"Prospect Medical Holdings has notified the Department of Attorney General and the Department of Health this morning of its formal withdrawal of the organization’s hospital conversions act and change in effective control applications," the company said in a statement. "The withdrawals conclude the regulatory review process."



Prospect went to Superior Court on Friday in an attempt to block Attorney General Peter Neronha from releasing his report on the company, arguing in part that he lacks authority to do so since Prospect has pulled its application.

According to Prospect, the report includes "confidential information and numerous factual inaccuracies that -- if publicly disclosed -- would cause irreparable harm to the hospitals, their employees, their healthcare providers and their patients."

Neronha fired back.

"The owners’ withdrawal of their application, designed to avoid the issuance of our decision, is telling," he said. "It reflects the owners’ unease with the public receiving a full and complete picture of the rationale behind this Office’s insistence that they provide adequate and reliable financial commitment to ensure that these hospitals continue to operate at the levels they do today."

"Put another way, they do not want the public to know what has gone on here, and why," Neronha continued.

He added: "The people of Rhode Island deserve the truth. It is a hard truth: that those who claimed to care about healthcare here in Rhode Island and around the country cared much more – orders of magnitude more – about lining their own pockets than about the people they purported to serve." 

Judge Brian Stern is expected to hold a hearing on Prospect's request next week, possibly Monday.

On Thursday, Prospect said Neronha wants Prospect to put between $120 million and $150 million in escrow “to purportedly ensure the financial viability of the hospitals,” according to spokesman Bill Fischer.

“The imposition of such an escrow is unreasonable, unacceptable, and unprecedented,” Fischer said in a statement. “The demand for such an escrow as a condition to continue to do business in RI would leave Prospect with very little choice but to initiate a wind down of its RI operations. Everyone involved in this transaction needs to understand that there are dire consequences for Rhode Island’s 3rd largest hospital system if this transaction is not approved.”

Neronha, however, pointed to concerns by a major accounting firm -- highlighted earlier this week by The Public's Radio -- showing that Prospect and its Rhode Island hospitals face financial viability risks. Prospect maintains it is well capitalized, with yearly revenue of $2.7 billion.

Neronha was expected to release Friday his decision on a proposal to allow two partial owners of Prospect Medical to take full ownership of the company, which operates 17 hospitals across the U.S.

"After an exhaustive review of Prospect Medical Holdings, the owners of Roger Williams Medical Center and Our Lady of Fatima, our Office will be issuing a decision tomorrow on Prospect’s request to allow its private equity owner Leonard Green to exit the company," the prosecutor said in a statement.

"The public deserves the entire story and that will be contained in the Decision we issue," Neronha said. "What I can say now – to quote the independent financial experts who testified before the Health Services Council – is that, as a result of decisions made by Prospect and its owners at the national level, both Prospect and our local hospitals 'face financial viability risks.' "

Neronha said Prospect can not legally close its Rhode Island hospitals without approval from the state Department of Health.

Prospect's CEO, Sam Lee, and his business partner, David Topper, want to raise their stake in the company from about 40 percent to 100 percent.

Prospect has faced criticism over how its majority owner, Leonard Green Partners, has taken hundreds of millions of dollars in dividends for investors from Prospect’s chain of 17 hospitals across the U.S.

According to Fischer, Prospect believes the proposed escrow on its face is unlawful and would exceed the scope of the Attorney General’s powers under the HCA. In a statement, Fischer said that the effect of the escrow condition would be catastrophic for the two hospitals, two vital elements of the State’s healthcare safety net, resulting in curtailing operations - including services to the under-served population.

Lynn Blais, an RN who is president of United Nurses and Allied Professionals -- a leading opponent of the ownership change, and which represents hundreds of Fatima workers, released this statement:

"Fatima has and will continue to exist to serve our families, friends and neighbors. Prospect cannot arbitrarily close the doors because they didn't get their way. Sam Lee and David Topper have dragged hundreds of millions of dollars from this community. The Attorney General is right to insist on conditions that secure the continued operation of these hospitals. We stand with him.

Blais added, "We fully expect state regulators to hold the wealthy owners of Fatima and Roger Williams accountable going forward."

State Senate President Dominick Ruggerio, whose district includes Fatima, has been a leading opponent of a change in control of Prospect.

 “Fatima and Roger Williams Hospitals are essential to the health and well-being of our communities," Ruggerio said. "I am confident that the Attorney General’s scrutiny will ensure the long-term viability of our community hospitals. This review is a central component of protecting the state’s health care system. I look forward to reading the Attorney General’s report tomorrow.”

House Speaker Joe Shekarchi and Gov. Dan McKee have kept a distance from the issue.

“As Governor, my objective is to protect Rhode Island’s health care system and preserve patient access to critical services," McKee said in a statement. "I urge all parties involved in the transaction to come together to reach an agreement that is in the best interest of the people of Rhode Island.”

Ian Donnis can be reached at idonnis@ripr.org