STATE OF RHODE ISLAND
DEPARTMENT OF HEALTH

CONSENT AGREEMENT

WHEREAS, this matter is before the Rhode Island Department of Health 
pursuant to the authority conferred upon the Director of Health (the ?Director") under the provisions
of R.I. General Laws 23-17 and 2347.14, R23-17. the Rules and Regulations Pertaining
to Hospital Conversions Regulations?), the Rules and Regulations for
Licensing of Hospitals, and the Rules and Regulations for Licensing of
Rehabilitation Hospital Centers; and

WHEREAS, Section 1.10 of the HCA Regulations de?nes a Conversion as ?any transfer by
a person or persons of an ownership or membership interest or authority in a hospital, or the assets
thereof, whether by purchase, merger, consolidation, lease, gift, joint venture, sale, or other
disposition which results in a change of ownership or control or possession of twenty percent 
or greater of the members or voting rights or interests of the hospital or of the assets of the hospital
or pursuant to which, by virtue of such transfer, a person, together with all persons af?liated with
such person, holds or owns, in the aggregate, twenty percent or greater of the membership or
. Yates .l?ishss'. We? sites. was of. materiel: 91'. the tassel;address?_
substitution of a partner which results in a new partner gaining or acquiring a controlling interest in
the hospital, or any change in membership which results in a new person gainng or acquiring a
controlling vote in the hospital?; and

WHEREAS, pursuant to RIGL 2347.146 and Section 2.0 of the HCA Regulations, any
hospital conversion shall require prior review and approval from RIDOH in accordance with the
provisions of Chapter 2347.14 of the Rhode Island General Laws, as amended, and the HCA

Regulations; and

 

 

 

WHEREAS, pursuant to Section 6.1 Review of Other Conversions of the HCA Regulations,
RIDOH shall review all preposed conversions involving a for~pro?t hospital as the acquires and a
not-for-pro?t corporation as the acquirer in accordance with the provisions for change of effective
control pursuant to sections 23-17-143 and 23-17-14.4 of the Rhode Island General Laws, as
amended; and

WHEREAS, pursuant to RIGL 23-17-6, a license issued under the provisions of this section
shall be the property of the state and loaned to the licensee and each license shall be issued only for
the premises and persons named in the application, and shall not be transferable or assignable except
with the written approval of the licensing agency; and I

WHEREAS, pursuant to RIGL 23~l7~6, any change in owner, operator, or lessee of a
licensed health care facility, shall require prior review by the Health Services Council and approval
of the licensing agency as a condition precedent to the transfer, assignment, or issuance of a new
license; and

WHEREAS, pursuant to RIGL 23-17-143, in conducting reviews of the application for a
license in the case of a preposed change in the owner, operator, or lessee of any licensed health care

facility, the Health Services Council shall speci?cally consider:

The s't'and'ing'in'the commoner the proposed I

owners, operators, or directors of the health care facility;

(2) In cases of initial licensure or of proposed change in owner, Operator, or lessee, the extent
to which the facility will provide or will continue to provide, without material effect on its viability
at the time of initial licensure or of change of owner, operator, or lessee, safe and adequate treatment

for individuals receiving the health care facility's services;

 

(3) The extent to which the facility will provide or will continue to provide safe and adequate
treatment for individuals receiving the health care facility's services; and

(4) The extent to which the facility will provide or will continue to provide appropriate access
with respect to traditionally undersewed populations and in consideration of the proposed
continuation or termination of health care services by the health care facility; and

WHEREAS, pursuant to RIGL 23-17.14-30, if any person knowingly violates or fails to
comply with any provision of the Hospital Conversion Act or willingly or knowingly gives false or
incorrect information:

(1) The director or attorney general may, after notice and opportunity for a prompt and fair
hearing to the applicant or licensee, deny, suspend, or revoke a license, or in lieu of suspension or
revocation of the license, may order the licensee to admit no additional persons to the facility, to
provide health services to no additional persons through the facility, or to take corrective action
necessary to secure compliance under this chapter; or

(2) The superior court, after notice and opportunity for a prompt and fair hearing, may impose
a ?ne of not more than one million dollars ($1,000,000) or impose a prison term of not more than ?ve

(5) years; and

.. . EREAsapmsuantt? conducting, managingoperating any health care facility without a license shall be ?ned not more than ?ve thousand
($5,000) or imprisoned not more than one year or both, in the discretion of the court, for each offense,
which approved practice is to consider each clay as an offense; and

WHEREAS, Prime Healthcare Services Landmark, LLC a Delaware
limited liability company, is the sole owner and operator of Landmark Medical Center an

acute care hospital located at 115 Cass Avenue in Woonsocket with a Hospital License granted by

 

P1030013 and Rehabilitation Hospital of Rhode Island a rehabilitation hospital
center located at 116 Eddie Bowling Highway, North Smithfield, with a Rehabilitation Hospital
Center License granted by RIDOH, RHC02103 (?collectively, the ?Hospitals?); and

WHEREAS, Prime Healthcare Foundation, Inc. (?Prime Foundation?) is a Delaware non-
stock charitable corporation; and

WHEREAS, Prime Healthcare Management II, Inc. (?Prime Management ii?) is a California
corporation and a wholly owned subsidiary of The Raddy Family Trust; and

WHEREAS, Prime Healthcare Services, Inc. (?Prime Healthcare Services?) is a California
business corporation and a wholly owned subsidiary of Prime Healthcare Holdings, Inc, itself a
subsidiary Trust No. 1, KASP Trust No. 2, and KASP No. 3, each with 1/3 ownership
interest respectively; and

WHEREAS, On December 31, 2016, Prime Foundation, Prime Management 11, Prime-
Landrnark, and Prime Healthcare Services (collectively referred to as ?Prime?), submitted the
Applications to RIDOH for processing as Change in Effective Control applications, as required under
the HOSpital Conversion Act and HCA Regulations (?Pending Applications?); and

WHEREAS, the purpose of the Pending Applications is for Prime Healthcare Services to

seek approval from to donate Prime?Landmark to Prime Foundation, and thus,P1nne~? I I 

Landmark would change from a for-pro?t entity to a subsidiary of Prime Foundation and a charitable
entity (the ?Transaction?) through the Membership Interest Transfer, Donation and Conveyance
Agreement between Prime Healthcare Sewices and Prime Foundation on December 31, 2016

(?Agreement?); and

 

WHEREAS, on January 3, 2017, RIDOH requested and, on January 5, 2017, Prime provided
con?rmation that the Transaction had not yet taken place and represented a ?possible retroactive
transaction? for IRS tax purposes dependent upon RIDOH approval; and

WHEREAS, on February 14, 2017, RIDOH issued written de ?ciencies in respect to the initial
submission of the Pending Applications and on March 17, 2017 Prime replied to the de?ciencies with
a resubmission of the Pending Applications; and

WHEREAS, on March 28, 2017, in response to the March 17, 2017 resubmission, RIDOH
issued a second set of written de?ciencies via email to Prime and on Aplil 11, 2017, Prime replied to
the second set of de?ciencies with a resubmission of the Pending Applications; and

WHEREAS, upon review of. the April 11, 2017 resubmission and in reliance of Prime?s
representation in the January 5, 2017 email that the Transaction had not yet occurred, RIDOH
determined the Pending Applications were acceptable in form and the formai review initiated on April
15, 2017; and

WHEREAS, on April 25, 2017, pursuant to RIGL 23-17.14-13, in order to effectuate the

purposes of the Hospital Conversion Act, RIDOH engaged an expert; and

HealthSeft/isesCouncil. 

an initial presentation of the Pending Applications; and 

WHEREAS, on May 23, 2017, RJDOH sent supplemental questions to Prime based on the
expert?s review With respect to the Transaction, Applications and Prime?s presentation before the
Council, with a reaponse deadline of June 6, 2017; and

WHEREAS, on June 6, 2017, Prime requested an extension to respond to the May 23, 2017

supplemental questions; and

 

 

WHEREAS, on June 13, 2017, RIDOH received Prime?s responses to the May 23, 2017
supplemental questions which raised questions as to whether the Transaction had already occurred on
December 31, 2016; and

WHEREAS, as a result of those responses, on June 29, 2017, RIDOH advised Prime that it
questioned whether the Transaction and, therefore, the change in effective control and conversion of
PrimeLandmark and the Hospitals had occurred prior to Prime obtaining approval of the Pending
Applications from RIDOH and suSpended review of the Pending Applications; and

WHEREAS, on July 7, 2017, a meeting was held between representatives of Prime and
representatives of RIDOH, at which Prime represented that the Transaction had not yet occurred. In
response RIDOH requested Prime provide a detailed letter of how each of the documents contained
in the record is consistent with Prime?s position that the Transaction has not yet occurred and will not
occur until RIDOH approval is received, as well as, individual statements signed and notarized by
each of the members of the Board of Directors of Prime Healthcare Services and Board of Directors
of Prime Foundation af?rming that the December 8, 2016 Unanimous Consents of the respective

Boards did not re?ect that, in fact, the donation occurred on December 31, 2016; and

WHEREAS 013111.13, 13,2017, P111116 Foundation submitted 3121.51.50?? RIDOH and, on 

?14 2017 and July 25, 2017, Prime Healthcare Services submitted letters to RIDOH, all letters stating
there had been no change to the operations of Prime-Landmark. Furthermore, Prime?s July 25 2017
letter recognized that RIDOH approval is required prior to operating LMC and RHRI as non?pro?t
heapitals; and I

WHEREAS, upon review of the July 13, 2017, July 14, 2017 and July 25, 201'? letters,
RIDOH found the letters did not provide suf?cient clarity to resolve the status of the Transaction, and

thus on August 2, 2017, RIDOH sent a letter to Prime that identi?ed with speci?city each document

 

that was in the record that was referred to in general at the July 7, 2017 meeting and that Prime needed
to reconcile with its position that the Transaction had not yet occurred and would not occur until
RIDOH approval is received, as well as, the following documents: Governing Board Minutes of the
LMC meeting of April 20, 2017; Governing Board Minutes of the RHRI meeting of April 20, 2017;
Governing Board Agendas for the July 2017 quarterly meetings and agendas, minutes
and resolutions of all meetings of Prime Healthcare Services and Prime Foundation that were held in
2017 to date; and audited financial statements of Prime Healthcare Services for 2016; and

WHEREAS, during the July and August 2017 communications, the 2016 audited ?nancials
for the Prime Foundation (?Prime Foundation Financials?) became available. Prime provided the
Prime Foundation Financials to RIDOH which showed the transfer of the Hospitals to the Foundation
occurred in Decemberl2016; and

Prime did not provide a written response to August 2, 2017 letter and
on August 25, 2017, a meeting was held between representatives of Prime and representatives of
RIDOH, during which Prime acknowledged the closing of the Transaction contemplated by the

Agreement had actually occurred on December 31, 2016, thereby triggering the change in effective

. to. review.andapprovalby RIDOH and, thus, .th.ey..cculdnot .. .. .. . .

a response to the August 2, 2017 letter; and

WHEREAS, on September 8, 2017, a telephone conference was held between representatives
of Prime and and

WHEREAS, Prime herein con?rms that the Trans action occurred on December 31, 20l6 and
thus Prime-Landmark became a wholly owned subsidiary of Prime Foundation on December 31,

2016; and

 

WHEREAS, throughout these proceedings Prime has represented that, despite that the
Transaction occurred on December 31, 2016, Prime has not changed any operations at LMC and
and

WHEREAS, the occurrence of the Transaction prior to review and approval by RIDOH is a
violation of RIGL 23?174, and RIGL 23-17-6; and

WHEREAS, pursuant to RIGL 234714-30, Prime?s violation of RIGL 
regarding the HCA Application of Landmark Medical Center allows a ?ne of up to one million dollars
and

WHEREAS, pursuant to RIGL Prime?s violation of RIGL 2347.146
regarding the HCA Application of Rehabilitation Hospital of Rhode Island allows a ?ne of up to one
million dollars and I

WHEREAS, pursuant to RIGL 23?17-17, Prime?s violation of 23-17?4 and RIGL
23-l7~6 by Prime regarding the Hospital License of Landmark Medical Center is subject to a ?ne
of not more than ?ve thousand dollars ($5,000) per day for a total of 300 days, as of October 27,
2017, for a total possible fine of approximately one million five hundred thousand dollars
($1500000Mnd

WHEREAS, pursuant to RIGL 23-17?17, Prime?s violation of RIGL 23-17-4 and RIGL
23-17-6 by Prime regarding the HOSpital License of Rehabilitation HoSpital of Rhode Island is
subject to a ?ne not more than ?ve thousand dollars ($5,000) per day for a total of 300 days, as of
October 27, 2017, for a total possible ?ne of approximately one million ?ve hundred thousand dollars 

and

 

WHEREAS, pursuant to RIGL and RIGL 23-17-17, Prime?s violations of
RIGL 23-11146, RIGL 23-17-4, and RIGL 23?17-6 for the Hospital Licenses of LMC and
RHRI allow a total possible ?ne of ?ve million dollars 

NOW, THEREFORE, to avoid dismption of the care to Rhode island residents receiving
services, RIDOH has agreed to maintain in full force and effect the Hospital Licenses of LMC and
RHRI from the date hereof through completion of the Application review and approval process,
subject to both Hospitals otherwise remaining in full compliance with Rhode Island state law and
regulations. Furthermore, in consideration of the contribution that Prime has made to Woonsoclcet
and the State of Rhode Island by acquiring the Hospitals, both as to the positive economic impact
and, as evidenced by statements submitted by the Rhode Island Department of Health Center for
Health Facilities Regulation at the May 13, 2017 Health Services Council meeting, Prime?s operation
of the Hospitals in accordance with the standards of care and in compliance with all applicable
licensing regulations and in consideration of the mutual promises contained in this Agreement, and
for other good and value consideration, the receipt and suf?ciency of which are hereby acknowledged,
the parties hereby agree as follows:

. 1 . . ..Primeshall pay. a ?ne. inthe. amount .ofonemillion dollars Ofthetotal
?ne, Prime shall pay five hundred thousand dollars payable to the Rhode Island General
Treasurer, within a reasonable period of time, but no later than (3) weeks from the execution of this
agreement. Of the total ?ne, Prime shall pay ?ve hundred thousand dollars payable to the
City of Woonsocket, within areasonable period of time, but no later than three (3) weeks from the
execution of this Consent Agreement, to be used for one or more public health purposes to bene?t

the residents of Woonsocket (and the surrounding area) in a manner consistent with one or more of

 

 

and the State?s priorities, Leg, addressing social and environmental determinants of health,
eliminating health disparities, and ensuring health care access to vulnerable pepulations.

2, Prime, pursuant to RIGL shall comply with Conditions 20 and 21
of the February 17, 2014 Amended Decision With Conditions of the Hospital Conversion Application
of Prime through a report by an Independent Third Party to be determined by RIDOH. The entire cost
of the report shall be borne by Prime through an Escrow Agreement with an escrow amount to be
determined by RIDOH. Prime shall fully cooperate with all requests for information by the
Independent Third Party.

3. Prime shall continue to seek review and approval by the Health Services Council and
approval by RIDOH for the Pending Applications. RIDOH will make its best efforts to provide the
. expert?s report to Prime by October 26, 2017, the expert having stated to RIDOH that she can produce
a report with the information provided. The Health Services Council will hear the Pending
Applications during the next regularly scheduled meeting. RIDOH and Prime will take all reasonable
steps necessary to complete the Application approval process in a timely fashion.

4. In the event Prime does not receive approval for the Pending Applications after review

by. by .. . .. .

Transaction and thus Prime-Landmark will revert from a subsidiary of Prime Foundation and a
charitable entity to a subsidiary of Prime Healthcare Services and a for~pro?t entity within thirty (30)
days after all appeal rights are satis?ed.

5. This Agreement will terminate automatically and immediately, without any further
action on the part of the parties, upon the parties? performance of their reapective obligations as set

forth herein.

10

 

6. Entire Agreement, Amendments and Waivers. This Agreement contains the entire
agreement (including representations, warranties and covenants) among the parties hereto pertaining
to the subject matter hereof and supersedes all prior and contemporaneous agreements, negotiations,
discussions, arrangements or understandings with respect thereto. No amendment, supplement,
modi?cation or waiver of this Agreement shall be binding unless executed in writing by each of the
parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provisions hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.

7. Severability. If any provision of this Agreement, or any covenant, obligation or
agreement contained herein, is determined by a court of competent jurisdiction to be invalid or
unenforceable, such determination shall not affect any other provision, covenant, obligation or
agreement, each of which shall be construed and enforced as if such invalid or unenforceable portion
were not contained herein. Such invalidity or unenforceability shall not affect any valid and
enforceable application thereof, and each such provision, covenant, obligation or agreement shall be
deemed to be effective, operative, made, entered into or taken in the manner and to the fullest extent


8. Notices, Except as may otherwise expressly be provided herein, any notice required
or desired to be served, given or delivered hereunder shall be in writing, and shall be deemed to have
been validly served, given or delivered upon the earlier of personal delivery to the addresses set
forth below, in the case of facsimile transmission, immediately upon con?rmation of completion
of transmission, (0) in the ease of mailed notice, seven (7) days after deposit in the mail, with prOper

postage for registered or certified mail, return receipt requested, prepaid, or in the case of notice

'11

 

 

 

 

by Federal Express or other reputable overnight courier service, two (2) business days after delivery

 

to such courier service, addressed to the party to be noti?ed as follows:
If to: Prime Healthcare Foundation, 11ch Prime Healthcare Services, Inc.

Prem Reddy, MD

President

Prime Healthcare Foundation, Inc./ Prime Healthcare Services, Inc.
3300 E. Guasti Rd.

Ontario, CA 91761

Michael Souza

Chief Executive Officer

Landmark Medical Center/ Rehabilitation Hospital of Rhode Island
115 Cass Avenue

Woonsocket, RI 02895

1. Warren, Esq.

Cameron Mittleman LLP
301 Promenade Street
Providence, RI 02908

 

If to: Rhode Island Department of Health

Sandra M. Powell

Associate Director

Division of Policy, Information Communications

Rhode Island Department of Health
3Cap1tolH111Room410

Providence, Rhode Island 02908

Michael K. Dexter

Chief
?Center for Health Systems Policy and Regulations
Rhode Island Department of Health

3 Capitol Hill, Room 410

Providence, Rhode Island 02908

With a copy to:

Stephen Morris, Esq.

Deputy Chief Legal Counsel

Rhode Island Department of Health

3 Capitol Hili
Providence, Rhode Island 02908 i

12

 

or to such other address or telecopy number as may be designated in writing by any party from
time to time in accordance herewith.

9. Successors. This Agreement shall be binding upon, and inure to the bene?t of the
heirs, executors, successors and permitted assignees of the parties hereto, and no other person shall
have any right, bene?t or obligations hereunder.

10. Co e1 ts. This Agreement may be executed in one or more counterparts, each of
which shall be construed as an original, and all of which together shall constitute one and the same
instrument.

IN WITNESS WHEREOF, the parties, by their agents duly authorized, have executed this

 

 

 

Consent Agreement effective (7416? ?44 3 0 2017

PRIME HEALTHCARE SERVICES RHODE ISLAND DEPARTMENT OF
LANDMARK LLC HEALTH ..

By: By: 
Michael Souza Michael K. Dexter 

Chief Executive Of?cer, Landmark Medical Chief, Center for Health Systems Policy and
Center and Rehabilitation Hospital of Rhode Regulations
Island

PRIME HEALTHCARE FOUNDATI
INC .

By: Vic/90% 

Michael Sarian, President
Prime Healthcare Foundation, Inc.

 

PRINIB HEALTHCARE SERVICES, INC.

By:
Michael Blather, Chief Financial Of?cer
Prime Healthcare Services, Inc.

 

PrimciDN2722749-vcr12(linked 26A52531l)

13

 

 

or to such other address or telecopy numbe
time to time in accordance herewith.

9. Successors. This Agreement shal

as may be designated in writing by any party from

i be binding upon, and inure to the bene?t of the

heirs, executors, successors and permitted assignees of the parties hereto, and no other person shall

have any right, bene?t or obligations hereunder.

IO. Counterparts. This Agreement may be executed in one or more counterparts, each of

which shall be construed as an original, and ail of which together shail constitute one and the same

instrument.
IN WITNESS WHEREOF, the parties, by

Consent Agreement effective

their agents duly authorized, have executed this

2017

 

PRIME HEALTHCARE SERVICES -

LANDM LLC

By:

Michael Souza 

Chief Executive Off: cer, Landmark Medical
Center and Rehabilitation Hospital of Rhode

Island

PRIME HEALTHCARE FOUNDATION,
INC.

Michael Sarian, President
Prime Healthcare Foundation, Inc.

 

PRIME HEALTHCARE SERVICES, INC.

By: 
Michael Heather, Chief Financial Officer
Prime Healthcare Services, Inc.

 

PrimeIDN2722749-Ver 12 {linked 26A525311)

13

RHODE DEPARTMENT OF
HEALTH

By:
Michael K. Dexter

Chief, Center for Health Systems Policy and
Regulations