Prospect files for bankruptcy, leaving its hospitals in R.I. and Conn. in limbo – The Boston Globe

“By engaging with stakeholders and implementing the Hospital Transactions, Prospect Holdings is prioritizing its core strength — focusing on operating community hospitals in California, providing vital care to underserved communities, and promoting patient and physician continuity — while ensuring these hospitals outside of California continue operations with proper financial support,” said Prospect in a press release around 11 p.m. on Saturday.

“Throughout the chapter 11 process, Prospect Holdings’ hospitals, medical centers, and physicians’ offices will remain open, and patient care and services will continue uninterrupted,” Prospect said in the press release.

According to the filing, Prospect named Paul Rundell, the managing director of Alvarez & Marsal’s North American Commercial Restructuring practice, as chief restructuring officer, managing the company’s bankruptcy process. It said Prospect had more than 100,000 creditors. It listed the company’s liabilities as between $1 billion and $10 billion, and its assets in the same range.

Prospect has owned Roger Williams Medical Center and Our Lady of Fatima for more than a decade. Both hospitals care for some of the state’s most vulnerable patients, including many covered by public insurance. Investigators last summer found decaying conditions, such as bedbug infestations, cockroaches, mice, and other problems that put patients at “immediate” risk. In Connecticut, Prospect operates Rockville General Hospital, Manchester Memorial Hospital, and Waterbury Hospital.

Prospect, which also owns hospitals in Pennsylvania, has struggled financially for years.

Since late 2022, they have been trying to sell their two Rhode Island hospitals, and in June 2024 Rhode Island state regulators approved the terms of a deal to sell them to The Centurion Foundation, a Georgia-based nonprofit. Their approval came with dozens of conditions set by the health department and Rhode Island Attorney General Peter F. Neronha’s office, which virtually guarantees that Prospect would not make a profit on the deal if the transaction goes through.

Ben Mingle, the president of The Centurion Foundation, said he remains “fully committed” to acquire Prospect’s two Rhode Island-based hospitals. “This latest development in no way diminishes our interest or enthusiasm,” Mingle told the Globe in a statement.

Neronha’s approval of the aquisition came after almost two years of deliberations between the parties, and working with regulators.

“We will work closely with all parties, including through the bankruptcy process, to advance the sale as quickly as possible,” said Mingle. “It is our hope that the court will recognize that after over eighteen months of formal review by the Rhode Island Department of Health and Rhode Island Attorney General, we have achieved full regulatory approval to secure these safety net hospitals, their 2,700 employees, and the critical role they play serving thousands of Rhode Islanders.

Regulators in several states, including in Rhode Island, have been putting pressure on Prospect over its troubled finances and deteriorating conditions at its facilities.

Neronha said he expects hearings for the Chapter 11 case to begin this week.

“If so, we’ll be there to protect Roger Williams and Fatima hospitals, workers, and patients,” he said. “Expect hospitals to continue as normal as Prospect attempts to effectuate sale to Centurion. We’ll continue to closely monitor.”

Prospect owes millions in back taxes, unpaid bills to vendors, and rent payments to landlord Medical Properties Trust, a national, publicly traded health care real estate investment trust. In its press release on Sunday, Prospect stated it would “pay vendors in full under normal terms for goods and services provided after the filing date.”

The fate of the thousands of patients and nearly 3,000 employees in Rhode Island will be determined by a process in which Prospect’s secured creditors will hold an interest in the system as collateral.

Prospect also has tried to sell its three hospitals in Connecticut to Yale New Haven Health. That transaction stalled after Yale New Haven Health filed litigation seeking to back out of its purchase agreement, citing decaying conditions at the hospitals. In a statement on Sunday, Connecticut Governor Ned Lamont said his administration will “continue to hold Prospect accountable.”

“Our number one priority remains maintaining safety and quality of care at Prospect’s three Connecticut hospitals. We currently have an independent monitor overseeing operations at Waterbury Hospital and will increase oversight at Manchester Hospital,” said Lamont. “We will continue to work to evaluate opportunities to transfer these institutions to a new operator.”

Prospect, which was previously owned by a private equity firm, has long been controlled by wealthy financiers Samuel Lee, who now serves as the company’s board chairman, and David Topper, Prospect’s co-chief executive officer. In a statement on Sunday, Prospect’s other co-chief executive officer, Van Crockett, said filing for bankruptcy was “an important step forward” to best serve the company’s patients and employees, and that the company would be “better positioned to prioritize and execute its core strengths.”

“Divesting our operations outside of California will ensure that they receive necessary financial support so that the communities that rely on those facilities will maintain continued access to highly coordinated, personalized, and critical healthcare services long into the future,” said Crockett in the statement. “Through this process, Prospect Holdings will regain its financial footing as we rededicate ourselves to our original mission of serving the community.”

PHP Holdings, LLC and its related subsidiaries, including Prospect Health Plan, Inc., Prospect Medical Systems, LLC and its affiliated medical groups in California, Arizona, and Texas, Gateway Medical Center, and Foothill Regional Medical Center, are not parties to the chapter 11 proceedings.

Prospect executives are still finalizing necessary funding for the duration of the chapter 11 process, according to a company press release.

Neronha said Sunday morning that his office will have attorneys in Texas to represent the interests of Rhode Islanders.

“This is personal to me, as I know it is to Rhode Island residents. I have a couple of physicians in my family who regularly relay to me the challenges of providing quality care in the current healthcare landscape,” said Neronha in a statement. “And I’m certainly well aware of the struggles of our failing system here in Rhode Island.

“This is tough stuff, 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,” added Neronha.

This article has been updated to include a statement from The Centurion Foundation.

Alexa Gagosz can be reached at alexa.gagosz@globe.com. Follow her @alexagagosz and on Instagram @AlexaGagosz.