Director of Health Jerry Larkin, MD accepted today the recommendation of Rhode Island's Health Services Council to approve the Change in Effective Control applications for the sale of Roger Williams Medical Center and Our Lady of Fatima Hospital. The prospective sale has now received all the state-level regulatory approvals that are required, following a separate set of approvals from last June.
The hospitals are currently owned by Prospect Medical Holdings and are operated by CharterCARE Health Partners. The prospective buyer, the Centurion Foundation, is a Georgia-based non-profit company.
Rhode Island's Health Services Council is an independent body that advises the Rhode Island Department of Health (RIDOH) regarding healthcare facility licensing reviews. Specifically, before making decisions on Change in Effective Control applications, RIDOH receives a recommendation from the Health Services Council.
Changes in Effective Control reviews are required when the owner of certain healthcare facilities in Rhode Island (including hospitals) want to transfer 50% or more of the ownership, assets, membership interest, authority, or control of the hospital. This Change in Effective Control decision follows approvals with conditions in June by RIDOH and Rhode Island Attorney General Peter Neronha on a Hospital Conversions Act application. (In 1997, the legislature created the Hospital Conversions Act as a second layer of review for hospital transactions.)
"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's Change in Effective Control decision and our Hospital Conversions Act decision came 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."
"I commend the RIDOH staff and the Health Services Council for its expedient and thorough analysis of the Centurion Foundation's application which was filed in complete form just weeks ago," said Dr. Larkin.
The conditions in RIDOH's Change in Effective Control decision largely reflect the conditions proposed by the Council in their report to the Director. The conditions of approval require the applicant to:
- Provide data, including but not limited to, finances, utilization, and demographic resident information, to RIDOH upon request;
- Maintain national accreditation (for ambulatory surgical centers, home health, and hospice facilities);
- Create a plan for the referral of charity care cases with a minimum of one licensed community health center (for ambulatory surgical centers, home health, and hospice facilities);
- Submit written reports to RIDOH regularly. These include reports that must detail any proposed reconfiguration of the composition of the boards of directors.
- Abide by the conditions in RIDOH's Hospital Conversions Act decision. Those include:
o Centurion is responsible for ensuring the hospitals remain in good standing with financial obligations.
o Governing bodies for the hospitals must be maintained and include 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. o The transacting parties must hire a Chief Restructuring Officer to manage business affairs, oversee financial management, and explore strategic alternatives. o Prospect Medical Holdings must settle certain outstanding balances with vendors and fund necessary repairs to the hospitals. o The hospitals may not eliminate or significantly reduce healthcare services without approval from RIDOH.
The Director's decision on Change in Effective Control applications is based on four criteria:
1. The character, commitment, competence, and standing in the community of the proposed owner or operator; 2. The extent to which the facility will continue to provide care without effect on the viability of the facility; 3. The extent to which the facility will continue to provide safe and adequate treatment for the individuals receiving health care provided by the facility; 4. The extent to which the facility will continue to provide access to underserved populations, in consideration of proposed continuation or termination of services provided by the facility.