Rhode Island regulators conditionally approved the sale of two privately owned hospitals in the state, ending an impasse that threatened to close the two facilities, according to The Wall Street Journal.
Attorney General Peter Neronha signed off on the sale of Roger Williams Medical Center in Providence and Our Lady of Fatima Hospital in North Providence, which are owned by private equity firm Leonard Green & Partners and Los Angeles-based Prospect Medical Holdings. Leonard Green has a 60 percent stake in the hospitals and the remainder was owned by Prospect Medical CEO Samuel Lee and his business partner David Topper.
The conditional agreement, announced June 1, paves the way for a change in ownership of the hospitals. Mr. Topper and Mr. Green would get full ownership of the facilities through Prospect Medical Holdings.
To secure regulatory approval, Prospect and Leonard Green & Partners had to set aside $80 million in escrow to help cover operating and capital expenses. Leonard Green must contribute $34.8 million.
Prospect Medical and Leonard Green in April threatened to close the two hospitals after a disagreement with Rhode Island's attorney general about the escrow demand. In particular, Mr. Neronha wanted to put up to $150 million in an escrow to ensure the hospitals' financial viability. Prospect said at the time that the $150 million escrow demand was "unreasonable, unacceptable and unprecedented." It would cause Prospect to wind down its operations in Rhode Island.
The new sale agreement ends more than a year of review from Rhode Island regulators, according to the report.
In addition to the escrow condition, Prospect must spend at least $72 million on capital improvements at Roger Williams and Fatima by 2026, agree to keep them open and operational, ensure the hospitals aren't part of a lease buyback transaction, and Prospect can't charge management fees.