The Rhode Island Department of Health is requiring that the owner of Roger Williams Medical Center and Our Lady of Fatima Hospital take immediate steps to stabilize the financial condition of both hospitals to "ensure the continuity of health services and care at the facilities."

In a news release late Thursday, the department stated it was issuing the Immediate Compliance Order to California-based Prospect Medical Holdings – and all related entities – after a "thorough, extensive" review found Prospect was underfunding the hospitals to an extent that it affected operations.

“The health care providers at Roger Williams Medical Center and Our Lady of Fatima Hospital are among the best in the state. People receive very high-quality care at these hospitals,” said Interim Director of Health Utpala Bandy in a news release. “However, these facilities need more consistent support from their corporate owners. The action we took today will ensure immediate accountability and get the hospitals on sounder footing. This is critical for the state as a whole, and for the communities these facilities serve as safety-net hospitals.”

What the state investigation found

Prospect Medical Holdings, the release said, would take all patient-care revenue from both Roger Williams and Our Lady of Fatima each week, and then dole back an "allowance" for the hospitals to operate. The Department of Health stated that the amounts given back to the hospitals to run would vary week-to-week and were often inadequate to pay vendors. This led to:

• In October 2023, at least 19 elective surgeries at the hospitals were canceled because the proper equipment and supplies were not available; vendors had not been paid.

• As of Oct. 24, more than 250 of the hospitals’ roughly 830 vendors were operating on a “cash on demand” basis, meaning they deliver supplies only if they are paid when the supplies are delivered.

• The average time for the hospitals to pay their bills exceeding 90 days.

In addition, while Rhode Island law requires local hospitals to have local governing bodies, the state alleges financial decisions for the hospitals are made in California.

What does Prospect Medical Holdings have to do?

The order requires Prospect Medical Holdings to:

• Hire an independent fiscal monitor who will be on site and report to the Department of Health daily for at least six months.

• Cover all operating costs of the hospitals, which will be determined by the fiscal monitor.

• Create a “cash on hand” escrow account to ensure the stability of the facilities.

• Create a plan to ensure that vendors, on average are paid in less than 90 days.

• Hire an independent operations monitor for six months who will report to the state daily "on census numbers at the hospitals, as well as on staffing and any procedure cancellations."

This article originally appeared on The Providence Journal: Roger Williams M.C., Our Lady of Fatima Hospital underfunded, RI says