities. The financial cushion created by the Attorney General’s work in 2021, in addition to making the transition possible at all, increases the chances of a successful outcome.