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By Richard Asinof
PROVIDENCE – CharterCare Health Partners announced Thursday that it had executed a letter of intent with Prospect Medical Holdings Inc., a national health care services company based in Santa Ana, Calif., to create a partnership.
Under the transaction, CharterCare, the parent corporation for Roger Williams Medical Center and St. Joseph Health Services of Rhode Island/Our Lady of Fatima Hospital, will create a new joint for-profit venture with Prospect Medical Holdings, a privately held, for-profit company. In addition, Prospect Medical Holdings will be making an unspecified capital contribution to the new joint venture.
Prospect Medical Holdings, which does not make its financial information public, owns and operates hospitals, physician networks, medical groups, clinics and outpatient centers. Prospect Medical Holdings currently owns and operates seven hospitals with a total of about 1,056 licensed beds and a network of 18 specialty and primary care clinics in high-density areas in Southern California and San Antonio, according to its corporate tear sheet.
CharterCare currently operates a total of 579 licensed beds, has about 3,000 employees, and has annual operating revenue of approximately $300 million, according to CharterCare spokesman R. Otis Brown.
The new company will maintain local governance, and 50 percent of the board of the directors for the new company will be appointed by CharterCare, according to Kenneth Belcher, president and CEO of CharterCare.
“We are pleased to have found such a strong capital partner in Prospect Medical Holdings and its corporate management team, who recognize and share our important mission and vision in health care delivery in Rhode Island,” Belcher said. “Prospect Medical Holdings seeks to make a significant investment in us and, by extension, in Rhode Island.”
If all goes well, regulatory review of the new venture will be completed in eight months, Belcher told the Providence Business News. “The first phase is that we need to complete our due diligence within the next 60 days on the letter-of-intent,” Belcher said. Once that agreement is finalized, the new venture will file an application under the Hospital Conversions Act.
Belcher said that he was excited and pleased by the new partnership with Prospect Medical Holdings, a pathway that begin with the issuance of an RFP for a financial partner in December 2011. In the mix of early contenders had been Steward Health Care, but they fell out after the deal with Landmark Medical Center in Woonsocket collapsed, according to Belcher.
“We’ve been working very hard on this,” he said. “Collaboration was a much better way to go than competition.” Belcher said that CharterCare had strengthened its internal finances, eliminating $28 million in expenses over the past few years. But, to get to the next level, the hospital needed to bring in new capital. “This new investment in Rhode Island is a good sign, helping to preserve jobs,” he said, before leaving to address hospital employees gathered in an auditorium to hear the news.
Tom Reardon, president of the division of Prospect Medical Holdings that will oversee the new venture, said that his company was excited about its new partnership with CharterCare. “We believe that the joint venture will build a unique and innovative model for a clinically integrated health care delivery system composed of high-quality providers that deliver high-quality care,” he said.