Judge orders owner of Roger Williams, Fatima hospitals to pay $17M in overdue bills
by: Ted Nesi
PROVIDENCE, R.I. (WPRI) — A judge on Wednesday ordered the owner of Roger Williams and Fatima hospitals to immediately pay more than $17 million in outstanding bills to its vendors, a move the company’s lawyers have argued could lead to bankruptcy.
“Not only are the hospitals scrambling to obtain supplies day to day, but other areas of the hospitals are falling into disrepair,” R.I. Superior Court Judge Brian Stern wrote in his 45-page decision, expressing concern about “the risk of losing the hospitals as reliable health care facilities for Rhode Islanders.”
Stern gave Prospect just 10 days to pay the $17.3 million in unpaid bills.
The decision is a victory for Attorney General Peter Neronha, who argued Prospect was violating the conditions he set in 2021 when he allowed its ownership to change hands. His office has spent years battling the hospitals’ out-of-state parent company, California-based Prospect Medical Holdings, over its stewardship of the two facilities.
“The decision unambiguously and correctly concludes that Prospect repeatedly failed to comply with important conditions set in our 2021 decision,” Neronha said in a statement.
Otis Brown, a spokesperson for Prospect, said the company had no comment on the decision. Its lawyers had warned Stern that if he ordered Prospect to pay the hospitals’ bills, the company might opt to put them into bankruptcy and potentially close them down the road. They have blamed the mounting pile of bills on a cyberattack last year.
Prospect has long faced criticism for loading Roger Williams and Fatima with debt to enrich its investors. In one frequently cited example, the company’s board borrowed $1.1 billion in 2018 and used a sizable portion of the proceeds to pay out a $457 million dividend to its owners, an investigation by Neronha found.
In his decision, Stern indicated that Prospect is using revenue generated by the Rhode Island hospitals to subsidize its operations in other states, citing the fact that Prospect is required by the state of California to maintain a minimum cash balance of $130 million in order to operate its hospitals there.
“Although the court understands [Prospect]’s position that it must stay in compliance with California’s regulations to keep its operations in Rhode Island ongoing, the court is troubled at [Prospect]’s prioritization of its entities in one state over another, particularly to Rhode Islanders’ detriment,” Stern wrote.
He continued, “[Prospect] agreed to certain financial conditions to take ownership of the hospitals in 2021. [Prospect]’s obligation to comply with regulatory requirements imposed upon it by Rhode Island is no less important or stringent than its obligation to comply with California requirements.”
The judge charged Propsect with using Roger Williams and Fatima “as a private bank.”
Stern’s ruling comes as Prospect is already trying to offload the two Rhode Island hospitals. Neronha and the R.I. Department of Health are currently in the final stages of deciding whether to approve its proposed sale of Roger Williams and Fatima to the Centurion Foundation, an Atlanta-based nonprofit.
A decision on the sale had been due by Tuesday, but the attorney general’s office said both sides had agreed to extend the deadline in order to continue negotiations over potential terms of a sale.
Roger Williams and Fatima — which employed over 2,000 workers at last check — have gone through a series ownership changes in recent years.
The two facilities first merged in 2009 under the umbrella of a new organization, CharterCARE. Then in 2014, Prospect took control of CharterCARE with an 85% stake in the organization. (The subsequent 2021 ownership decision by Neronha was over allowing of Prospect’s investors to sell its stake in the company.)
Ted Nesi (tnesi@wpri.com) is a Target 12 investigative reporter and 12 News politics/business editor. He co-hosts Newsmakers and writes Nesi’s Notes on Saturdays. Connect with him on Twitter, Threads and Facebook.