“It is my understanding that, without post-petition financing, the Debtors will be unable to meet their next payroll cycle,” Rundell wrote in the Jan. 13 filing.
Prospect declares bankruptcy, says sale of Roger Williams and Fatima hospitals will continue
Even Chris Callaci, who represents the 1,200 United Nurses & Allied Professionals members who work for Prospect’s Rhode Island facilities, was taken aback.
“That was more grave than we thought in terms of a brush with disaster of not making payroll,” Callaci said in an interview on Wednesday. “We thought they had access to a little more capital.”
The 12,500 Prospect hospital employees, including the 2,500 in Rhode Island, will get their next paycheck, after a federal bankruptcy judge in Dallas authorized a $100 million line of credit on Tuesday.
Not that it offered much assurance to Rhode Island Attorney General Peter Neronha, whose office has been keeping close tabs on Prospect’s management of Roger Williams and Fatima for the last decade. Anticipating the potential for bankruptcy, Neronha’s office also brought on New York bankruptcy attorney Andrew Troop last year; Troop attended the hearing in Dallas Tuesday on the AG’s behalf.
“We wanted to be ready,” Neronha said in an interview on Wednesday.
In search of investors
But the proactive approach may not be enough to save Rhode Island’s safety net hospitals, whose fates hinge on their cash-strapped owners’ ability to drum up the money to sell the facilities. The $80 million sale to The Centurion Foundation was expected to close this month, following a yearslong application and review process, which included a set of 85 conditions set by state regulators.
Both Prospect and Centurion insist they still intend to go through with the deal, using a clause in federal bankruptcy code that allows debtors to sell certain assets through private sale, according to court documents.
But first, they have to finish securing the $160 million in financing — $80 million for the sticker price of the sale plus another $80 million injected directly into hospital operations — required by state regulators. Neronha said Wednesday the companies had not finished raising the funds required.
Callaci doubted Prospect would be able to entice investors, given its bankruptcy declaration, and feared the company would ask state regulators to ease up on the financial strings attached to the sale.
Neronha maintained that his office did not intend to change its conditions. Joseph Wendelken, a spokesperson for the Rhode Island Department of Health, said in an email Wednesday that the agency was “committed to ensuring the hospitals have new ownership.”
That was more grave than we thought in terms of a brush with disaster of not making payroll. We thought they had access to a little more capital.”
– Chris Callaci, general counsel for United Nurses & Allied Professionals
Dr. Jerry Larkin, state health director, stressed the importance of keeping Roger Williams and Fatima open in pre-filed testimony to the federal bankruptcy court. The two hospitals, with 500 beds between them, account for more than 50,000 emergency room visits per year. Together they have 104 beds for behavioral health patients, representing more than 20% of behavioral health beds available statewide.
“It is certain that an abrupt closure of RWMC and/or OLF will disproportionately impact vulnerable and underserved populations, creating deeper inequities in access to care,” Larkin wrote. “The closure of these RI safety net hospitals would overwhelm RI’s healthcare system and create significant barriers to care for individuals already facing profound health disparities.”
Surgeries rescheduled
Not that operations have been running smoothly now. Rundell testified in bankruptcy court Tuesday that the company also owes millions of dollars to vendors at its 16 hospitals, forcing delays in surgeries, according to news reports.
Otis Brown, a spokesperson for CharterCARE Health Partners, Prospect’s Rhode Island subsidiary, confirmed in an email Wednesday that two spine surgeries scheduled for that day in Rhode Island had been moved to Monday, Jan. 20 because a vendor “unexpectedly requested pre-payment.”
“We are actively working with them to resolve it,” Brown said of the payment problem, adding that the rescheduling of surgeries was “without incident.”
It’s not the first time the hospital operator let bills at its Rhode Island hospitals pile up. In November 2023, Neronha’s office sued Prospect for missing $24 million in payments to vendors at Roger Williams and Fatima, forcing elective surgeries to be canceled due to lack of staff, supplies and equipment. Paying its bills on time and keeping day-to-day operations running was one of a host of conditions set by Neronha’s office in 2021, when Prospect’s ownership composition changed.
A Providence Superior Court judge sided with Neronha, demanding Prospect fork over the longest overdue vendor payments — $17 million — and blasting the company for using its Rhode Island hospitals as a “line of credit” to pay off debts elsewhere. A Prospect executive confirmed it had paid the $17 million balance as of July, but in November, filed a new affidavit that the company again let bills pile up beyond the 90-day payment deadline.
Prospect intended to rectify the late payments by the time its pending sale of Roger Williams and Fatima to The Centurion Foundation closed at the end of January 2025, George Pillari, Prospect’s senior vice president and chief performance officer, wrote in the Nov. 15 Rhode Island Superior Court filing.
“For years, they’ve been playing this game of slow walking on paying their bills, gimmicks like that to save a buck,” Callaci said. “Our guys consistently, for years, have been telling us it’s a struggle to do their jobs in a timely fashion.”
Union members who work at Roger Williams and Fatima had not indicated that daily operations had worsened in recent weeks, Callaci said.
While the union railed against the pending sale to Centurion, citing the debt financing used to fund the deal and Centurion’s lack of experience, Callaci now considers hospital closure a worse outcome.
McKee ‘missing in action’
Potential buyers were few when Prospect first sought interest in 2023. And Neronha isn’t hopeful that the pool will be larger now, given Rhode Island’s uncompetitive reimbursement rates relative to neighboring states, and his criticism of Gov. Dan McKee.
McKee attempts to rally his team in 2025 State of the State
McKee in his 2025 State of the State Tuesday night acknowledged Prospect’s financial crisis with a single line, saying he was “in conversations” with Prospect and Centurion executives.
Neronha, who sat in the front row for the packed State House event, called McKee’s statement “meaningless.”
“I don’t know what he’s talking about,” Neronha said Wednesday. “He’s not involved in any talks with Prospect.”
Callaci blasted McKee for being “missing in action.”
“He ought to be making unequivocal affirmative commitments to the 2,500 to 3,000 people who work in that system and the tens of thousands of people who use those facilities,” Callaci said. “He’s chief executive officer of this state. It is his job to do the job.”
Olivia DaRocha, a spokesperson for McKee’s office, offered further explanation on McKee’s State of the State remarks in an email Wednesday.
“Discussions have centered on a potential carve-out for Prospect’s Rhode Island facilities and ensuring that the sale of Roger Williams and Fatima moves forward,” DaRocha said.
She did not respond to requests for comment on criticisms of the governor made by Callaci and Neronha.
A second hearing on Prospect’s request for short-term financing is set for Feb. 12 in federal bankruptcy court in Dallas.
Updated to include comment from Gov. Dan McKee’s office and from the Rhode Island Department of Health.
