State panel ap­proves non-profit sta­tus for Land­mark

Woonsocket Call - - Front Page - Fol­low Joseph Nadeau on Twit­ter: @JNad75 By JOSEPH B. NADEAU jnadeau@woonsock­et­call.com

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.

Photo by Ernest A. Brown

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.

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