Centurion signs financing agreements to buy Roger Williams and Fatima hospitals

The Centurion Foundation has secured the private investor-backed bonds needed to cement its purchase of Roger Williams Medical Center and Our Lady of Fatima Hospital, state officials announced Thursday afternoon.

The update comes one day before the court-ordered deadline for Centurion to close on its long-awaited purchase of the two hospitals from bankrupt owner Prospect Medical Holdings. Having inked the agreements with unspecified investors Wednesday, Centurion still needs another week to close the sale, Rhode Island Attorney General, Gov. Dan McKee, House Speaker K. Joseph Shekarchi and Senate President Valarie Lawson said in a joint statement Thursday. 

“These agreements, providing more than $100 million in financing, represent significant and necessary progress towards ensuring that our critical safety-net hospitals remain open and able to serve Rhode Islanders,” they said.

A 12-page agreement submitted in federal bankruptcy court late Thursday by Neronha’s office and attorneys on behalf of Prospect’s debtors outlines details of the one-week extension. If Centurion does not close the sale by March 6, Neronha’s office will reimburse the debtors for the extra week of hospital operating costs, along with court fees, up to $1.2 million. The state has been contributing toward short-term hospital costs since November using money from an escrow account, with the intent of being reimbursed by Centurion (or another buyer) when the hospitals are sold.

More than 18 months have passed since Centurion received conditional regulatory approval to purchase Roger Williams and Fatima. Yet Centurion struggled to secure the investor-backed bond financing needed to seal the deal, prompting state lawmakers to race to approve an $18 million backstop from state coffers.

“We all put everything aside to work out what was critical for the people of Rhode Island and healthcare, but to keep those two hospitals open,” Shekarchi said during an unrelated press conference Thursday afternoon. “The jobs, the health care, the cancer center, at Roger Williams, the behavior unit at Fatima. We have to do that. We had to do it, and I’m proud to say we got it done.”

The two hospitals account for more than 500 inpatient beds and 50,000 annual emergency room visits between them, along with unique specialties in bone marrow transplants and geriatric psychiatry.

Shekarchi acknowledged the haste with which lawmakers vetted and approved the state reserve, which was signed into law by Gov. Dan McKee on Feb. 11.

“If you said we were going to pass an $18 million rescue package for the two hospitals and get it done and close that deal in the first week of March to save those two hospitals I’d say that’s impossible and off the radar,” Shekarchi said.

Lawmakers also started to advance a backup plan, easing the state regulatory review for another buyer to enter the picture if Centurion failed to close the deal. However, no one else made an offer by the Feb. 17 deadline, according to the filing submitted by Neronha’s office Thursday.

Ben Mingle, CEO for Centurion, thanked officials for their “diligent” work to make the sale possible.

“All parties are now preparing closing documents that will result in the execution of the transaction on March 5,” Mingle said in a statement Thursday. “Once completed, CharterCARE hospitals and its 2,400 employees will be returned to a new 501(c)3 nonprofit organization under local control and management as CharterCARE Health of Rhode Island, and begin a new future.”

Returning the hospitals to nonprofit ownership will allow them to qualify for federal drug discount programs and tax exemptions, saving $75 million a year, according to estimates by Centurion. Owners will still have to contend with a trail of losses and postponed repairs left by Prospect, which ransacked balance sheets to pay out executives and shareholders of its former majority stakeholder, private equity firm Leonard Green. But Centurion leaders assured state legislators they still expect to generate enough money to make annual debt service payments while infusing the hospitals with long-overdue operating and capital projects funding.

U.S. Bankruptcy Court Chief Judge Stacey Jernigan of the Northern District of Texas had not approved the requested deadline extension as of 4 p.m. Friday.

Reporter Christopher Shea contributed to this story.