Can city stymie Landmark move to non-profit?

Officials consider moves to force hospital to keep paying taxes to city

PROVIDENCE – As Landmark Medical Center seeks to change from its current for-profit operation to a nonprofit status similar to most hospitals in state, local legislators are looking to maintain the current tax contributions Landmark makes to Woonsocket even if that change is made.

State Rep. Michael Morin has a bill in the House and state Sen. Roger Picard a similar measure in the Senate that both seek to force Landmark, now a member of the Prime Healthcare forprofit hospital network, into some form of a tax contribution or tax stabilization plan if the change from for-profit to non-profit operation is made.

Morin’s bill, H5779, was heard in the House Finance Committee last week and held for further study and Sen. Picard’s bill, S0461 was aired by the Senate Finance Committee and was also held for further action as the legislators work on the overall state budget for the coming fiscal year.

Morin said he put in his bill in at the request of Woonsocket City Councilman James Cournoyer who is worried that the change in Landmark’s tax status could hurt the city through a loss of expected revenues.

Morin also sees impacts on the city if Landmark were to suddenly stop paying the $1.6 million it now contributes to city coffers since converting Landmark from a failing non-profit community hospital to a for-profit

operation boosting capital improvements and program operations.

“The problem I have is that we were under a Budget Commission that came up with a five-year plan to solve our financial problems and Landmark’s tax review was part of that five-year budget plan,” he said. “They are a piece of the financial puzzle and it’s not fair to the rest of the taxpayers if they no longer pay taxes,” Morin said.

Landmark had been a nonprofit hospital for all of its 140-year history before being acquired by Prime Healthcare and converted to for-profit operation, but local governmental leaders and many city residents had vocally supported Prime’s acquisition of Landmark when its conversion was reviewed by the state Department of Health and the Attorney General’s Office and ultimately approved.

Prime set off the current round of legislative maneuvering when it announced during the winter that it would be applying for a conversion back to non-profit operation of Landmark after deciding to move the Cass Avenue, Woonsocket, based community hospital from its for-profit Prime Healthcare Services entity to ownership by its non-profit Prime Healthcare Foundation Inc., holding company.

Picard said on Thursday that his own bill on Landmark’s taxable status would be heard by Senate Finance even as Prime moves forward with a state Health Service Council review of its change in effective control application that was accepted by the state on April 15.

In light of the state’s acceptance of Prime’s application, the state will now have 90 days to render a decision on Prime’s request, Picard explained.

How the review process affects legislation that is passed regarding such con- versions remains to be seen, but for now the tax impact bills are at the least being reviewed, Picard noted.

“This is something new, we have never had a nonprofit hospital converted to for-profit operation and then go back to being not for profit,” he said.

The General Assembly could approve the pending legislation that would say a hospital going through such a conversion would still have to pay some form of taxes or secure a tax stabilization plan with its host community, or at least encourage that a discussion on that possible contribution be held, Picard said.

Noting the bill would be held in Senate Finance for now, Picard said he planned to continue pushing for its consideration.

He also advised Woonsocket residents to do the same. “I want them to write to the Health Services Council and say that they think Landmark should continue to be a great corporate neighbor and talk to the city about a tax treaty or payment in lieu of taxes,” he said.

PROVIDENCE – Members of the Senate Finance Committee heard two opposing views on Landmark Medical Center’s proposed change from for-profit to nonprofit operation while considering a bill filed by Sen. Roger Picard seeking to minimize the financial burden of that change on his home community of Woonsocket.

On the one hand, was Landmark’s new President and CEO Michael Souza— head of the Prime Healthcare-owned, Cass Avenue-based Landmark— arguing his hospital should be released from property tax liabilities as a result of the proposed conversion. And, on the other was Woonsocket City Councilman James Cournoyer who maintained Woonsocket will need Landmark’s current $1.6 million in tax payments to remain fiscally healthy.

Souza told the Senate committee members last week that Landmark and its Rehabilitation Hospital of Rhode Island operation are part of the 44 hospital network operated by Prime.

“Of those 44 hospitals, 14 are part of the Prime Healthcare Foundation which is a non-profit. So of the 44 hospitals we have nationwide, 30 are for-profit hospitals and 14 are non-profit,” Souza explained.

Prime has recently decided to donate Landmark over from its for-profit hospital holdings to its Prime Healthcare Foundation, which would in turn operate it as a non-profit, he explained.

Prime acquired Landmark Medical Center in 2013 from a state-run receivership while the hospital was fiscally troubled, and changed it to a forprofit, according to Souza.

“At that time there was no other interested party in acquiring the hospital and it faced closure. They had a couple of days cash on hand,” he said.

Landmark employs about 1,000 staff members in its operations, with most of those employees coming from the Greater Woonsocket community, according to Souza.

The hospital now hosts a state-of-the-art interventional stroke and cardiac care program— the only interventional cardiology program in the area— and Prime has also added “quite a bit to the community’s benefit, including state-of-art technology, new patient units, a newly renovated cancer center, a new wound care center, and recruitment of best-in-class providers,” he said.

“That represents a $20 million investment in the Woonsocket community and resulted in improved patient safety and quality of care. And there is much more to come,” he said.

Although only arriving at his job from the Hospital Association of Rhode Island four weeks ago, Souza said he already has a four-page list of added capital improvements by Prime still to come above that $20 million investment.

It should be no surprise, that Prime and Landmark are opposed to the non-profit conversion legislation, he told the committee, since it would require “us to pay 100-percent of the property tax as a nonprofit, which would be unlike many other non-profit hospitals in the state which pay either zero or pay an extremely minimal pilot program with their city,” he said.

Providence in fact is the only community to have such an agreement with a couple of its non-profit hospitals, he said.

“So I think our point of view, and our argument would be, just really to be treated equally on a level playing field while becoming a nonprofit,” he said.

“Landmark was a for-prof- it for the last three years, and the city has benefited,” Souza said.

“In year one, we paid $900,000 worth of property tax and in year two there was a re-evaluation of the property and because the property hadn’t been revalued for quite a while it went up from $900,000 to $1.6 million. We paid that in year two, again in year three, and now we are in year four,” he said.

But now that Landmark will once again be becoming non-profit, Souza said the hospital shouldn’t be penalized for its three years of forprofit operation. “We were a non-profit for 140 years, so we don’t feel again we should be penalized for the last 3 years of investment in the city, the hospital and jobs, and through all the capital investment that we have had,” he said.

Landmark was just barely profitable last year, Souza told the panel, but he added that is a significant improvement over the hospital’s past troubles of being on track to lose $10 million a year. “So there has been a significant turnaround but there is still more to come,” he said.

Cournoyer, however, offered the panel a much different view of Prime’s role as a taxpayer in the community.

Cournoyer said the city has no problem with Prime after it came to convert Landmark to for-profit operation and said “we applaud them. We want to see them survive and thrive. They have done a good job,” he said.

But the city does not want to see Landmark exempted from the taxes that it agreed it would contribute to city coffers when it arrived to take over the hospital, according to Cournoyer.

“This issue is that when they came in, as Mr. Souza said, there were other suitors, some came and some went. There was a view in some circles that we should just shut Landmark down. And that could have happened,” he said. “But they got a lot of support from the city of Woonsocket, from Sen. Picard and others, to support the acquisition of Landmark Medical by Prime,” he said.

“And they came in as a forprofit and that was unique for Rhode Island, that was a first,” he said. “So they came in with their eyes wide open, they knew they were coming in as a for-profit, they knew they were going to be paying property taxes,” he said.

“With all due respect to Mr. Souza, it is disingenuous in my mind to say to say “oh, we paid taxes for three years and now we shouldn’t be punished and we need a level playing field,” Cournoyer said.