Prospect Medical Holdings is pushing through its bankruptcy proceedings with new deals on its Rhode Island and Pennsylvania hospitals.
Monday, the for-profit announced an amended and restated asset purchase agreement to sell its CharterCARE Health Partners system to The Centurion Foundation and other nonprofits.
That deal—which includes Roger Williams Medical Center, Our Lady of Fatima Medical Center and their associated care network—had been announced in late 2022, but faced pushback from Rhode Island officials and local stakeholders who sought certain assurances over facility conditions and the hospitals’ financial sustainability.
“Entering into this transaction and transitioning ownership … to nonprofit healthcare operators will ensure that commitment continues to be upheld long into the future,” Jeffrey Liebman, CEO of CharterCARE Health Partners, said in a release. “This is a positive development for our employees, physicians and the Rhode Island communities we serve on a daily basis.”
The new agreement reflects adjustments from the initial asset purchase agreement stemming from the regulatory approval process. It will be reviewed by the bankruptcy court during a Feb. 12 hearing and, if approved, “the parties intend to close the sale shortly thereafter,” Prospect said.
“We appreciate all the support received from the Rhode Island community and are excited to return the CharterCARE Health System to non-profit status and local control,” Ben Mingle, president and CEO of Centurion, said.
The Rhode Island hospital news follows a proposed sale of Prospect’s Crozer Health in Pennsylvania, which was unveiled Friday.
That deal would send all of the struggling system’s hospitals, ASCs, clinics and physicians' offices to an unspecified “non-for-profit consortium of healthcare operators.” The state of Pennsylvania has, and will continue to, help facilitate the deal, Prospect said.
The sale is similarly dependent on bankruptcy court approval, which Prospect said it will seek at a Feb. 6 hearing.
Documents filed with the court describe the sale as the “only viable alternative to an immediate, forced shutdown” of Crozer Health and specify that Prospect can only fund the system until the end of January.
The release announcing the deal also notes that the consortium of buyers “intends to continue Crozer Health’s longstanding commitment to training new generations of physicians and other health care providers, as well as providing support for community programs that improve the health and well-being of residents and families throughout the area.”
Prospect, which runs 16 hospitals and more than 160 outpatient sites across four states, filed for bankruptcy protections earlier this month to grease the wheels on several rocky divestitures. While the CharterCARE sale faced numerous slowdowns, the company had already scuffed two different deals attempting to sell off Crozer Health. At the time of the filing, Prospect had about $2.3 billion in total funded debt obligations, per the legal team hired to oversee the proceedings.
A separate $745 million definitive agreement with Astrana Health is also ongoing but unaffected by the bankruptcy.
Though Prospect stressed that it will avoid service shutdowns and continue to pay employees and vendors, the Chapter 11 filing has placed the company in the crosshairs of private equity’s opponents.
It was majority-owned by private equity firm Leonard Green & Partners from 2010 to 2021, with media reports noting facility closures, service suspensions and deteriorating conditions at Prospect locations near the end of the firm’s involvement or shortly after its exit. Lawmakers also criticized the firm’s influence over Prospect, which they wrote in a report fueled a slew of hospital acquisitions, a damaging sale-leaseback agreement and all-around declines in care.
“While Prospect Medical Holdings paid out $645 million in dividends and preferred stock redemption to its investors—$424 million of which went to Leonard Green shareholders—it took out hundreds of millions in loans that it eventually defaulted on,” Sen. Sheldon Whitehouse, D-Rhode Island, said in early January. “Private equity investors have pocketed millions while driving hospitals into the ground and then selling them off, leaving towns and communities to pick up the pieces.”