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RIDOH Issues Compliance Order to Owners of Roger Williams and Fatima Hospitals

The Rhode Island Department of Health (RIDOH) issued an Immediate Compliance Order today requiring the owners of Roger Williams Medical Center and Our Lady of Fatima Hospital to ensure the continuity of health services and care at the facilities by acting immediately to stabilize the two facilities financially.

This Immediate Compliance Order was issued to the California-based Prospect Medical Holdings and related entities after a thorough, extensive review by RIDOH determined that Prospect's underfunding of the hospitals is impacting operations. For example, in October 2023, at least 19 elective surgeries at the facilities were canceled because the proper equipment and supplies were not available because of non-payment to vendors. These latest issues are part of a pattern of Prospect Medical Holdings engaging in non-compliance and creating delays in making required disclosures of financial information.

The Immediate Compliance Order requires the owners to hire an independent Fiscal Monitor and cover all operating costs of the hospitals, as determined by that Fiscal Monitor. Prospect also must create a "cash on hand" escrow account to ensure the stability of the facilities, and have an independent Operations Monitor on site who will report to RIDOH daily. The Compliance Order includes many additional, stringent requirements in the areas of finance, operations, and oversight.

"The healthcare providers at Roger Williams Medical Center and Our Lady of Fatima Hospital are amongst the best in the state. People receive very high-quality care at these hospitals," said Interim Director of Health Utpala Bandy, MD, MPH. "However, these facilities need more consistent support from their corporate owners. The action we took today will ensure immediate accountability and get the hospitals on sounder footing. This is critical for the state as a whole, and for the communities these facilities serve as safety net hospitals."

While Rhode Island law requires hospitals to maintain local governing bodies, much of the financial decision-making for these two hospitals happens in California. Prospect Medical Holdings sweeps all patient care revenue from Roger Williams and Fatima every day and then returns an operating allowance back to the hospitals once a week. The amounts of these allowances vary and are determined by Prospect Medical Holdings. The amounts of these allowances are inadequate to pay vendors in a timely manner, leading to interruptions in services.

A RIDOH investigation revealed that, as of October 24, more than 250 of the hospitals' approximately 830 vendors were operating with the hospitals on a "cash on demand" basis. This means they only deliver supplies if they are paid at the time of delivery. This is generally reserved for payors with a history of non-payment. The average time it takes the hospitals to pay bills ("days payable outstanding," or DPO), was in excess of the 90-day limit set when the acquisition of the facilities was approved in 2021.

Unpaid vendors have included suppliers of hip joints, catheters, endoscopes, and eye lenses. The procedures that were canceled included endoscopies, eye surgeries, and a spinal surgery. There is no indication that issues with vendors ever prevented emergency procedures from being performed.

Among other requirements, the Immediate Compliance Order requires Prospect Medical Holdings to:

- Retain a third-party Fiscal Monitor for six months. This person will immediately determine the average monthly operational expenses for the hospitals and create a plan to ensure that the DPO for all vendors is less than 90 days. The Fiscal Monitor will report to RIDOH weekly on the progress of vendor accounts and the general fiscal standing of the hospitals.

- Retain a third-party Operations Monitor for six months. This person will be charged with doing an assessment of the extent to which vendor non-payment has previously impacted patient care and resulted in canceled surgeries. This person will report to RIDOH daily on census numbers at the hospitals, as well as on staffing and any procedure cancellations.

- Provide funding over and above the weekly allowances to the hospitals to cover all operational expenses.

- Create and fund a separate "cash on hand" escrow account equaling 30 days of average daily operational expenses for the sole use of operations at the hospitals. This account will be maintained by a RIDOH-approved escrow agent, located in Rhode Island.

In addition to these requirements, the Immediate Compliance Order states that RIDOH reserves the right to order a cease and desist on the daily sweeping of patient care revenue from the hospitals to the parent company in California.

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