PROVIDENCE — Prospect Medical Holdings, the Los Angeles-based company controlled by private equity, may be shedding its Rhode Island-based properties after nearly a decade of tensions with nursing unions and state regulators.
Prospect announced Tuesday morning that it has signed a definitive agreement with The Centurion Foundation, an Atlanta-based nonprofit. In the agreement, Centurion would acquire CharterCARE Health Partners, which operates Roger Williams Medical Center in Providence and Our Lady of Fatima Hospital in North Providence.
In Rhode Island, the state Department of Health and Attorney General Peter Neronha’s office will review and either approve, reject, or approve the deal with stipulations. If the deal is approved, CharterCARE hospitals will return to its nonprofit status after years under Prospect, a for-profit hospital owner with properties nationwide.
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CharterCARE hospitals have faced many management challenges in recent years. The company has had a long history of financial struggles, particularly when an independent report exposed that Prospect’s liabilities exceeded its assets by more than $1 billion as of September 2020 (the $1 billion loan it took out was used to pay a nearly half a billion dollar dividend). And that came after the two hospitals had accumulated net operating losses of $88.1 million from Fiscal Year 2015 to Fiscal Year 2020. CharterCARE has also had grueling fights with local lawmakers over ownership changes.
At the end of October, the United Nurses and Allied Professionals, which represents workers from both hospitals, put Prospect “on notice” about a possible sale by running full-page ads in local newspapers, saying it would take “strong action” if the interests of patients and employees are not protected. In early November, the union held an informational picket at Fatima. Lynn Redding, a registered nurse and local union president, said Prospect was “refusing to negotiate a contract” that was fair.
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“We are all tired of Prospect putting profits before patients and health care workers,” said Redding. “Their greed knows no bounds, and we will no longer sit by and watch them pay huge dividends to shareholders while siphoning money out of Rhode Island’s community hospitals. Enough is enough.”
In the definitive agreement, Prospect would continue to own and operate Prospect Provider Group, an independent physician association, and Prospect Health Services of Rhode Island, which Prospect says it serves 72,000 members through its nearly 500 physicians. In a news release sent by Otis Brown, a Prospect spokesman, Prospect would also continue to work “closely with CharterCARE and its hospitals and ancillary entities.”
It’s unclear how involved Prospect would be if the deal is approved. Brown could not be immediately reached for comment.
Centurion said in a news release that its charitable mission is to “increase access to and lower the cost of community-based healthcare.” Ben Mingle, Centurion’s president, said the organization would establish CharterCARE Health of Rhode Island, Inc. as a nonprofit organization to acquire the system from Prospect. If and when the deal closes, the system, with its more than 2,500 employees, will become a nonprofit health system “seeking to increase access and lower the cost of healthcare services for the local community.”
“Centurion was created for this exact purpose, to partner alongside providers and communities in creating equitable and cost-effective solutions,” said Mingle. “We believe strongly in the mission of CharterCARE and look forward to the opportunity of engaging in a long-term relationship with the community.”
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Mingle said Centurion will maintain local leadership and will have a board of directors that includes local community leaders in the health care industry.
QHR Health, a Tennessee-based company that provides management and support services to hospitals in more than 40 states, will assist in the transition process and provide “ongoing consulting support to CharterCARE senior management and board of directors.” QHR began providing onsite advisory services to Prospect earlier this summer for operational, financial, and support functions of the health system. QHR was spun off from its former parent company, Quorum Health Corp. last year, and is now controlled by private equity firm Grant Avenue Capital.
Dwayne Gunter, the president and CEO of QHR Health, said in a press release last year that the company’s mission was to provide “the solutions our clients require to remain independent, financially strong, and well-positioned to serve the evolving health care needs of their communities.”
Representatives from CharterCARE, QHR Health, and The Centurion Foundation met with Neronha earlier this year to discuss a potential deal. But it’s unclear how involved QHR would be after the transaction is complete — if it’s approved.
Along with the hospitals, Centurion will also purchase the assets and operations associated with Blackstone Valley Surgicare in Johnston; CharterCARE Medical Associates in Providence; CharterCARE Home Health Services in Providence; Roger Williams Cancer Center in Providence; Southern New England Rehabilitation Center in North Providence; and St. Joseph Health & Dental Center in Providence. The agreement includes all of real estate assets, physician clinic operations and outpatient services.
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The definitive agreement is the first step in the regulatory and review process. The system and Centurion will have to submit an application to both state regulators, which they expect to do so by the “end of 2022.”
“CharterCARE is excited at the potential of this proposed acquisition, which allows us to build on Prospect’s significant investment in Rhode Island healthcare,” said Jeffrey H. Liebman, the CEO of CharterCARE. “The combination of a strong capital partner with an experienced operator of hospitals and the return to nonprofit status is very attractive.”
The news comes as Prospect has been in the process of unloading their properties across the US for the last year. Yale New Haven Health announced in July that it would acquire two health networks, including three Connecticut-based hospitals, from Prospect.
Alexa Gagosz can be reached at alexa.gagosz@globe.com. Follow her @alexagagosz and on Instagram @AlexaGagosz.