'Going concern' doubt at Maryland proton center as similar bond-financed centers struggle

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The Maryland Proton Center's most recent audit raises doubt — once again — about the center's ability to continue as a going concern while similar bond-financed cancer treatment therapy centers struggle across the country.

"The center's management has concluded that, due to uncertainties surrounding the center's future ability to repay its outstanding bond obligations and maintain compliance with the covenants and other requirements under the trust indenture, substantial doubt exists as to its ability to continue as a going concern" as payments become due within one year, the Maryland Center's latest audit said.

It's at least the third straight audit that warned of going concern doubts. The notice comes after the center in January notched a fresh default on $8.7 million of interest due on $267 million of unrated municipal bonds.

The Maryland facility is one of several struggling proton centers financed with speculative-grade municipal bonds. Proton therapy more precisely targets radiation to tumors, with less damage to surrounding tissues than other radiation therapies. The treatment is costly, not always covered by insurance, and has not gained widespread acceptance. The centers rely on patient revenue for bond payments and many have struggled to build volume, especially in the wake of the COVID-19 pandemic.

Many were financed through Wisconsin's Public Finance Authority. The PFA did not provide comment by press time.

Limited insurance coverage hampers the sector, said Steve Hicks, CEO of Provident Resources Group, Inc., which owns a $416 million Georgia proton center that has missed bond payments, most recently in January.

"GPCC and other proton centers across the country are dealing with reimbursement rate challenges. We are working with the National Association of Proton Therapy in an effort to address these challenges," Hicks said in an email.

The center "continues to work with our bondholders in a collaborative manner," Hicks added. "We remain very proud of our service and the care GPCC and Emory Health provides to our patients throughout the region and from outside the U.S."

The Maryland center has been in default since 2022, according to Moody's Investors Service.

A chunk of Maryland center bonds traded on April 23 at rock-bottom prices. Roughly $6 million of senior bonds due in 2049 with a 8.5% coupon traded for $0.05 according to the Electronic Municipal Market Access website. The MSRB confirmed the trade prices.

There are roughly 40 proton therapy centers operating in the U.S. Among those facing struggles:

New Jersey's Princeton Procure Proton Therapy Center in January defaulted on interest payments and in February made a partial payment to bondholders from the senior debt service reserve fund. The bond trustee, UMB Bank NA., has retained Greenberg Traurig LLP to represent it in association with the bonds.

The PFA and Georgia-based Proton International LLC center at the University of Alabama Birmingham, were sued by Varian Medical Systems Inc. to recover $6 million owed for the purchase of a Varian proton system and other work. The facility in default on its bonds and closed in December 2023 amid an ongoing dispute with the University of Alabama.

The Proton International Arkansas, LLC reported in late December that it would miss an interest payment on subordinate bonds and would be forced to shift money from its liquidity support fund to the debt service fund to make the Jan. 1 interest payment on the senior bonds.

In 2020, a trio of proton centers in Tennessee and Florida filed for bankruptcy, affecting more than $360 million of bonds. Provision Cares Proton Therapy Centers in Nashville and Knoxville, Tennessee., and a related center that was being built in Orlando, Florida, filed for Chapter 11 in the U.S. Bankruptcy Court in Nashville. They cited low patient volume, the covid pandemic and cyberattacks as driving the insolvency. The case was closed in September 2023 with bondholders receiving roughly 58.1 million, according to court filings.

Kathie O'Donnell contributed to this report.