Investigating the Closure of Providence Hospital & Safeguarding Nonprofit Assets

Providence Hospital

In 2018, Ascension Health, a national nonprofit healthcare network based in Missouri, announced it would be closing Providence Hospital, a large nonprofit hospital it owned in the District. Providence, located in Ward 5, was the District’s longest continuously operating hospital. It was also just one of just two remaining hospitals on the city’s East side. Providence, which Ascension has controlled since January 2000, is one of the District’s oldest nonprofit entities, founded in 1861 at the urging of President Lincoln.

Ascension’s announcement that it was closing the hospital was met with widespread criticism from the community, healthcare professionals, and local elected officials. Many were concerned that the largely Black and lower-income patients who depended on Providence would no longer be able to access care. When Providence’s own Board of Directors protested the hospital’s closure, Ascension fired and replaced a majority of Board members.

The circumstances around Providence’s closure raised concerns with the Office of the Attorney General (OAG). Under District law, OAG is responsible for protecting District nonprofit organizations and their assets. The Attorney General can intervene on behalf of the public interest if a nonprofit operating in the District violates the law or its own bylaws, or if it otherwise fails to fulfill its charitable purpose. District law also prohibits a District nonprofit (like Providence) that is winding down from transferring assets to a parent nonprofit incorporated outside of the District (like Ascension).

OAG initially opened an investigation into whether Ascension acted improperly when it installed a new board of directors to wind down the hospital’s operations, and whether it gave proper notice to Providence donors regarding the closing. The investigation then expanded to consider whether Ascension imposed excessive fees on Providence in an attempt to improperly remove nonprofit assets from the District. OAG subpoenaed documents related to the Providence Hospital’s governing history, reasons for closing, and finances. It also conducted sworn interviews of the leadership teams of both Providence and Ascension. Expert review revealed that some of the fees Ascension charged Providence were likely excessive.

OAG’s investigation of the issue of potentially excessive fees prompted Ascension in December 2018 to forgive $130 million in debt that Providence owed the health network. If Ascension had not forgiven that debt, it could have forced the sale of Providence’s campus or other assets to recover the money. Instead, Providence’s assets will remain in the District and continue to be used to provide nonprofit healthcare for District residents.

After in-depth review, and based on Ascension’s decision to forgive Providence’s suspect debt, OAG concluded that Ascension had taken appropriate steps to ensure Providence’s assets were not improperly transferred out of the District.

Ascension and Providence have announced plans to develop an innovative “Health Village” on the hospital’s former site. Providence also agreed to provide refunds to donors who gave money after the decision to close the hospital was made but before it was publicly announced, or to obtain donor’s consent to use the funds for Providence’s future form. While OAG has ended its nonprofit oversight investigation into Providence Hospital’s closure, it will continue to closely monitor the development of the hospital’s former campus and the use of its assets.

OAG’s Nonprofit Enforcement Work
This investigation is part of OAG’s effort to ensure that nonprofits operating in the District spend their money for purposes that benefit the public, and to hold these organizations accountable if they break District law. OAG has taken action to protect nonprofit funds when they have been misused or mismanaged by organizations including District charter schools, the owners of a nonprofit that owned an affordable housing building for mismanaging nonprofit funds, and the 58th Presidential Inaugural Committee.

If you suspect that a nonprofit doing business in the District of Columbia is violating District law, please contact the Office the Attorney General at (202) 727-3400.