State panel approves non-profit status for Landmark
PROVIDENCE – The state Department of Health’s Health Service Council on Tuesday voted unanimously to recommend changing Landmark Medical Center and the Rehabilitation Hospital of Rhode Island (RHRI) to not- for- profit operation but only after including several additional requirements sought by Attorney General Peter Kilmartin.
The state healthcare facility supervision panel’s recommendation on Landmark owner Prime Healthcare’s request for a conversion from for-profit to non-profit operation of the facilities will now go to Dr. Nicole Alexander-Scott, Department of Health director, for a final decision.
Prime had actually violated the department’s rules for changes in effective control last Dec. 31 when it technically moved Landmark and RHRI from for-profit to notfor-profit status by transferring them into the ownership of its Prime Healthcare Foundation, a Delaware registered non-profit corporation holding 13 of its hospitals nationwide.
After the improper transfer was identified by the state this spring, Prime entered into a consent agreement with the state under which it paid a $1 million fine for its asset transfer and also completed additional agreements with the Attorney General’s office. The Attorney General has a role in overseeing hospital change in effective control requests along with the Department of Health.
Prime Healthcare’s fine for the premature transfer will be shared equally by the state and the City of Woonsocket.
The new requirements from the Attorney General’s office include Prime providing decision compliance reporting for two additional years, and also to annually report any charitable donations to the hospitals. Prime also agreed to “continue to operate Landmark Medical Center as an acute care facility with an open and accessibly emergency room” for an additional five years beyond 2018.
Panel member Raymond Coia said: “I’m doing this based on applying the totality of the evidence to our requisite review criteria.
“There is a lot here from both sides, from the public and I think if we look at the four corners of what our requisite review criteria is, regardless how we feel, legally I think we are bound and I vote aye,” Coia said.
Coia had also voiced concern over the number of meetings, just one, that Landmark held with the city on a potential payment in lieu of taxes agreement while the state reviewed its change in effective control application.
After tallying a 7-0 vote in favor of the change, Health Services Council Chair Victoria Almeida thanked the parties for their participation in the review process while pointing out Landmark’s importance to the community it serves.
“This hospital has been in operation I believe for 140 years, and its emergency room alone services 38,000 people a year,” she noted.
The decision was not the one Mayor Lisa BaldelliHunt and City Solicitor John DeSimone had been seeking when they testified against the change two weeks ago and again on Tuesday.
City could lose $1.7M
The city officials maintained that Woonsocket supported Prime’s original bid to take the longtime non- profit Landmark into forprofit operation as part of its acquisition deal in 2013 because of the annual $1.7 million in new taxes it would gain through the change in Landmark’s status. But after securing its new facilities, the city officials argued Prime set out on a campaign to regain nonprofit status so that it could gain additional federal reimbursements while lowering its operating expenses, a “bait-and-switch” as Baldelli-Hunt called it.
Baldelli-Hunt picked up on a review by the Council’s contracted consultant Jennifer Gallop, that she said showed some information requested by the state was only partially answered, “did not align with other information they received,” or wasn’t accurate.
“Just nothing was positive within that presentation,” Baldelli-Hunt said.
She also detailed Prime’s attempt to file a tax exemption application with the city in Jan. of 2017 that ultimately was “backdated” to Dec. 31, of 2016, the date it transferred Landmark from forprofit to non-profit ownership.
DeSimone said Prime’s interactions with the city, including the move to hold a single meeting on the payment in lieu of taxes, made him suspect of their intentions of working with the community.
“After listening to them testify it looked to me like they had the meeting so they could come before you and say that they met with us,” DeSimone said.
Calling that “self-serving at best,” DeSimone continued that “in my mind I don’t think they have proven to you that they are credible, or that they’ve been a competent good neighbor to the community, obviously not to the administration of the city.”
Gallop’s review included the consideration of additional questions submitted to Prime after the Council’s last meeting on Landmark and noted the updated information that Dr. Prem Reddy no longer serves as CEO and President of the nonprofit Prime Healthcare Foundation and instead, Michael Sarian, a foundation management company employee, holds that role. The hospital governing board for Landmark has also been updated to include two new members to move toward the required mix of local and outside members.
As a Delaware corporation, she noted the Foundation has no public charity requirements in that state.
And, no additional details were submitted on requests for the governing board to meet more frequently, she said.
As to the role of the Foundation in operating the hospitals, Gallop said overall Prime has been operating its non-profit hospitals at a loss, and the Foundation has subsidized hospital operations in the past, noting that “they will not only use the revenues that they sweep up from the hospitals to do that, but will make use of the earnings on their investments and other charitable contributions that they have,” she said. “We didn’t ask for any detail to back that up, that is just a statement that they are making,” she added.
Prime has not committed to “writing” any statement to subsidize their hospitals but have also said the Foundation has not made “assessments” on its hospitals.
As for Landmark and RHRI, she said that under the “traditional organization” they operate at a loss” and the day’s cash on hand figures are low. The operational model of not having a formal budget but a “dashboard” method of transferring needed funds from Prime to operations makes discerning cash flows difficult, she noted.
She offered no disagreement with Prime’s assessment that the tax exemption it would receive as a nonprofit would have a positive impact on the hospitals’ balance sheet, but also indicated its expectation of additional savings from a federal prescription reimbursement program could be premature. That program, she said, is currently under debate in Congress and may not result in the projected savings in the future.
The overall “financially viability” of the Foundation that would operate the hospitals “is strong,” she concluded.
Prime attorney defends move
During her comments to the Council on Tuesday, Prime Healthcare legal counsel Cindy Warren noted Prime has already responded to 55 questions from the Council during the review its application and another 27 following the past meeting.
All of its responses to the 27 were in by the deadline of Nov. 9, she said, adding “we really believe we have satisfied all of the regulatory criteria for this change in effective control.
“We ask you focus on, and I boiled them down a little bit, but will the hospital continue to provide safe and adequate care, will there be sufficient attention to quali- ty and will the hospitals be financially stable?” she said. “It is a resounding yes for all of them,” she said.
She also noted the financial benefits raised in the past such as the federal prescription reimbursement program and an incentive program for doctors forgiving some of their education loan costs that Landmark would be eligible to offer as a non-profit.
She also took on the City of Woonsocket and its opposition to the change.
“We’ve been trying to lay low and we really don’t want to be terribly controversial but we really have to respond to the comment made by Solicitor DeSimone at the last meeting,” she said. DeSimone had raised a pending federal case against Prime she described as allegations of coding and other kinds of Medicare reimbursement issues “that Prime Healthcare is presently fighting.
“They are no different from what most other hospitals in America at some point in their lifetime have to face, an investigation and having to respond,” she said. “We just think it’s not fair to say allegations as if they’re facts. We just don’t think that it’s right,” she said.
Landmark CEO Michael Souza has tried to explain “how we really do want to work with the city of Woonsocket,” she said. “We’ve been very, very supportive over the past four years and we have tried to negotiate with the mayor to come up with some kind of reasonable payment. It’s just the discussions aren’t productive because the mayor at this time just wasn’t, until the application was approved— she’s just not willing to compromise,” Warren said. “We don’t blame her, we feel let’s wait and approach her when discussions can be more productive,” she said.
Warren also disputed the city’s description of Dr. Reddy engaging in a bait and switch with the City of Woonsocket.
“Dr. Reddy came in and saved these hospitals. He promised to save hospitals and he saved the hospitals. He made sure that Prime Healthcare invested $60 million in the hospital agreement where they are today, providing more births, emergency rooms visits at 38,000 and really bringing financial stability to these hospitals,” Warren said.
The City of Woonsocket has benefited through the years from the taxes but not because a promise that Reddy made, or a condition imposed by the department on Prime Healthcare by the Department of Health and the Attorney General, she offered. “It is the law, you’re a for profit healthcare system, you pay taxes. So we really think it was important to set that record straight at least reporting from our view,” Warren said.
Landmark Medical Center’s parent company is asking state regulators to sign off on its transfer of status to a non-profit entity. The transfer is opposed by city officials who are concerned with the potential loss of tax revenue.