Rhode Island’s health advisory board on Tuesday unanimously approved Prime Healthcare Services’ conversion of Landmark Hospital to a nonprofit, thereby allowing the company to avoid paying millions of dollars in property taxes to the City of Woonsocket.
The Health Services Council’s approval comes two weeks after the state Department of Health fined Prime $1 million for illegally moving Landmark and the Rehabilitation Hospital of Rhode Island in North Smithfield into the company’s charitable foundation without the state regulators’ permission.
The fine against the California-based for-profit company is the largest in at least three decades leveled by the state against a health care company.
Prime has been illegally operating Landmark and the Rehabilitation hospitals as nonprofits for nearly a year.
The council’s approval serves as a recommendation to state Health Director Nicole Alexander-Scott, who has final say in the matter.
No details about the council’s vote were immediately available, Joseph Wendelken, a health department spokesman, said late Tuesday.
But some details emerged about state officials negotiations with Prime in a Nov. 14 letter submitted to the council from the Rhode Island attorney general’s office. The letter from Katie Enright, an assistant attorney general, to the state’s chief health regulator, Michael Dexter, states that “to confirm their commitment to the Hospitals, Prime has agreed to continue to operate Landmark Medical Center as an acute care facility with an open and accessible emergency room for an additional five (5) years…” The current agreement to keep those operations open, made when Prime purchased the hospitals, is set to expire on Dec. 31, 2018.
Last summer, state health regulators discovered Prime’s illegal actions after the company released its 2016 financial reports, according to a consent agreement signed by state regulators and Michael Souza, chief executive officer of Landmark and the Rehabilitation Hospital.
Prime had repeatedly assured state regulators that there had been no change in the hospitals' status, the agreement said.
Prime maintained that it “provided a good faith application” for the hospitals’ nonprofit status. However, Prime acknowledged it moved the hospitals into its foundation while “the conversion to non-profit was pending state and regulatory approvals.’’
Prime agreed to pay $500,000 to the state general treasurer and another $500,000 to Woonsocket to be used to benefit the public health of its residents and surrounding communities.
The $1 million fine is less than the $2.5 million in property taxes Prime paid in 2016. That included $1.6 million to Woonsocket and $9,647 to North Smithfield, according to local tax assessments.
Earlier this year, Prime had planned to buy the financially ailing Memorial Hospital from Care New England Health System. The purchase was to be done through Prime’s nonprofit arm -- Prime Healthcare Foundation, Inc. But negotiations broke down in mid-October, and Care New England subsequently announced plans to close Memorial.