Legislation would allow city to tax Landmark

Bill proposed in General Assembly would target Landmark to make it taxable even if it becomes non-profit

WOONSOCKET – State lawmakers have introduced a bill into the General Assembly that is intended to prevent Landmark Medical Center and the Rehabilitation Hospital of Rhode Island in North Smithfield from becoming tax exempt if the for-profit facilities are converted to nonprofit status, as their parent corporation seeks.

The measure would prohibit such switchover hospitals from qualifying for taxexempt status – unless the city or town council in which the affected health care facilities are located say otherwise.

Prime Healthcare Services, the for-profit company that owns Landmark and RHRI, filed an application to convert them to nonprofits on Dec. 31 with the state Department of Health – a move city officials say puts up to $1.6 million in hospital-driven tax revenue at risk.

Whether the bill gains any traction in the General Assembly remains to be seen. And even if it does, sponsors say it’s unclear if the measure can be applied retroactively to Prime’s proposal.

“That’s the million-dollar question,” said State Sen. Roger Picard (D-Dist. 20, Woonsocket-Cumberland). “I don’t know that any legislation we introduce at this point is applicable to the situation.”

State Rep. Michael Morin (D-Dist. 49, Woonsocket) introduced the measure in the House on Tuesday and Picard said he expected to introduce a companion measure in the Senate yesterday.

The bill is an amendment to a state law that exempts certain classes of property from taxation, including nonprofit hospitals. The measure would generally preserve the exemption except for “nonprofit hospitals that are converted from for-profit to nonprofit hospitals, or nonprofit hospitals that are owned directly or indirectly by forprofit hospitals or by for-profit healthcare companies and or for-profit holding companies…”

The proposed measure says hospitals that fall into the exclusion “shall not be exempt unless authorized in whole or in part by the City or Town Council of the city or town in which the hospital is located after holding a properly advertised public hearing and making a determination that such exemption is in the

best interest of the community…”

The municipal councils would also be empowered to negotiate a tax stabilization agreement or a payment in lieu of taxes with the affected healthcare organizations.

The law is uniquely crafted to Prime’s efforts to convert the Greater Woonsocket hospitals. Before they were purchased out of receivership by the Prime in 2013, they were nonprofit facilities, but they were switched – at Prime’s request – to for-profit facilities, a move that required the General Assembly to amend a state law governing hospital acquisitions known as the Hospital Conversions Act.

Picard says it appears those revisions provide DOH with unilateral authority to decide whether Prime may now switch the hospitals back to nonprofit status. Attorney General Peter Kilmartin said as much recently during a recent interview with radio station WNRI.

“When the HCA was changed to allow Landmark to do what it needed to do, we never really thought about the reverse happening too much,” said Picard. “So what we’re trying to do is address that.”

Lawmakers say the idea for carving out an exclusion to the nonprofit exemption for Prime’s hospitals originated with City Councilman James Cournoyer.

Cournoyer said he wants to make sure the city is doing everything it can to protect its revenue interests at Prime without alienating the owners of the hospital.

“There may be very good reasons why Landmark wants to become nonprofit,” he said. “It might not just be to avoid paying property taxes. My view… if they want to be nonprofit, I’m not going to oppose that. If it makes sense for them we should support that.”

“But they should also pay their taxes, no different than they pay their salaries, their public utilities…” said Cournoyer.

Mayor Lisa Baldelli-Hunt raised questions about the proposed legislation, however, saying its bound to run into opposition from other forprofit hospitals in the state and the lawmakers from the communities where they operate.

“There are other hospitals in Rhode Island that are forprofit,” she said. “I don’t feel it’s something that’s going to land in the hands of a City Council because of the significant impact it could have on municipalities.”

The mayor said she’s “in total opposition” to Prime’s proposed conversion of the hospitals, but if it happens the company may be willing to negotiate a treaty of some sort with the city that involves continued payment. She said she met with representatives of Landmark and Prime about a week ago and made her position abundantly clear.

“We did have a conversation about taxes,” the mayor said. “Both parties appear willing to come back to the table.”

Prime’s application to convert the hospitals to nonprofit status is technically known as a request for change of effective control, a term regulators use whenever a healthcare entity proposes a change of ownership. Prime proposes donating all of the assets of Landmark and the Rehabilitation Hospital of Rhode Island to its charitable arm, Prime Healthcare Foundation, a separate entity incorporated in Delaware.

Prime owns 32 hospitals around the country and about a dozen operate as nonprofits under the auspices of Prime Healthcare Foundation, papers on file at DOH say. Some of those hospitals used to be for-profit facilities, the company says.

The hospital argues that switching Landmark and RHRI back to nonprofit status is a better match for the income demographics of the region and would allow the hospital to increase its level of uncompensated care.

Although Prime filed the application for change of effective control on Dec. 31, formal review by DOH’s Health Services Council has not yet begun, according to Joseph Wendelken, spokesman for the agency.

The review will not begin until regulators are satisfied that the application contains all the necessary information required to render a decision.

“The application is not yet complete,” he said. “We replied to Prime requesting more information.”

When DOH is seemed complete, the agency will issue a public notice that the review has begun, triggered a 30-day window for public comment. The HSC is allot- ted up to 60 days after that to render a decision.

In addition to the application for change of control, Prime has filed a separate application with for a certificate of need to establish an Level III trauma center at Landmark Medical Center, an move that would require about $11.3 million worth of renovations to the emergency room.