WOONSOCKET — The R.I. Department of Health has approved Prime Healthcare’s conversion of Landmark Medical Center in Woonsocket and Rehabilitation Hospital of Rhode Island in North Smithfield to nonprofits, sparing the company from contributing $1.7 million and $19,828 to the communities’ respective tax bases, while also gaining $890,000 in savings with the 340(b) drug discount program unavailable to for-profit hospitals.
The nonprofit status is not retroactive, according to the decision. In October, RIDOH fined Prime Healthcare $1 million for prematurely transferring the hospitals to its nonprofit entity, Prime Healthcare Foundation Inc., on Dec. 31, 2016. According to the decision, the fine will be split between the RI General Treasurer and the City of Woonsocket, the latter of which must spend the money to benefit public health in the area.
The decision approving the hospitals’ conversion to non-profits is effective Jan. 1, 2018.
The Centers for Medicaid and Medicare Services issued a final rule on the 340(b) program in November, according to Kaiser Health News, cutting Medicare payments to hospitals enrolled in it by 28 percent. The American Hospital Association and the Association of American Medical Colleges are suing to prevent the change, according to the report. The uncertain future of the 340(b) program was also noted in the decision.
Landmark hospital is projected to realize a $2,121,881 profit in fiscal year 2017 after two years of losses, $287,823 in 2016 and $1,341,195 in 2015. Landmark reported a $4,859,426 profit in fiscal year 2014, according to the RIDOH 99-page decision, dated Dec. 15.
Rehabilitation Hospital of Rhode Island has posted losses the last two years, $1,778 in fiscal year 2017, $738,693 in 2016, and a $378,693 profit in 2015. The hospital reported a $581,798 loss in fiscal year 2014, according to the decision.
Prime Healthcare purchased the hospitals for $15.7 million with the support of Woonsocket officials, including then-mayor Leo Fontaine, in 2014, who wanted to preserve the hospitals’ services and jobs in the northern Rhode Island community, and touted the for-profit’s potential contribution to the local tax base. At the time, Landmark was a nonprofit hospital.
According to the decision, Woonsocket officials opposed the hospitals’ conversion back to nonprofit status during the Health Services Council’s May 16, Oct. 31 and Nov. 14 meetings this year, citing the resulting loss of $1.7 million in tax revenue to the city.
“I think that it’s important to remember that the taxation that would be lost from this particular hospital going into nonprofit status is very detrimental to the residents of the City of Woonsocket,” said Mayor Lisa Baldelli-Hunt at the Oct. 31 meeting.
At the same meeting, Woonsocket’s solicitor, John DeSimmone, warned the Health Services Council about a California U.S. District Court case where the United States alleges Prime Healthcare induces its physicians to increase in-patient admissions for Medicare beneficiaries at their emergency departments without regard to whether in-patient admission is medically necessary.
“The reason you do that is when you get someone into that type of care you get four times the reimbursement,” DeSimmone said, according to the decision.
According to the document, Prime Healthcare confirmed the pending case in U.S. District Court alleging improper admissions. Prime also disclosed separate allegations that the same hospitals improperly up-coded Medicare claims to boost reimbursement. Prime denies the allegations, according to the document.
Rob Borkowski is a PBN staff writer. Email him at Borkowski@PBN.com.
