Delivery of Care

Prospect Medical files for Chapter 11 bankruptcy

In a prescient interview, AG Neronha tells ConvergenceRI his team is prepared for the coming legal battle to keep two RI hospitals open

Photo by Richard Asinof/File Photo

R.I. Attorney General Peter Neronha talks at length in his office about the health care choices facing Rhode Island during a one-on-one interview with ConvergenceRI in 2024.

By Richard Asinof
Posted 1/13/25
An insightful interview with AG Peter Neronha on the cusp of Prospect Medical declaring bankruptcy and how his legal team is prepared to address the financial challenges facing Rhode Island.
When will the news media focus on the ongoing health care crisis that threatens the future prosperity of Rhode Island? Why is Gov. McKee allegedly seeking retribution against Kim Simmons, the Black woman executive director of the RI Coalition To End Homelessness, for the courage to speak out with the accurate data about the homeless crisis in the state, challenging the Governor’s misleading statements? What does it mean politically when more than 40 legislators sign a letter to the Governor, asking him to declare a public health emergency on homelessness, days before his state of the state address? How crowded are hospital emergency rooms trying to cope with the current onslaught of flu, COVID-19, and norovirus cases?
The preventive role that AG Neronha and his legal team have played in fighting against the corporate greed of private equity investors in order to keep the safety-net Roger Williams Medical Center and Our Lady of Fatima hospitals open and functioning is a much bigger story, underappreciated by many.
The ongoing hot buttons in news coverage these days include: the state’s [and Deloitte’s] data breach, with letters being sent to more than 600,000 residents notifying them that their personal data may have been hacked; the Governor’s continued reluctance to declare a public health emergency on homelessness; the continuing legal drama over the highway bridge failure leaves little room for the ongoing health care crisis.
The moral of the story seems to be: don’t get old, don’t get sick, and don’t need expensive medication to stay healthy. Also, don’t get impatient when you can’t schedule tests for months, and don’t get angry when you have surgeries cancelled by prior authorization firms working for health insurers.
As the most recent California wildfires that have swept through Los Angeles have shown, money and status and wealth don’t matter when it comes to urgent climate change events destroying homes and communities. It is folly to think that status will protect communities from ecological disasters.
Here in Rhode Island, a major health care delivery crisis is upon us. Is state government prepared to act?

Editor’s Note: On Sunday morning, Jan. 12, Prospect Medical Holdings advised the Attorney General Peter Neronha that it had filed for Chapter 11 bankruptcy in federal bankruptcy court in Dallas, TX. In response, the Attorney General said that his office is prepared for all scenarios. “This is tough stuff,” Neronha said, “but it can and should serve as a catalyst for Rhode Island leadership to meet the moment and attempt to provide real solutions, not just lip service.”

What follows is an exclusive interview with AG Neronha conducted by ConvergenceRI about the potential bankruptcy filing.

PROVIDENCE – Call it the Friday afternoon drive time conversation. ConvergenceRI spoke with R.I. Attorney General Peter Neronha while he was driving home from work on Friday, Jan. 10. The call was to check in with him about the latest reporting that the financially distressed Prospect Medical Holdings, the California private equity firm that owns Roger Williams Medical Center and Our Lady of Fatima hospitals, was considering restructuring [declaring bankruptcy], according to a story in The Wall Street Journal.

Even though there is a deal in place between Prospect to sell the two hospitals to the Atlanta-based Centurion Foundation – albeit with strict financial conditions imposed by state regulators – the worry is that a potential Prospect bankruptcy might prove to be a tipping point in the survival of the two Rhode Island hospitals.

Given the havoc and chaos precipitated by the bankruptcy of Steward Health Care to the health care delivery system in Massachusetts, the Attorney General’s office has sought to be prepared. The financial rumblings caused the Attorney General to issue a news release on late Thursday afternoon, Jan. 9, addressing the news of a potential bankruptcy by Prospect.

“Here’s what we know now,” Attorney General Neronha said in the release. “Roger Williams and Fatima have the best possible chance for continued operation because of the work my Office has done to transition these safety net hospitals out of Prospect ownership.”

To support that claim, Attorney General spoke of his continuing legal efforts:

  •    “In 2021, we had the foresight to make approval of the sale to Prospect contingent on them putting $80 million into an escrow account, and just last year, we took them to Court to force them to pay $17 million in unpaid bills. In 2024, we approved the sale of Prospect to Centurion, with even more robust conditions to ensure that our hospitals have the best possible chance for success – and should bankruptcy occur, we believe that the transaction can and should move forward and away from Prospect.”

Attorney General Neronha continued: “Rhode Islanders know the devastating effects of private equity on our health care system, not because we studied it, but because we’ve lived it.”

U.S. Senate Budget Committee investigation.  
Earlier in the week, Sen. Sheldon Whitehouse and Iowa Sen. Chuck Grassley released an epic, bipartisan 171-page report detailing the Senate Budget Committee’s investigation into private equity investments in health care. [See link to report below.]

The report took a deep dive into what happened with Prospect Medical Holdings’ Rhode Island hospitals. “Private equity has infected our health care system, putting patients, communities, and providers at risk,” Sen. Whitehouse said in the news release. “As our investigations revealed, these financial entities are putting their own profits over patients, leading to health and safety violations, chronic understaffing, and hospital closures. …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.”

The release of the Senate Committee’s investigation appeared to presage the bankruptcy filing by Prospect Medical Holdings. Here is the ConvergnceRI interview with R.I. Attorney General Peter Neronha:

ConvergenceRI: It has been a busy time for you.    
NERONHA: It’s been a busy early part of the year, for sure.

ConvergenceRI: What is going on with Prospect Medical Holdings? Are you reacting to the recent story in The Wall Street Journal about potential bankruptcy?    
NERONHA: A reaction to not only to that, but also inquiries we’ve had because of The Wall Street Journal article.

And so, I’m answering as candidly as I can be, based on what I know.

ConvergenceRI: Will the hospitals be able to survive the bankruptcy of Prospect?
NERONHA: I’m not in a position, Richard, as we sit here right now to confirm that there will be a bankruptcy of Prospect.

Not to be bland about it, but the fact that Prospect is in financial [turmoil] as a result of self-inflicted financial distress, our hospitals are in difficult position. It’s no secret.

A symptom of that difficult position is that their buyer is Centurion Foundation.  No knock on Centurion, but that was the only serious bidder, as I understand it.

I’ve been concerned, I remain concerned, if Prospect should file for bankruptcy, I’d be very concerned about that. But, we prepared for that possibility, and if it arises, then we will be ready to deal with it.

Dealing with it means trying to position Rhode Islanders as best we can, but it is going to be a difficult endeavor, for sure.

ConvergenceRI: Sen. Whitehouse’s Senate Banking Committee released this long report about private equity with a large section devoted to Prospect. Was there anything in the report that was new for you that you didn’t know about?    
NERONHA: I haven’t had a chance to review the report in its entirety to answer that question as of yet. But certainly Prospect, Steward are two very similar tales.

They are tales of how private equity groups [buy] health care systems for their investors and leave a shell behind and make it very difficult for [systems] to survive. Particularly in the national, regional and Rhode Island state health care environment that is very difficult.

ConvergenceRI: Do you think that there is a tipping point, where the people will be more skeptical of private equity investment in health care?    
NERONHA: Yes, and I think in Massachusetts, the story has been well told. In Rhode Island, you’ve done some good reporting on this issue, along with a few others, but I don’t know that it’s registered with all of our state leaders and again, most of the public.

I think it is really going to require some kind of a story that literally feeds newscasts and newspapers and all kinds of news sites or health care blogs – places where people in Rhode Island get their news.

I think it’s really got to lead those newscasts and news stories and front pages, every day of the week, for a month, before people understand the crisis we’re in.

ConvergenceRI: Why do you think it is so difficult for people to understand what is going on?    
NERONHA: Because I don’t think it impacts them in a macro kind of way. Nearly all – a good chunk of Rhode Islanders – have dealt with our health care failures.

Individually, they can’t find a doctor; they have long waits in the ER; they can’t get in to see a specialist that they need for a long period of time; they have a hard time getting patients covered; they wait long periods of time to get tests done; they walk into facilities that are threadbare.

I think they see it. Most if not all of Rhode Islanders have experienced it, but they don’t see it on a kind of a [larger level]. They may be only experiencing it; their circle of friends and acquaintances are experiencing it. But they don’t see the systematic failure [emphasis added] because it hasn’t failed yet in such a spectacular way, you know, that in the news cycle, it takes precedence over a car crash or a house fire, as serious as those [events] can be.

ConvergenceRI: Is there anything I can do differently in terms of my reporting that can bring this into sharper focus?    
NERONHA: I don’t think so, Richard. I had excellent meetings just today with Dr. Wagner [president and CEO of Care New England and President Fernandez [president and CEO of Brown University Health]. I helped their team to discuss some of these issues – and how we can continue to get the kind of data that can tell a cohesive story.

I could have a really fine book sitting in my library, but if nobody wants to read it, or no one knows it’s on the shelf, I’m not sure what good it does.

But we are going to keep hammering away at it. It is my goal, it may be aspirational, to try and bring some more attention to health care strategic thinking and the need for it in this corner. The team is still working hard on that.

ConvergenceRI: Was the dialogue between you and the Care New England and Brown Health CEOs fruitful?    
NERONHA: Yes. We meet periodically, I would say every couple of months, just to kind of kick around what they are seeing, what we are seeing. To the extent that we have conclusions or near-conclusions, they help pressure test them.

They may have things that they are interested in or concerned about, and we will give them our reaction to that. I think it has been a very good and open relationship, and I think we have developed a relationship of trust.

It doesn’t mean that they, as a regulator, if they came to us, we will give them whatever they wanted. We would remain objectively skeptical, as we’ve always been. I do find these conversations fruitful. They do help us understand some of what we are seeing from the limited data that we can gather.

ConvergenceRI: Will there be opportunities for you to meet with the legislative leadership in a similar fashion?    
NERONHA: We have met, and I expect to do that again. The Speaker and I have had some ongoing conversations about health care. And, I have had some conversations with the Senate President but they have been more limited, given his health challenges. But, certainly with the Speaker, for sure.

ConvergenceRI: What questions should I be asking?    
NERONHA: Here’s what I have concluded: There are two principal problems, both revenue-driven, or the lack of revenue-driven. One is the overall financial health of our large health care hospitals and health care delivery systems. Two is the lack of primary care providers.

I believe those are the two seminal challenges of our health care time. I think what you should be asking is: What’s the vision in the Governor’s office and elsewhere to fix it?

Do they care enough about the issues to educate themselves enough so that they can try to fix it? I’m not so sure that they are that interested in it.

I don’t think it is optional to fix health care. It is really not optional. If hospitals close, that’s a major crisis in the making when that happens. But that is a real possibility. I don’t think that our elected Governor fully appreciates that yet.

You don’t want to try to fix an issue when the crisis is literally not so much on your doorstep but in your living room.

You want to anticipate the problem and deal with it in advance.  We don’t do a lot of that, unfortunately. And, that’s a problem. And it’s a problem in health care, too.

ConvergenceRI: Thank you again for making time to talk with me.    
NERONHA: Always.

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