Rhode Island fines Prime Healthcare $1M for illegally converting 2 hospitals to nonprofits

The Rhode Island Department of Health fined Ontario, Calif.-based Prime Healthcare Services $1 million for violating a state law requiring state regulatory approval to convert two of its Rhode Island hospitals into nonprofit entities, according to Rhode Island Public Radio.

According to an Oct. 30 consent agreement, Prime submitted applications to RIDOH Dec. 31, 2016, to legally convert Woonsocket, R.I.-based Landmark Medical Center and North Smithfield-based Rehabilitation Hospital of Rhode Island into nonprofit hospitals.

Prime told regulators it had not completed the transaction involving the two hospitals, and repeatedly assured regulators the deal had not been completed. However, RIDOH obtained a copy of the health system's financial records for 2016. The documents showed the transaction had been completed in December 2016.

Under the agreement, Prime agreed to pay $500,000 to the Rhode Island General Treasurer and $500,000 to the city of Woonsocket. A state department spokesperson told Rhode Island Public Radio the $1 million fine is one of the largest the state has ever leveled against a health system, according to the report.

Prime will continue to operate both hospitals to "avoid disruption" in patient care, according to the agreement.

It is unclear whether the failed acquisition deal between Prime Healthcare's nonprofit arm, Prime Healthcare Services, and Pawtucket, R.I.-based Memorial Hospital earlier this month contributed to state regulators' discovery regarding Prime's dealings with the two other hospitals, according to the report.

The RIDOH spokesperson told Rhode Island Public Radio, "The Rhode Island Department of Health never received an application from Prime to purchase Memorial Hospital, so I cannot comment on that hypothetical scenario. However, [the] character and standing in the community are factors that are considered during the approval processes for the purchase of a hospital."

"Prime Healthcare provided a good faith application acknowledging that the conversion to nonprofit was pending state and regulatory approvals. After extensive discussions with the state, and in the interest of time and moving this application forward, Prime Healthcare has entered into this consent decree. Prime Healthcare remains deeply committed to the community and patients we serve, as evidenced by our commitment to establishing a trauma center at Landmark Medical Center. We are hopeful this development will move our trauma center application further along in the process," a spokesperson for Prime told Becker's Hospital Review via email Oct. 30.

The RIDOH Health Services Council will meet Oct. 31 to discuss Prime's application to maintain Landmark Medical Center and the Rehabilitation Hospital of Rhode Island's nonprofit status, the report states.

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