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Westerly Hospital receivership approved by judge

Wakefield, R.I. - A Superior Court judge Wednesday approved Westerly Hospital's petition for receivership, beginning a process to allow the financially troubled hospital to restructure its debt and stabilize its finances.

Associate Justice Brian Stern said he would name a temporary administrator, called a special master, by Friday, to oversee the hospital while it is in receivership. The special master is an attorney chosen for his or her expertise in this area. Day-to-day operations at the hospital will be unaffected by the receivership status.

Attorney Richard Beretta submitted the petition for receivership on behalf of the hospital and four affiliated companies, including Atlantic Medical Group - a Westerly physician practice - and the North Stonington Health Center, a recently opened walk-in clinic, primary care, physical therapy and lab services center.

In the petition, the hospital said that it "has not generated a surplus for 20 years and operated at a loss of over $5.7 million for its most recent fiscal year." The hospital said it has been working to locate a strategic partner to stabilize its operations.

The Westerly Hospital had been in talks since this summer with Lawrence & Memorial Hospital in New London toward a possible merger or partnership. Receivership voids the contract between the two hospitals for exclusive negotiations. The special master can entertain a new offer from L&M as well as other would-be partners, however.

The special master would be in charge of the hospital's day-to-day operations and take charge of its assets, according to the petition. The receivership status will protect the hospital from lawsuits, foreclosures and other actions against it by creditors, the petition said.

Over the next two days, Judge Stern expects to appoint two committees, one representing the state attorney general, the state health department and other regulators, and another representing employees including doctors, as well as vendors and creditors, said Craig Berke, spokesman for Rhode Island court system.

Todd Nelson, technical director for senior financial executives for the Health Care Financial Management Association, said that nationwide, there has been an increase in recent years of the number of hospitals struggling financially, though he could not provide specific numbers. It has become increasingly common for independent hospitals to seek to merge or be acquired by larger institutions, he said.

"Is it a trend? Absolutely," he said.

Neither patients nor employees should notice any changes at the hospital now that it is in receivership, Nelson said. Hospital officials have been emphasizing that there will be no changes in services, hours, or employee pay and benefits.

The main effect, Nelson said, will be that the hospital will not be able to take on any new debt for expansions or major equipment purchases.

j.benson@theday.com

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