Back in 2014, a California-based for-profit company, Prospect Medical Holdings, was described as a savior when it acquired two financially troubled Rhode Island hospitals, Our Lady of Fatima in North Providence and Roger Williams Medical Center in Providence.
More than six years later, critics have a very different view. They say they fear that Fatima and Roger Williams could go bankrupt. And state officials have so many questions about the hospitals’ future that they’ve repeatedly extended the deadline for completing a review of a proposed change in ownership.
The Los Angeles-based private equity group that controls Prospect Medical, Leonard Green & Partners, wants to sell its majority share in the company. And that’s intensified the whole debate.
The intended buyer is Prospect CEO Sam Lee and his business partner, David Topper.
Supporters say the new owners would have more than enough liquidity to keep the hospitals going. And during a meeting of the state Health Services Council last July, Fatima’s chairman of medicine, Dr. William Beliveau, praised Lee and Topper as hands-on managers who are responsive to local needs.
“They’ve been intimately involved with the medical staff,” Beliveau said. “They conduct at least two meetings a year to bring in all the medical staff and have discussions with them. And during the COVID crisis, they were tremendously involved as an organization in making sure we had all the necessary equipment that was needed, and that was very, very impressive.”
Chris Callaci is less impressed by Lee and Topper.
“Their finances are highly questionable,” he said.
Callaci is general counsel for United Nurses and Allied Professionals, which represents more than 600 nurses and other workers at Fatima Hospital. He points to how, as ProPublica has reported, that Leonard Green and other investors took $645 million in dividends from its investment in Prospect Medical’s chain of 17 hospitals around the U.S.
Callaci questions how Prospect will be able to pay back more than $1 billion as part of a lease-back arrangement. And he said he’s troubled by how Lee and Topper have received tens of millions of dollars in dividends from Prospect Medical.
“What these two guys have demonstrated,” Callaci said, “is that getting into healthcare is a process by which they more than line their pockets and divest from the very hospitals that they claim they’re investing in and that’s a dangerous proposition for us and we oppose it.”
An independent monitor recently found that Prospect fulfilled its commitment to invest more than $100 million in the two Rhode Island hospitals in the four years after acquiring them. The monitor found that staffing at the hospitals remains in line with industry norms.
But ProPublica reported that almost all of Prospect Medical’s hospitals rank below average in annual quality of care assessments by the federal government. And that Rhode Island, unlike four states that quickly offered approval, is the only state to seriously examine the move by Leonard Green & Partners to sell its majority share in Prospect Medical.
For now, the state officials who need to approve the ownership change at Prospect Medical have so many questions that they’ve continually extended the deadline for making their decision.
Attorney General Peter Neronha said he will not approve the deal unless he’s confident the hospitals will have solid financial health into the future.
“The reason we keep extending it,” Neronha said, “is because I don’t have the information I need to be certain that those hospitals, after a change in ownership, are going to be viable quality hospitals into the future. And I’m going to keep extending it until I have that information.”
As the state’s review continues, some CharterCARE employees are speaking out.
Lynn Blais, a longtime nurse at Fatima Hospital, said she sees the impact of Prospect Medical’s for-profit approach in a diminished availability and quality of supplies.
“As simple as the gloves that we wear,” Blais said. “Now all of a sudden, you’ve changed vendors three, four, five times and now we’ve got gloves that you put your hands in, your fingers go right through them.”
Callaci, the union lawyer, said Prospect Medical has declined to share findings after a hospital accreditation group found deficiencies at Fatima, even after an administrative law judge in 2019 ordered the information to be made public. Callaci said he’s particularly upset about that since Prospect gets tens of millions in tax breaks from Providence and North Providence.
CharterCARE spokesman Otis Brown declined to comment for this story.
The battle over the future of Fatima and Roger Williams Medical Center has become a sharper public debate after starting quietly last year.
Rhode Island General Treasurer Seth Magaziner announced the state would no longer invest with Leonard Green & Partners.
And legislation has been introduced in the General Assembly that would impose a one-year delay on ownership changes involving for-profit healthcare entities.
Boston University professor of Health, Law and Management Alan Sager takes a critical view of for-profit hospitals. He believes that if Fatima and Roger Williams are needed to provide healthcare, the state should find them a not-for-profit owner.
“Without a functioning market, without a competitive free market, it’s folly for the people of any state to rely on for-profit hospitals, which act in their own financial self-interest or that or their stockholders,” Sager said.
There’s no indication that Rhode Island officials are considering the approach favored by Sager. Neronha’s office and the state Health Department are continuing their review, with a goal of completing it this spring.
Ian Donnis can be reached at idonnis@ripr.org