Jo-Ellen Paterno lives with her husband, Paul, and three children in Warwick.
“I’m a school teacher by trade,” Paterno said during an interview in her home. “I’ve been a physical education teacher for about 24 years.”
Two years ago, during the summer of 2022, Parterno added a new title: cancer patient.
After considering her options among local hospitals, Paterno decided to go to Roger Williams Medical Center in Providence, since it was where her primary care physician was affiliated.
“They were so good to me,” she said. They set her up in an “absolutely gorgeous” spacious corner room with yellow walls and big windows, Paterno said. The nurse called her “VIP — very important patient.”
“She’s like, ‘Listen,’” Paterno recalled, “we read the backstory of what you’re here for and this is a room we save when people we know are going through hard times.’”
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Paterno is still waging her fight with cancer and she now gets treated in Boston. But she said having a well-regarded cancer center just up the road made a huge difference when she was at a very vulnerable point.
“I thought, ‘Thank God I came to Roger Williams,” she said, “because this wouldn’t have happened anywhere else.’”
Roger Williams and Our Lady of Fatima Hospital in North Providence are both part of CharterCARE Health Partners, owned by California-based Prospect Medical Holdings. After years of disinvesting in its national chain of hospitals, Prospect Medical has closed some while trying to sell others, encountering difficulty in at least one instance. Now, it has put CharterCARE Health Partners, including the two hospitals, up for sale. And the only buyer to submit a bid is a nonprofit based in Atlanta, the Centurion Foundation.
During a public hearing at Rhode Island College in March, Centurion Foundation President Ben Mingle said Centurion wants to be on the right side of improving hospitals like those in Rhode Island.
“Our mission today is only about changing the healthcare dynamics in this country,” he told the crowd in a prepared statement.
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Centurion does not operate other hospitals and plans to keep most of CharterCARE’s local management team in place. Mingle said Centurion saves its clients millions of dollars each year by financing real estate transactions, and that this shows how the foundation would restore a brighter financial outlook for Fatima and Roger Williams.
“Our proposal will return local control and independence to the existing management team,” Mingle said. “Centurion is confident in the ability of our management team to convert these hospitals into self-sustaining organizations, which is critical for long-term success.”
A challenging outlook
Long-term success has been elusive at CharterCARE’s Rhode Island hospitals.
Prospect Medical bought CharterCARE in 2014 and later directed almost a half-billion dollars in dividends from its national chain of hospitals to top executives and other investors.
The majority stake in Prospect used to be owned by a private equity firm in Los Angeles, Leonard Green & Partners. In Massachusetts, eight hospitals — including Morton Hospital in Taunton and Saint Anne’s Hospital in Fall River — face uncertainty due to a recent bankruptcy filing by Steward Health Care, which was formerly owned by a private equity outfit. Critics say these instances offer a stark warning about the danger of how private equity-owned healthcare companies.
In Rhode Island, some longtime employees have left and hospital staffers complain about the worsening quality of basic supplies like gloves.
Despite that, the union representing hundreds of workers at Fatima and Roger Williams opposes the proposed takeover by Centurion.
“We were optimistic at the beginning when Centurion came forward, then we read the business model and realized that it’s not worth the paper it’s written on,” said Lynn Blais, a nurse at Fatima and president of the United Nurses and Allied Professionals.
According to the proposal Centurion filed with Rhode Island healthcare regulators, it would finance the proposed deal with $160 million of debt. The foundation plans to use $80 million to buy CharterCARE and spend the remaining $80 million on investments in the local hospitals.
Blais questioned how Centurion can turn losses at the hospitals into profits, particularly since the foundation has not disclosed its own management fees and does not plan to invest any of its own money.
“So how are we going to come in, borrow money and then expect to be able to pay that money back plus interest and continue to get a positive bottom line?” she asked. “So all that’s going to do is guarantee us to go into foreclosure or into receivership or some other way of locking the doors because we’re not going to be able to make those bond payments.”
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Roger Williams Medical Center and Our Lady of Fatima are important institutions in more ways than providing critical healthcare. They are among the biggest employers and top taxpayers in their respective communities.
Blais said it would be a catastrophe if Fatima and Roger Williams were to go belly up.
“I don’t think the state of Rhode Island can afford for those two hospitals to close,” she said. “Those hospitals provide probably close to a hundred psychiatric beds. They provide a cancer institute, they provide surgical services. They provide inpatient hospital care that none of the other hospital systems could pick up. So if you close the doors to those hospitals, you would send the healthcare system in Rhode Island into a spiral.”
Through a CharterCARE spokesman, Centurion President Ben Mingle declined an interview request.
Instead, in a written statement, Centurion called its financing plan a traditional model that has received a “high confidence” letter from Barclays Capital. Centurion says the bonds it plans to sell would provide ample funds to recapitalize the hospitals’ parent company. With these and other changes, Centurion says, it would be able to compete on a level field in Rhode Island’s healthcare market.
“Centurion is committed to empowering a local leadership team to implement and execute the hospital’s mission of delivering healthcare to the community it serves,” Mingle told the crowd at the public meeting in March. “Centurion is going to leverage both our intellectual financial resources to ensure the hospitals have access to capital that they desperately need to succeed in the future.”
But the main union at CharterCARE is not the only entity skeptical about Centurion’s plan.
A public records request by The Public’s Radio unearthed a letter to Centurion sent in February by the state Department of Health. It questioned how the nonprofit would make the Rhode Island hospitals sustainable, and it noted that Centurion has no experience running healthcare facilities. The foundation’s response has not been made public.
Regulators examining the proposed deal
The state Department of Health would have to approve the sale of these hospitals. So would state Attorney General Peter Neronha.
The regulators can approve the sale, reject it, or approve it with conditions. To some observers, a sale with conditions is the most likely outcome.
However, during a late-May interview in his office, Neronha said he still has serious concerns about Centurion’s offer and his office had not made a decision.
“You have a proposed transaction which may ultimately lead to an insolvency even if we were to approve it,” he said.
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Neronha has shown a willingness to play hardball when it comes to regulating healthcare. In 2021, he conditioned a change in the ownership of CharterCARE’s parent, Prospect Medical, on the creation of an $80 million escrow account.
Without that money, Neronha said, “these hospitals would be closed. Those aren’t empty words. This same company closed hospitals where regulators haven’t had the ability to stop them. I, we, have been able to stop them by — what is the crudest mechanism to do that? We hold their money and they’re not getting it back unless they keep them open.”
Under state law, Neronha can only enforce the terms of the 2021 agreement for five years.
Part of the challenge for Roger Williams and Fatima, he said, is that they treat a high proportion of patients on Medicaid and Medicare, which pays less than private insurance. Neronha said there’s a desperate need to dramatically change how healthcare is reimbursed in Rhode Island.
“The way reimbursements are done, Medicaid, Medicare and commercial insurance — those are the three components of revenue,” he said. “If these hospitals can’t make enough revenue to pay that debt financing and break even and reinvest back into themselves, then they’re going to be in a tough spot.”
Looking ahead, the attorney general said that if a neutral third-party was in charge of seeking offers for CharterCARE, rather than current owner Prospect Medical, there might be more interest.
For now, Neronha worries about deciding between two unappetizing options.
“No matter what we do vis-a-vis this transaction,” Neronha said, “we’re really choosing potentially between a really bad spot and one that may not hold great promise, even if we were to approve it with conditions.”
State regulators’ decision on Centurion’s application is due by June 11.
This story was produced in partnership with Rhode Island PBS. A television version will air on RIPBS Weekly at 7:30 pm on Sunday, June 2, and it can also be found on YouTube.
Ian Donnis is the political reporter for The Public’s Radio. He can be reached at idonnis@thepublicsradio.org. Follow him on Twitter/X at IanDon