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PROVIDENCE — The owner of Roger Williams Medical Center in Providence and Our lady of Fatima Hospital in North Providence is threatening to shut down the two facilities after a dispute with Attorney General Peter Neronha.

Los Angeles-based Prospect Medical Holdings, the for-profit parent company of CharterCARE Health Partners, has had majority stake in the two hospitals for the last seven years.

Prospect Medical Holdings is controlled by Leonard Green & Partners, a private equity firm that has sought state approval to sell its ownership of Prospect. But like any major hospital transaction in the state, both the state health department and the attorney general’s office has to approve of the transaction.

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Neronha is requiring that Prospect put $120 million to $150 million in escrow to “ensure the financial viability of the hospitals,” according to a statement sent by Prospect spokesman Bill Fischer on Thursday afternoon.

Fischer said the company has continued to negotiate in “good faith” on the conditions of the transaction with Neronha and Dr. Nicole Alexander-Scott, the state health director, throughout the regulatory review process. However, Fischer said the attorney general’s stipulation about the escrow is “unreasonable, unacceptable, and unprecedented.”

“The demand for such an escrow as a condition to continue to do business in Rhode Island would leave Prospect with very little choice but to initiate a wind down of its Rhode Island operations,” said Fischer. “Everyone involved in this transaction needs to understand that there are dire consequences for Rhode Island’s third largest hospital system if this transaction is not approved.”

He added that the company believes the proposed escrow is “unlawful” and would “exceed the scope of the Attorney General’s powers under the Hospital Conversion Act.”

Fischer said that Prospect is “well capitalized with liquidity and resources” to enable it to invest in Roger Williams and Fatima at this point. He said Prospect has approximately $325 million in cash on hand and an untapped line of credit for $200 million with J.P. Morgan Chase & Co.

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In a statement to the Globe, Neronha said: “Prospect has threatened to close these hospitals. That is something the law in this state does not allow them to do without approval of our Department of Health, and that this Office will challenge.”

“What I can say now – to quote the independent financial experts who testified before the Health Services Council – is that, as a result of decisions made by Prospect and its owners at the national level, both Prospect and our local hospitals ‘face financial viability risks,’” said Neronha.

Neronha said it is the job of the Council to protect these “critical, safety-net hospitals” for Rhode Islanders. But it is his job to ensure that the new owners will adhere to a “minimum investment to protect the assets, financial health, and well-being of the new hospital and for community benefit for the foreseeable future.”

“That’s the law. That is what our decision will do,” he said. “We expect Prospect Medical Holdings to abide by the law and the decision we issue.”

Neronha’s office is expected to release his decision on Friday.


Alexa Gagosz can be reached at alexa.gagosz@globe.com. Follow her on Twitter @alexagagosz.