CharterCARE, the umbrella organization for Our Lady of Fatima and Roger Williams hospitals, has announced its intent to partner with Prospect Medical Holdings, a for-profit health care firm based in California. The deal is in its infancy. But it's the fourth proposed hospital merger/acquisition under Rhode Islands Hospital Conversions Act. And it's yet another sign of the shaky financial ground on which many of the state's hospitals now find themselves.
So who, or what, is Prospect Medical Holdings? It's a for profit health care management and holding company, based in Southern California, that owns several community hospitals there and in Texas. Prospect is affiliated with Leonard Green & Partners, L.P., another California-based private equity firm that owns or has significant stakes in a huge range of companies, including Nieman Marcus, Savers (as in Savers Thrift Stores), Whole Foods, J.Crew, Petco, and the Palms Casino Resort in Las Vegas.
LGP's investment philosophy is "to target cash flow positive businesses that have the ability to grow by at least 50% over a five-year period." I'm not sure what kind of growth they're talking about, but if it's profitability, operating margin, income, or liquidity, few Rhode Island hospitals have seen much growth on any of those fronts. Would Prospect (operating under LGP's guidance) hold CharterCARE institutions to that standard? And if so, what would it require to achieve them? And would that affect patient care or hospital employees? Those are unknowns now, and, of course, the deal is still written in pencil, not pen.
It's going to be an interesting spring and summer for hospitals in Rhode Island!
Do you work at any of the affected hospitals? Let us know your thoughts.