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Prospect Medical bankruptcy may threaten the future of two RI hospitals

The filing jeopardizes Prospect’s attempt to sell the Roger Williams Medical Center and Our Lady of Fatima Hospital.

In a muted, melancholy blue and pink illustration, a patient in a hospital bed stares out of the window.

Last June, Prospect formed a tentative agreement to sell CharterCARE Health Partners to Georgia-based non-profit The Centurion Foundation. But these plans may come to a halt amid Prospect’s bankruptcy filing.

California-based healthcare company Prospect Medical Holdings filed for bankruptcy earlier this month, raising uncertainty about the future of its two Rhode Island hospitals.

According to a court filing reviewed by The Herald, Prospect attributed their financial struggles to the lingering effects of the COVID-19 pandemic, a rise in inflation and an August 2023 ransomware attack that compromised sensitive data.

Prospect is the parent company of CharterCARE Health Partners, a care network that operates the Roger Williams Medical Center in Providence and Our Lady of Fatima Hospital in North Providence. The healthcare company has been attempting to sell both its hospitals since 2021.

In a press release, Prospect Co-Chief Executive Officer Von Crockett described the recent filing as “an important step forward in our longstanding commitment to best serve the interests of our patients, physicians, employees and communities.”

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Last June, Prospect formed a tentative agreement to sell the two hospitals to the Centurion Foundation — a Georgia-based non-profit — according to a press release from the Rhode Island Department of Health.  

Centurion had planned to “return CharterCARE to not-for-profit status and retain local management, with oversight from a new board with a majority of local representation,” wrote Otis Brown, a spokesperson for CharterCARE and Centurion, in an email to The Herald.

But these plans may come to a halt amid Prospect’s bankruptcy filing. A decision from the United States Bankruptcy Court for the Northern District of Texas — the district in which Prospect filed for the bankruptcy — may choose to approve the sale of the hospitals to Centurion or designate the hospitals as assets to be returned to creditors. 

A Jan. 22 open letter by the Hospital Association of Rhode Island and other regional healthcare leaders urged the judge presiding over the case to “look favorably and act expeditiously on the petition to approve the private sale of CharterCARE Health Partners to The Centurion Foundation.”

The hospitals managed by CharterCARE provide vital care to patients across the state. The facilities “operate two busy emergency departments, are one of the largest behavioral health providers and offer an array of essential services from cancer care to digestive diseases, serving a disproportionate share of underserved and underinsured patients,” the letter continued. 

“Rhode Island’s healthcare system has faced years of chronic underinvestment, low reimbursement rates and significant workforce shortages,” HARI Senior Vice President Lisa Tomasso wrote in an email to The Herald. 

If the sale falls through, “the state’s hospitals and healthcare infrastructure are simply not equipped to absorb the patient volume, services and workforce from these hospitals,” Tomasso added. 

But operational issues existed before the bankruptcy filing: In 2023, RIDOH issued a compliance order following an extensive review detailing a pattern of underfunding at the two hospitals. In the same investigation, they found that 19 surgeries at CharterCARE facilities were delayed that October due to an insufficient supply of proper medical equipment.

“Prospect has been a bad actor from day one,” said Brad Dufault, a spokesperson for the United Nurses and Allied Professionals, a union representing employees at both of Prospect’s Rhode Island hospitals. 

Brad Dufault, a spokesperson for the United Nurses and Allied Professionals, claimed that Prospect Medical has a history of mismanaging and underfunding the CharterCARE hospitals. UNAP is a regional union representing employees at both of Prospect’s Rhode Island hospitals.

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“They’ve cut supplies and medical equipment and our members have had to do more with less for years,” Dufault wrote in an email to The Herald. 

Prospect did not provide additional comment regarding the claims of underfunding, mismanagement and decreases in medical supplies.

Dufault also noted that two surgeries at Fatima Hospital were cancelled within the week of the bankruptcy filing. 

“Though we recently rescheduled a few surgeries, that was due to an administrative issue and had no impact on patient care,” wrote Jeffrey Liebman, chief executive officer of CharterCARE Health, in an email to The Herald.

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Otis Brown claimed that “there have been no other rescheduled surgeries at either hospital,” in a statement shared with The Herald.

Earlier this month, the U.S. Senate Budget Committee, chaired by U.S. Senator Sheldon Whitehouse (D-R.I.), released a bipartisan staff report detailing the “questionable” leadership of hospitals managed by private equity firms. Between 2010 to 2021, Prospect was majority-owned by private equity firm Leonard Green & Partners. 

The report found that meetings between executives at Prospect and LGP “centered around profits, cost cutting, acquisitions, managing labor expense and increasing patient volume — with little to no discussion of patient outcomes or quality of care.” Consequently, this led to “labor cuts, decreased patient capacity, inadequate and unsafe building maintenance and financial distress,” the report reads.

Amid the underfunding issues, LGP offered stock incentives to employees at Prospect who were able to reach earning goals, according to the report. Dividends and preferred stock worth $424 million were paid out to Leonard Green shareholders over this period.

“It’s fiscally and morally wrong, and something our union has been sounding the alarm on for years,” Dufault said.

Prospect and Leonard Green did not respond to these claims.

Prospect is currently operating 16 hospitals with $3.4 million in cash, Prospect Chief Restructuring Officer Paul Rundell wrote in a Jan. 13 testimony

The court authorized Prospect to secure an $100 million loan with $29 million available immediately, according to a Jan. 15 Prospect press release.


Zach Robel

Zach Robel is a Senior Staff Writer from Corvallis, Oregon, studying economics and environmental studies at Brown.



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