CharterCARE Bonds Aren’t Selling, McKee Is Pouring in Millions to Try and Save Deal

CharterCARE Bonds Aren’t Selling, McKee Is Pouring in Millions to Try and Save Deal

More than two weeks after the two bonds offered by the Rhode Island Health and Education Building Corporation (RIHEBC) totaling $140,665,000 hit the market, there is a desperate effort to try to salvage the deal.

The money from the bonds is to fund the deal in which Georgia-based Centurion Foundation would take over the CharterCARE hospitals from bankrupt Prospect Medical Holdings. The hospitals include Roger Williams and Fatima.

Centurion has never run a hospital.

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The bonds were pre-marketed for weeks — roadshows, online presentations, and one-on-one investor meetings. The marketing started on May 7.

S&P rated the bonds as BB- with a negative outlook.

The deal was scheduled to close on May 29; the bonds did not close, and the deal has been floundering.

The Wall Street firm Barclays, the deal's underwriter and the group leading the bond marketing, was unable to sell a significant amount of the bonds.

 

Good Money After Bad?

Now, the McKee Administration is trying to save the deal, but it may be good money after bad.

Amended deal documents were issued on Saturday, highlighting that McKee is trying to pump millions into the hospital. But while the new documents promote McKee’s proposed changes, they ignore that developments in Washington, D.C. may hit the CharterCARE hospital’s bottom line.

The amended bond package released Saturday highlights an amendment to the budget proposed by McKee, first reported by GoLocal on May 28th. The McKee deal shifts $10 million from elderly programs and other health programs to Fatima Hospital for a behavioral health program.

If approved by the legislature, the initiative would need approval from the Trump administration’s Centers for Medicaid and Medicare — historically, this review process can be lengthy.

But, there are significant questions about the financial modeling of the deal. The revised financials anticipate even greater positive EBIDTA [ Earnings Before Interest, Taxes, Depreciation, and Amortization]. The financials show the hospital flipping from losing $60 million in FY 2023 to running a net positive revenue of nearly $9.7 million in its first year under the new management in FY 2026.

It is a turnaround that at least one national healthcare expert says would be unprecedented and unrealistic.

And in this healthcare environment, it would appear to be impossible.

 

Trump’s “Big Beautiful Budget Bill”

The financial modeling for CharterCARE does appear to take into account the impact of significant cuts to Medicaid.

The Trump budget bill that has passed the House and is now pending in the United States Senate would have a significant adverse impact on so-called “safety net” hospitals like Roger Williams and Fatima.

The most direct impact is a projected surge in uncompensated care costs for hospitals.

By 2034, hospitals would face at least $42.4 billion more in uncompensated care annually compared to 2025 levels—split between $21.7 billion from Medicaid payment shortfalls and $20.6 billion from caring for the newly uninsured, according to Fierce Healthcare. 

Safety net hospitals, which serve a disproportionate share of low-income and uninsured patients, are expected to bear about 25% of these added costs, amounting to an additional $10.7 billion in cuts in 2034 alone.

KKF estimated that between 34,000 and 56,000 Rhode Islanders will lose their medicare coverage under the House version.

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