Landmark Medical Center valued at $65M in unauthorized transaction

WOONSOCKET, R.I. (WPRI) – Landmark Medical Center’s owner valued the Woonsocket hospital at $65 million when it completed a business transaction last year that the state now says was illegal.

The R.I. Department of Health last month announced Prime Healthcare Services, Landmark’s California-based owner, will pay a fine of $1 million for transferring the hospital to its not-for-profit affiliate without state approval. Landmark became a for-profit entity when Prime bought it in 2013, and Woonsocket officials have been fighting the company’s pending application to convert it back to not-for-profit status.

Prime paid $15.7 million in 2014 to purchase Landmark and its sister facility, Rehabilitation Hospital of Rhode Island, according to the for-profit company’s latest audited financial statements.

Prime’s not-for-profit affiliate, Prime Healthcare Foundation Inc., took control of Landmark last Dec. 31, “subject to ratification by the regulatory authority,” according to the foundation’s most recent audited financial statement. Prime sought permission to make the move the same day.

Technically, the for-profit company (Prime Healthcare Services) “made contributions of its ownership interests in Landmark Medical Center” to the not-for-profit (Prime Healthcare Foundation), according to the financial statement. Landmark’s $65 million in assets at the time included $40 million in property and equipment, $23 million in outstanding patient bills and $808,000 in cash, according to the foundation.

When the fine was levied last month, a Landmark spokeswoman said the company had agreed to pay it following “extensive discussions with the state” and “in the interest of time and moving this application forward.”

Landmark is one of a number of hospitals that Prime has transferred to its not-for-profit affiliate, which is exempt from taxes. The not-for-profit affiliate in turn paid the for-profit company more than $52 million in fees for management and other business services last year, according to the financial statement.

The R.I. Health Services Council is scheduled to take up Prime’s request to convert Landmark to nonprofit status at a meeting on Tuesday.

Separately, Landmark said last week it had received an “A” safety grade from The Leapfrog Group, a national nonprofit organization that rates health providers. Landmark CEO Michael Souza said in a statement the grade shows the hospital has “made great strides.”

Ted Nesi (tnesi@wpri.com) covers politics and the economy for WPRI.com. He writes Nesi’s Notes on Saturdays and hosts Executive Suite. Follow him on Twitter and Facebook