CRANSTON, RI – The Rhode Island Attorney General has made the “unprecedented” decision to conditionally approve the sale of two hospitals in Rhode Island, saying securing future operations remains the top priority.
“Since our review of this proposed transaction began over a year ago, we have been guided by one principle: to ensure the delivery of quality, accessible and affordable health care to all Rhode Islanders,” said Neronha.
The ruling concerns Our Lady of Fatima Hospital and Roger Williams Medical Center, which “have historically been – and remain today – completely dependent on their California owner, Prospect Medical Holdings for their financial security,” Neronha said, explaining that this became clear during his examination of the office.
“PMH covers their operating costs. PMH pays for the capital improvements necessary to keep the operation of any hospital at a level capable of providing high quality care. PMH’s current financial health is therefore critically important to the health of Roger Williams and Fatima hospitals – and our review raised real concerns about this, ”Neronha continued.
For this reason, it was absolutely necessary that the new majority owners make significant financial commitments to hospitals from the start, “not just verbal promises,” he said.
“They have finally made these initial financial commitments,” continued the GA. “This office will therefore approve the proposed change in ownership, subject to these strong financial and other conditions that will ensure the continued operation of these important hospitals in their communities and in our state.”
Neronha’s office demanded several conditions before approving the transaction. They are:
- PMH must provide for a full financial commitment to Rhode Island hospitals that covers operational and capital expenses for the next five years.
- PMH must provide either escrow accounts or irrevocable letters of credit totaling $ 80 million to be used if PMH does not meet its full financial commitment to Rhode Island hospitals to cover operating expenses and investment.
- Private equity firm Leonard Green is expected to contribute $ 34.8 million towards this commitment, including the $ 10 million the company would have obtained from this transaction.
- PMH is expected to make at least $ 72 million in capital investment in Rhode Island hospitals between 2020 and 2026.
- Hospitals in Rhode Island must remain open and operational and continue to provide all of the essential health care services they currently provide. Any significant reduction or disruption of essential health services can only take place with the approval of the DOH.
- PMH is to extend the payment date on a $ 113 million loan by five years and remove the sale and lease of Rhode Island hospitals as an option to repay that loan during that period. In addition, any transfer of assets or financial charges on Rhode Island hospitals beyond five years, including an assignment / lease, must be approved by the Attorney General.
- PMH cannot charge Rhode Island hospital operating fees or collect previously accrued fees.
- PMH has to pay off all of Rhode Island’s existing hospitals for Property Assisted Clean Energy (PACE) – approximately $ 60 million. $ 33 million has already been spent; $ 27 million (already in receivership) will be spent on hospital capital spending going forward.
- PMH is to guarantee responsibility for Rhode Island Hospital’s Accelerated and Advance Payment Program (MAAP) – approximately $ 27 million.
- PMH and PCC must submit to a broad regime of oversight over its financial operations, board composition and health care operations.
“Providing quality, accessible and affordable health care is different from running a traditional business: there is more than money at stake,” continued Neronha. “Unfortunately, not everyone agrees with this concept. If you decide to get into health care, it is our responsibility as health care regulators to make sure you do. Rhode Islanders deserve nothing less. Ultimately, our Rhode Island conditions ensure that the communities that depend on Roger Williams and Fatima Hospitals – as well as the doctors, nurses, and staff providing high-quality care – are supported and there is no disruption in care. That’s what matters, and that’s what we’ve been trying to accomplish here. “