PROVIDENCE — Rhode Island Attorney General Peter F. Neronha has previously said that he’d welcome the sale of the two for-profit hospitals owned by Los Angeles-based Prospect Medical Holdings.
Roger Williams Medical Center in Providence and Our Lady of Fatima Hospital in North Providence, which are critical in serving Rhode Island’s low-income residents, have been in dire straits for years. Unpaid bills have mounted even as services have been reduced, all while executives received millions in dividends. In an exclusive interview with the Globe, Neronha called Prospect “an owner that doesn’t want to own hospitals.”
“I wouldn’t lose any sleep if, under the right circumstances, they were gone. In fact, I would cheer it,” said Neronha of Prospect.
Still, when he and the state Health Department approved the sale of the two hospitals to Atlanta-based Centurion Foundation on June 20, they added 40 different caveats — virtually guaranteeing that Prospect would not make a profit on the deal.
It’s an effort to make sure the hospitals stay open and remain financially viable, Neronha said. But it’s also an indication that the Attorney General has little faith in either Prospect or Centurion.
Neronha said Centurion is “not a foundation like many of think of.”
“It’s not the Carnegie Foundation or the Rockefeller Foundation. They’re not investing money into these two hospitals,” he said. “They have no endowment.”
Centurion wants to buy the hospitals, but without putting any money into the deal, he said.
“What you’re left with are two hospitals... with Prospect wanting to make money off this sale. And Centurion is really more like a broker,” said Neronha.
The Centurion Foundation, local executives at the hospitals, and Prospect’s attorneys have not yet indicated to the attorney general’s office if they plan to accept the restrictions and go through with the deal. A spokesperson for Prospect, the two hospitals, and Centurion has not responded to the Globe’s requests for comment on Neronha’s decision.
Yet on June 21 — the day after the approval and “non-negotiable” restrictions were announced — Jeffrey H. Liebman, the CEO of the two hospitals under Prospect subsidiary CharterCARE Health Partners, sent an email to hospital workers calling the approval “a welcome step.”
“We are now focused on reviewing the conditions of approval and continuing to work with our regulators in the days ahead,” Liebman wrote in his email, which was shared with the Globe.
The Centurion Foundation, which was founded in 1996 by investment banker Greg Grove, describes itself on its website as a “nimble, private-sector” organization that offers “real estate transaction expertise and strategic leadership to non-profit health systems, institutions of higher education, and local governments.” But the union that represents the hospitals’ workers, the United Nurses and Allied Professionals, has been vocal in interviews, in public meetings, and in mailing fliers about Centurion’s plans, noting that the foundation has never owned or operated a hospital.
In its application to buy Fatima and Roger Williams, Centurion revealed that it would finance the deal by having the hospitals issue $133 million in bonds.
“This is not a capitalization infusion,” UNAP General Counsel Chris Callaci told the Globe recently. “We are supposed to go to the bond market to borrow a principal amount of $133 million at a 6 to 7 percent probable rate. No one is getting those rates right now.”
“When those bonds come due in 10 years, add another $93 [million] in interest,” added Callaci, who has said publicly that if the deal does go through, the hospitals would be “in serious jeopardy.”
As part of Neronha’s conditions, Prospect would have to pay all the hospitals’ unpaid bills — a total of approximately $24 million, according to Neronha. Prospect would also have to address numerous repairs and issues detailed in inspection reports, court records, and other non-compliance documents reviewed by the Globe, which include leaking roofs, insect infestations, and other problems.
The $47 million remaining in escrow for the hospitals, which was required by Neronha as part of a different set of conditions he imposed on the hospitals in 2021, would be redirected to create an endowment.
Neronha’s 222-page decision and conditions came just days after state Superior Court Judge Brian Stern on June 12 ordered Prospect to pay $17.3 million in unpaid bills within 10 days. Prospect’s attorneys requested a deadline extension through June 28, but then withdrew that request on Monday — which was also their deadline to pay, Stern told the Globe. It’s not clear if Prospect has fulfilled Stern’s order. Prospect’s attorney Patricia K. Rocha, of Adler Pollock & Sheehan P.C., did not respond to the Globe’s requests for comment.
In his decision Neronha said Centurion “lacks the requisite expertise and experience necessary” to run a hospital and was clear in its application to the state that, unlike Prospect, it does not plan to fund losses if the hospitals were unable to sustain their operations. Neronha said that, based on information provided to his office by Centurion, the foundation seemed ready to shift the risk of the hospitals’ financial failures to the state and to taxpayers and will “seek help from the state if necessary.”
Centurion President Ben Mingle told the Globe in an interview earlier this year that the foundation is investing in health care because investment and private equity firms like Prospect are “misaligned” with the delivery of care. Centurion focuses on reducing real estate costs for non-profits, but is not involved with the health-care aspect of the business. If the deal with Prospect goes through, Mingle said, Liebman would stay on as chief executive officer of the hospitals for at least five years.
Liebman confirmed to the Globe that he would accept such an offer, and pushed back against dire warnings about the hospitals’ financial situation.
“I think we’re doing fine. I think the hospitals are doing OK,” Liebman told the Globe, though he called Centurion’s proposal “a better way.”
But Centurion’s confidence in the local management team under Liebman “is not backed by sufficient evidence,” said Neronha in his decision. He said Liebman has been “out of touch” with how the hospitals have been managed by Prospect, and that Liebman and the current leadership team have been “unable to remedy the financial challenges facing the hospitals, and... in fact, under current leadership, financial conditions have deteriorated.”
Among Neronha’s conditions was a requirement for Centurion to retain an expert turnaround consultant, which would also need to be approved by Neronha’s office and would be tasked in developing and implementing a roadmap for the hospitals to move forward.
“I just have no confidence in Liebman’s leadership at all,” Neronha told the Globe. “The truth is, we’re fighting for a better future for these hospitals than he is. That says a lot to me.”
Alexa Gagosz can be reached at alexa.gagosz@globe.com. Follow her @alexagagosz and on Instagram @AlexaGagosz.