Rhode Island's AG, seen as likely contender for governor in '26, toils over health care plan

Rhode Island Attorney General Peter Neronha, confident on most questions, says that several years of looking under the hood of the state's biggest hospital transactions has taught him not to underestimate the complexity and difficulty of health care challenges.

But with the state's hospitals in what he described as a state of crisis, he is adamant that Rhode Island must come up with a proactive and comprehensive health care policy strategy to prevent care for many residents from becoming less convenient and more expensive.

And he has two of his top lawyers, plus associated staff, working on one that he plans to present to General Assembly leaders about a year from now.

"Health care is complicated. And it's hard," he said in a recent interview at his office. "And I think that's why in some quarters there is a lack of enthusiasm to take it on, but it has to be taken on."

Since 2020, Neronha's office, which along with the Department of Health is responsible for approving hospital sales, has done financial deep dives into the books of the state's top hospital groups: Prospect CharterCARE, Lifespan and Care New England.

The result has been the rejection of Lifespan's proposed blockbuster merger with Care New England and Prospect being forced to place $80 million in escrow as the for-profit firm's investors look to offload their Rhode Island assets.

These aggressive regulatory moves, combined with his combative social media game, have helped Neronha grab a large share of the Rhode Island political spotlight in the lull before the next big statewide campaigns in 2026.

In addition to health care, the Jamestown Democrat and former federal prosecutor has used the attorney general's bully pulpit to argue for a more aggressive approach to climate change, pushing the office further into the public policy and agenda-setting realm than it has been in years.

The fact that Neronha might run for governor in 2026 adds another dimension to his policy work, to say nothing of an ongoing investigation into the hiring of school consultants ILO Group, who had links to Gov. Dan McKee.

With that in mind, Political Scene sat down with Neronha for a wide-ranging interview on the Prospect CharterCARE case, struggling hospitals, his health care policy vision and plans for 2024.

'Canaries in the coal mine'

More than a year after denying the Lifespan-Care New England merger and separately accusing Prospect Medical Holdings of underfunding Our Lady of Fatima and Roger Williams Medical Center, have the financial conditions facing Rhode Island hospitals fundamentally changed for better or worse?

"I think we are at a place of crisis or near-crisis," Neronha said, describing Fatima and Roger Williams as "canaries in the coal mine."

Over the last 15 to 20 years, Neronha said, Fatima and Roger Williams have been unprofitable, and in recent years had to be "propped up" with cash from California-based Prospect. At some point between 2019 and the end of 2020, the for-profit company decided it didn't want to keep doing it.

Worried that without steady outside capital support, Fatima and Roger Williams would decline, Neronha required the $80 million be placed in escrow as a condition of allowing private equity firm Leonard Green sell its interest in the hospitals. Serving as a kind of insurance policy against defunding of the facilities, around half of the escrow now remains, Neronha said, after some has been used for hospital expenses.

Neronha's office will have control of that $40-million balance until 2026. It is at that point with no resourced or leverage to support them that he worries Fatima or Roger Williams could become the "first health care domino" in the state to fall.

Whatever company owns them "will want to close them," he said. "If they want to stay open on their own, they can't do it on their own. They can't make any money. So what do they do? They're going to come to the General Assembly, not for a one-time bailout, but for an annual bailout. And I could be wrong, but I don't think there'll be an appetite for that."

With for-profit Prospect looking for a way out, the Atlanta-based nonprofit Centurion Foundation reached an agreement to buy the Rhode Island hospitals, a deal that both Neronha and the state Department of Health will need to sign off on.

Centurion applied for permission to buy the CharterCARE hospitals in May, but Neronha's office has yet to sign off on the application being complete, a step that sets the 180-day review clock ticking.

And it doesn't sound like he is in any hurry to speed that process up.

"The ticking clock is more likely to be 2026 than today because I've got $40 million in escrow and I'm not giving it back," Neronha said. "I've told Centurion that there's no way that I will agree to that sale unless that $40 million is accounted for. Now, if Centurion wants to put up $40 million, fine, but I'm not giving that $40 million back to Prospect."

As it is, Neronha feels Prospect has violated the conditions of the Leonard Green transaction anyway, "so I don't think they're entitled to the $40 million back no matter what they do going forward."

If a bailout seems unlikely, and swift, condition-free handover to Centurion isn't the answer, what will save the two CharterCARE hospitals and other struggling Rhode Island health care institutions?

According to Neronha, it will be that "we fix health care so that they can meet the bottom line."

The fix he imagines will need to address all hospitals who serve large numbers of Medicaid patients and as a result are paid the much lower reimbursement rates the government safety-net insurance provides.

"No owner's going to prop them up indefinitely," Neronha said of hospitals with a payment mix like the two CharterCARE facilities. "I mean, who wants to give up 15 million a year to keep two community hospitals going?"

At Roger Williams and Fatima, around 70% of patients are on Medicare or Medicaid and other Rhode Island hospitals, including those owned by Lifespan and Care New England, have similarly challenging payment mixes.

"So we've got to change that mix, get more people on a commercial insurance, or we've got to raise the reimbursement rates for Medicare or Medicaid," Neronha said.

The plan

Since the pandemic, the General Assembly has turned its attention to the problems facing the health care sector and in recent budgets has raised some reimbursement rates.

But there hasn't really been a big-picture examination of health care finance since Gina Raimondo's first year as governor. And that "Reinventing Medicaid" project was focused on cutting public spending, arguably exacerbating some of the problems facing hospitals now.

Neronha said his team is working on a multi-part, soup-to-nuts health care policy recommendation package to give to lawmakers.

It will include ideas to reorganize state agencies and break down some of the "silos" that exist now, he said. And a look at the thorny question of whether there are now too many hospitals.

"Do we have too many hospitals that look like this, meaning community hospitals with beds?" he said. "I'm not saying we do, but who is doing that strategic thinking about what our overall health care needs are, particularly as health care moves away from the hospital setting and more towards the ambulatory setting?"

To learn more about the primary care doctor shortage, Neronha has staff calling every primary care provider within 30 miles of Providence for an appointment. His concern is that health insurers are offering lower reimbursement rates in Rhode Island, prompting doctors to practice in Massachusetts or Connecticut, and possibly not meeting their obligations to policyholders.

Neronha's health care strategic planning is being led by Sarah Rice, deputy chief of the civil division, and assistant attorney general Julia Harvey.

Rice previously worked in Maryland, which has used Medicaid waivers to deploy an all-payer model in which the state sets uniform prices for health care services that providers receive regardless of who the insurer is.

"Maryland has done some really interesting work around Medicare waivers and Medicaid waivers; they have leveraged their federal dollars in ways that Rhode Island has not," Neronha said.

When the multipart plan is done, Neronha said he is going to present it to the speaker and Senate president and see if they want to pursue it, instead proposing individual bills and hoping they move through the legislative process.

Concern that an out-of-state entity will buy one of more Rhode Island hospitals, reducing local control, has traditionally had a lot of influence on state policy. But Neronha isn't particularly fearful of the influence of groups in Boston or New Haven.

"If the relationship makes both stronger, well then, that is good for both," he said about out-of-state groups affiliating with Rhode Island hospitals. "I'm not saying it's necessarily true, but you can't necessarily rule it out simply because there's a border drafted here."

"We can't be small-minded in our approach," he went on. "But to get back to the essential point, we have to be thinking about these things and what has always concerned me is that there's an absence of that strategic thinking."

Loose ends, and a professed loathing of politics

In unrelated cases involving the attorney general's office, Neronha said any announcement related to the investigations of the ILO Group or Sabina Matos' congressional-nomination signatures is now likely to come early in 2024.

An exhaustive report on sexual abuse by clergy is not expected until the spring, and "the amount of information we are going to make public is going to be extraordinary," he said.

Aside from health care, his most notable new legislative initiative next year is likely to be to give prosecutors veto power over waiving jury trials.

And, oh yeah, is he going to run for governor in 2026?

"I don't know what I am going to do," he said. "No one should infer anything from anything I do. I zig when other people zag, not by choice, but I think that's just how I'm wired."

Describing himself as a "lawyer at heart," he lamented being term-limited from remaining attorney general after 2026.

"I mean, how do I put this? I love public service. I hate politics. Politics was a means to get here to hopefully do some good," he added. "So I don't know, I guess I'm just riffing now, but if I could run for a third term, you wouldn't have to ask me what office I am running for."

This article originally appeared on The Providence Journal: Neronha, 'a lawyer at heart,' labors over RI health care, hospital plan