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RIDOH Issues Approval with Conditions of Initial Application for Sale of Hospitals

The Rhode Island Department of Health (RIDOH) is announcing today its approval with conditions of a Hospital Conversion Act (HCA) application for the sale of Roger Williams Medical Center and Our Lady of Fatima Hospital. The decision contains several stringent conditions intended to ensure the financial viability of the hospitals, stable operational structures at the facilities, and a continued commitment to health equity and the needs of all patients in the hospitals' communities.

The hospitals are currently owned by Prospect Medical Holdings and are operated by CharterCARE Health Partners. These hospitals provide essential services to vulnerable populations in the state and are served by staffs of dedicated and committed healthcare workers. The prospective buyer, the Centurion Foundation, is a Georgia-based non-profit company.

"Rhode Island needs a stable network of hospitals that supports the health and wellness of every community in the state," said Director of Health Jerry Larkin, MD. "In light of the historical and ongoing financial and operational challenges at the hospitals, RIDOH issued a decision today with conditions carefully developed to restore local control, help stabilize these two facilities, and help ensure that the new operators would be positioned to provide consistent, safe, high-quality care."

RIDOH and the Rhode Island Attorney General review HCA applications. Attorney General Peter F. Neronha also issued an approval of the HCA application today, with a separate set of conditions.

Separate, additional approvals of Change in Effective Control (CEC) applications are also required of the transacting parties. All licensed healthcare facilities are subject to CEC reviews for changes that would affect 50% or more of the entity's ownership, assets, membership interest, authority, or control. Only hospital transactions are subject to an additional HCA review. RIDOH alone issues decisions on CEC applications after the Director of Health receives recommendations on those applications from the Health Services Council. (RIDOH has not yet received complete CEC applications for the sale of Roger Williams Medical Center and Our Lady of Fatima Hospital.)

The conditions contained in the decision include:

- Centurion is responsible for ensuring the hospitals remain in good standing with financial obligations.

- Governing bodies for the hospitals must be maintained and include a majority of independent board members and individuals with experience in hospital operations, healthcare, finance, law, business, labor, investments, community purpose, and diversity, and they must represent the diverse populations served by the hospitals.

- The transacting parties must hire a Chief Restructuring Officer to manage business affairs, oversee financial management, and explore strategic alternatives.

- Prospect Medical Holdings must settle certain outstanding balances with vendors and fund necessary repairs to the hospitals.

- The hospitals may not eliminate or significantly reduce healthcare services without approval from RIDOH.

RIDOH and the Attorney General hosted two public meetings in March to gather input on the HCA application. Transcripts and video recordings of those meetings are available online. (See link below.)

In reviewing HCA applications, RIDOH considers nine statutorily defined criteria:

1. Satisfactory character, commitment, competence, and standing in the community; 2. Sufficient safeguards to assure the affected community continued access to affordable care; 3. Clear and convincing evidence to provide healthcare and access for traditionally underserved populations in the affected community; 4. Procedures or safeguards to ensure that ownership interests will not be used as incentives for hospital employees or physicians to refer patients to the hospital; 5. Commitment to assure the continuation of collective bargaining rights and workplace retention; 6. Estimated future employment needs under the conversion, and retraining of employees who may be impacted by the proposed restructuring; 7. Demonstration that public interest will be served, including access to essential medical services needed to provide safe and adequate treatment, and assurance of a balanced healthcare delivery system; 8. Acquiror must meet the Conditions of Approval for any previous Conversion under the Act (For-Profit conversions only); and 9. Issues of market share, especially as they affect quality, access, and affordability of services.

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