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DOH director gives his nod to Landmark, Prime merger

October 26, 2013

WOONSOCKET — It came at the end of the day, but for Landmark Medical Center a decision by R.I. Department of Health Director Michael Fine supporting its acquisition by Prime Healthcare appears to be a major step forward toward a new beginning for the local 214-bed acute care hospital.

Fine issued decisions of approval on both change of effective control applications by Landmark and Prime late Friday, and also ruled favorably on their application for an acquisition under the state’s Hospital Conversion Act.

“We did our due diligence in reviewing these applications, and found that Prime met the criteria for approval of its application,” Fine said in the announcement of his decisions.

“We are pleased to welcome Prime to Rhode Island and thrilled they are joining our collaboration to make Rhode Island the healthiest state in the nation,” he said.

The full decisions by Fine were posted on the department’s website at www.ri.gov.

The department’s approval, however, is only one of two state approvals needed to make Prime’s proposed acquisition of Landmark complete under the Hospital Conversion Act. Attorney General Peter Kilmartin must also decide whether the application merits his approval, and that decision was not rendered jointly with Fine’s.

Landmark was still awaiting Kilmartin’s decision, the hospital’s spokesman, Bill Fischer, said Saturday, and would not speculate on what his ruling in the matter might be.

“We certainly have great respect for this regulatory process that is overseen by the Department of Health and the office of the Attorney General,” Fischer said.

“We are certainly awaiting the Attorney General’s decision and will not prejudge it,” he said.

The Department of Health and the Attorney General are required under the provisions of the Hospital Conversion Act to render their decisions within a review period ending on Monday.

And while still awaiting the second part of the state’s decision on the application, Fischer said Landmark was pleased to have gained the support of Fine in that process. “It is very good news for Landmark Medical Center and very good news for the hospital’s 1,100 employees, and it is good news for economic development in northern Rhode Island,” he said.

Most important of all, Fischer said, the decision supports the continuation of Landmark as a quality healthcare provider to the northern Rhode Island community, a goal the hospital had set when it began seeking a partner to help it out of its longstanding fiscal problems.

“We knew 1,100 jobs were at stake if we were not able to find an acquisition partner, and we felt Prime was a great fit for that acquisition,” he said.

Landmark’s long-standing losses from providing free and uncompensated care to underinsured or non-insured patients at the hospital had made it difficult to complete a partnering arrangement in the past, and the opportunity to access Prime’s management resources, already proven at turning around troubled hospitals, made the proposed acquisition all the more desirable, according to Fischer. Prime is a for-profit hospital corporation, and as such its acquisition of Landmark would convert the hospital to for-profit status, a change providing new tax revenues to the city as an added incentive.

The for-profit company would also invest $30 million worth of capital improvement in Landmark and provide it with improved technology for its patient services, according to Fischer.

Prime would also be acquiring Landmark’s Rehabilitation Hospital of Rhode Island facility at Park Square as part of the transaction.
Fine mentioned Prime’s business model in his decision as one of the issues he had considered as a possible downside of the proposal.

The department considered, according to Fine, that the “potential impact of approval” (and acquisition) on the one hand, or denial (and the possibility, if not probability of closure) on the other, in light of its duty to “take cognizance of the interests of life and health among the peoples of the state.”

The department also took cognizance of Prime’s business model, Fine stated, “its past corporate behavior, and expresses, for the record, concern that Prime’s presence in the market may contribute to the growing cost of health care in Rhode Island, particularly in the public payer programs, should those past practices be put into play in Rhode Island.”

The department also took notice of testimony during its review of the number of excess hospital beds in Rhode Island in regard to Prime’s past business practices.

“Still, the alternative to the acquisition of Landmark by Prime is an expected closure of the hospital, and the considerable adverse economic impact on the hospital’s catchment area,” Fine stated.

“Given this reality, and the consequent likely adverse impact of economic hardship on the health of the people who live in the hospital’s catchment area, the department accepts the contention that, taken as a whole, this acquisition is in the public interest,” Fine concluded.

In a statement issued on Fine’s decision on Saturday, Landmark President and CEO Richard Charest said that while still awaiting the approval of the Attorney General, Landmark does view the initial approval as “welcome news for our employees and the Greater Woonsocket community.”

“It has been a long and winding road these past five years, and we are now starting to see some light at the end of the tunnel,” he said.
Charest described Fine’s favorable decision as a result of “the collective effort of our employees, physicians, and so many members of the community who pulled together to save Landmark Medical Center.”

Even with a similar favorable ruling from Kilmartin, the actual transaction of the hospital’s acquisition by Prime would not begin until its state-appointed special master, Jonathan N. Savage, grants his agreement to the deal.

Savage would be asked to consider the next step in that process once a final decision has been rendered by the state, Fischer said Saturday.
“We don’t want to put a timeline on that because we are still under the supervision of the court overseer process,” he said.

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