DE l5 I
0 {44/ Nicole Alexander-Scott MD, MPH

- 
Director
*6 J11Department of Health
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WENT 09

Three Capitol Hill
Providence, RI 02908-5097

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TTY: 771
ov

VIA ELECTRONIC MAIL

December 15, 2017

Warren, Esq.
Cameron Mittleman LLP
301 Promenade Street
Providence, RI 02908

Dear Ms. Warren:

This Decision is pursuant to the requirements of RIGL 23-17.14 The Hospital
ConversionsAct and RIGL 23-17 Health Care Facility Licensing Act othode Island.

Attached is the Report of the Health Services Council on the applications of Prime
Healthcare Foundation, Inc," Prime Healthcare Services Landmark, and Prime
Healthcare Management II, Inc. for the Change in E?ective Control of Landmark Medical Center
in Woonsocket; and Rehabilitation Hospital of Rhode Island in North Smithfield.

At its November 28, 2017 meeting, the Health Services Council (?Council?) voted to adOpt
the Report, as written, which recommends approval of the applications subject to the standard
conditions of approval, including those contained in the February 14, 2014 hospital conversions
Amended Decision, as well as those conditions outlined in the Rhode Island Attorney General?s
letter of November 14, 2017 to be incorporated by reference and be made part of the Council?s

decision of approval.

The Rhode Island Department of Health accepts the recommendations of the
Council and hereby approves the applications, adopting the attached Report, including the ?ndings
incorporated in Section IV and conditions of approval in Section VI, as its ?nal decision in
accordance with Section 23?17 of the General Laws of Rhode Island.

In addition, RIDOH has varied from the recommendations of the Health Services Council
by amending conditions to those contained in Section VI of the Report. In accordance with 23-
17?6 of the General Laws of Rhode Island, the conditions of approval shall be those as set forth as
attached. The conditions of approval as attached shall supersede those previous conditions of
approval contained in the February 14, 2017 hospital conversions Amended Decision.

State of Rhode Island and Providence Plantations

 

 

RIDOH takes notice of the issues regarding the effective date for these applications and
transfers of ownership and their implications on the social determinants of health of the
communities served by Landmark Medical Center. Accordingly, as provided for in this Decision,
these approvals are effective on January 1, 2018. RIDOH does not and shall not recognize any
retroactive dating for purposes of implementation and approval of these applications.

Please be advised that these approvals are a pre-condition to licensure. Prior to actual
licensure, the applicant must complete the appropriate licensure forms and submit them to the

Center for Health Facilities Regulations to initiate ?nal licensure activities.

If you have any questions, please contact Michael Dexter at (401) 222-2788.

 

Rhode Island Department of Health

Attachments

 

 

Final Decision. of the Director of the. Rhode ls lend Department of Health

This hospital conversion proposed by the transacting parties, Prime Healthcare Foundation, Inc. 
Prime Healthcare Services- Landmark, LLC, and Prime Healthcare Management 11, inc. for
Landmark Medical Center and the Rehabilitation Hospital of Rhode Island is
hereby approved by the Rhode Island Department of Health subject to the terms and
conditions outlined below:

General Conditions:

1.

The approvals shall be effective on January 1, 2018 (?the effective date of this Decision?).
RIDOH does not and shall not recognize any retroactive dating for purposes of
implementation and approval of these applications.

The transacting parties shall implement the applications, as detailed in the initial
application, and as approved by the Director of RIDOH.

Prime shall maintain a governing body at Prime Healthcare Services Landmark, LLC
(the licensees) whose membership shall include a minimum of two (2) individuals who
are uncompensated, independent and who reside in Rhode Island;

Hospital Operations Conditions:

4.

Prime shall keep LMC open and operational, including the complete scope and array of
services as existed at the hospital prior to the conversion, for a minimum period of time,
which shall be no less than five (5) years from the effective date of this Decision; that
Prime may add services (in accordance with Rhode Island statutes and regulations);

LMC shall participate in Prescription Drug Monitoring Program (PDMP),
ensuring that within one month of the effective date of this Decision all medical doctors,
nurse practitioners and physician assistants working in the Emergency Department of
LMC shall be enrolled in the and ensuring that for every prescription for
Schedule through the prescriber shall document the findings and decision of 'that
consultation in the patient chart; that all new practitioners to LMC shall be enrolled in
the PDMP upon credentialing; and that all existing (non?Emergency Department)
practitioners of LMC shall be enrolled in the PDMP upon re-credentialing;

LMC shall achieve at least Level 3 certification as outlined in the Levels of Care for Rhode
Island Emergency Departments and Hospitals for Treating Overdose and Opioid Use Disorder
within six (6) months from the effective date of this Decision;

LMC shall adopt a transitions-of-care program to prevent unnecessary hospital
admissions and re?admissions in accordance with the requirements set forth in
Addendum 1 and had been set forth in the February 14, 2014 hospital conversions
Amended Decision, herein;

LMC and RHRI shall participate in CurrentCare, Rhode Island?s Statewide Health
Information Exchange, through the following:

1

 

 

 

 

a. Offer enrollment in CurrentCare to all patients seen in ambulatory clinics and
physician practices owned by LMC and RHRI, patients seen in the emergency
departments, and all patients at time of admission or discharge. 

b. Continue to send or receive any data currently sent or received to or from the
state?s designated entity for Health Information Exchange, and work with the
state?s designated entity for Health Information Exchange to expand the quality,
scope, and type of data sent or received. LMC and RHRI shall share data for
statewide health information exchange purposes, including, but not necessarily
limited to data included in CurrentCare. Health information exchange purposes
includes exchanging (both sending and receiving) CCDs, ADTs, Labs, Radiology
reports, and EKGs as structured data feeds between providers with treating
relationships to the patient. If the newly acquired hospital has locations outside
of Rhode Island which share the same system as those Within Rhode Island,
preferably LMC and will also agree to share these types of data from those
locations. LMC and RHRI shall share data from non-Rhode Island sites that is
directly related to Rhode Island residents.

c. Make the CurrentCare data available at all clinical sites (such as ambulatory clinics
and physician practices, hospitals, and emergency departments) if at least 25% of
the patient population served at the site within the last year is made up of Rhode
Island residents. For CurrentCare data to be considered available at the site,
CurrentCare data must be made available through bidirectional exchange within
the site?s Electronic Health Record for any EHR vendor where this is
already occurring in Rhode Island and relevant staff must be trained to access
this information, alternatively if bidirectional exchange is not already in place with
the EHR vendor, at least 75% of relevant clinical staff must be trained and received
a username and password to access the CurrentCare Viewer. 

Birthing Conditions:
9. LMC shall participate in all local (defined as the primary service area) and state-wide
coalitions that work to improve prenatal care and to prevent teen pregnancies, including

the Rhode Island Alliance and the Rhode Island Statewide Prematurity Task Force;

10. LMC shall maintain a ?hard?stop? (as defined by the March of Dimes) for the use of
elective Caesarian Sections before 39 weeks;

11. LMC shall obtain Baby Friendly certification within six (6) months from the effective
date of this Decision; . - 

CLAS and Health Equity Conditions:

12. In accordance with the federal National Standards for Culturally and Linguistically
Appropriate Services in Health Care (National CLAS Standards), published in 2000 by the

 

 

 

Office of Minority Health, US. Department of Health (it Human Services, and with the
current interpreter service policy in Rhode Island, LMC and RHRI shall:

a.

Ensure that a qualified interpreter (for both spoken and sign languages) is present
in connection with all services if the appropriate bilingual assistance (including
Sign language) 18 not available to translate for every non?English speaker who 15 a
patient or seeks appropriate care and treatment and who IS not accompanied or
represented by an appropriate qualified interpreter or a qualified sign language
interpreter who has attained at least sixteen (16) years of age; and

Post multi?lingual notices in conspicuous places setting forth the requirement in
subsection of this section in English and, at a minimum, the three (3) most
common foreign languages used within the newly acquired hospital?s service
areas; 

13. Per Section 11. 5 of the Rules and Regulations Pertaining to Hospital Conversions and in
alignment with its Community Health Needs Assessment (CHNA) Implementation
Strategy LMC shall:

a.

within 90 days of the effective date of this Decision, meet with the collaborative
partners of the Woonsocket Health Equity Zone (HEZ) to establish a plan for the
investment of financial resources to support the sustainability of the Woonsocket
HEZ collaborative; 

within 180 days of the effective date of this Decision, submit to RIDOH a written
plan for review and approval for the investment of financial resources, in the sum
of $100,000 or more annually, to the Woonsocket HEZ. This plan should include
at minimum:
i. the total. dollar amount to be invested per year;
ii. a detailed explanation on how LMC will engage with the HEZ beyond
funding;
a copy of existing CHNA and community benefits plan;
iv. an analysis that identifies overlaps 1n LMC 3 existing CHNA and the HEZ
needs assessments priorities; 
v. a detailed description on how LMC and its investment plan'will address
the identified community needs in conjunction with the 

within 30 days of approval of the investment plan by RIDOH, disperse funding to
support the continued sustainability of the HEZ collaborative in Woonsocket in

accordance with the approved plan;

submit a report annually to RIDOH on the progress of the collaborative
investment in the Woonsocket 

work with the local HEZ to collaborate on all future versions of 

 

 

 

14. Prior to or on the effective date of this Decision and for five (5) successive years, LMC
shall submit an implementation plan to RIDOH addressing the following:

a. The findings of the RIDOH 2015 Statewide Health Inventory (and all subsequent
editions);

b. The delivery of primary care within an integrated health care delivery system for
physical (including oral health) and behavioral health (including mental health
and substance use) in service area;

c. Activities related to the recommendations of the Rhode Island State Innovation
Model, health equity and the IHI Triple Aim Initiative, integrated population health
and risk contracting capabilities, and participation in population health in?asmicture I
within Rhode Island, including but not limited to:

i. Expansion of Medication Assisted Treatment providers and services to
address the overdose epidemic,
ii. Participation in interventions to improve the safety of opioid prescribing;

Utilization of Certified Conununity Health Workers and Certified Peer
Recovery Specialists within any aspect of the healthcare delivery system or
Community Health Teams established in service area;

iv. Expansion of maternal and child health interventions to reduce infant
mortality, as well as toxic stress, within maternal fetal medicine, obstetrics,
and pediatrics capabilities, as may be applicable to LMC

v. Development of relationships with local tribal nations.

d. Strategies that support achieving Integrated Population Health Leading
Priorities, Strategies, and Goals, including but not limited to:

Addressing social and environmental determinants of health Within
community and service area through the RI DOH Health Equity Zone
Initiative 

ii. Reducing and preventing health disparities;

Expanding access to care for the community?s vulnerable populations;
iv. Improving integrated population health outcomes;

v. Improving health equity as measured by the Statewide Health Equity
Indicators, once established;

vi. Developing a workforce that re?ects the service area?s diversity

e. Details outlining financial investments to date and going forward in LMC and or
the surrounding Rhode Island community.

15. LMC shall contribute $100,000, annually in conjunction with the initial and renewed
license, to the Health Professional Loan Repayment Program administered by the
RIDOH, to pay health professional student loan debt of primary care health providers
(as defined by the Federal Bureau of Health Work Force) practicing in the state of Rhode
Island;

 

 

Fiscal Conditions: 

16.

17.

18.

19.

20.

Prime shall contribute, annually in conjunction with the initial and renewed license, a
sum of $75,000 to support the state's coordinated health planning process;

Prime shall not enter into any contract or other service or purchasing arrangements with
an affiliated legal entity except fOr contracts or arrangements to provide services or
products that are reasonably necessary to accomplish the health care purposes of the
relevant hospital and for compensation that is consistent with fair market value for the
services actually rendered, or the products actually provided;

Prime shall not provide any corporate allocation, or equivalent charge, to any affiliated
organization(s) in any hospital fiscal year to not exceed reasonable fair market value for
the services rendered or the assets purchased or leased from such affiliate;

Prime shall report to the Director on annual distributions of revenues to Prime
Healthcare Foundation, inc. and the revenues from Prime Healthcare Foundation, Inc.,
in a form and substance acceptable to the Director Within 30 days of the effective date
of this Decision;

Prime shall provide complete audited financial statements for Prime Healthcare
Services - Landmark, and Prime Healthcare Foundation, Inc. to RIDOH on or
before March 1st of each calendar year; RIDOH reserves the right to request more
frequent financial information as it deems necessary;

Reporting Conditions:

21.

22.

23.

24.

LMC shall offer opt~out adult (as defined by the US. Centers for Disease Prevention (3:
Control) HIV testing on all emergency department patients at least once a year and
report annually to RIDOH Within 30 days of the effective date of this Decision the rate
of testing of the prior year; 

LMC and RHRI shall offer annual seasonal influenza vaccines to 100% of patients at
discharge (September through April) and document each said offering in the patient?s
chart and report annually to RIDOH Within 30 days of the effective date of this Decision
the rate of vaccination of the prior year; I

LMC shall adopt evidence?based alcohol?abuse~screer1ing during emergency
department visits Screening, Brief Intervention, and Referral to Treatment (SBIRT) for
individuals aged fifteen (15) and over and provide annual reports to Within 30
days of the effective date of this Decision of the number and types of referrals, generated
as a result of screening;

LMC and RHRI shall provide complete and timely information in response to requests
to RIDOH regarding the RIDOH Statewide Health Inventory;

 

 

 

 

25.

26.

27.

 

LMC shall comply with reporting requirements regarding surveillance as
outlined in the Rules and Regulations Pertaining to the Reporting of Infectious, Environmental
and Occupational Diseases;

Prime shall file reports with on or before March of each calendar year
detailing compliance with these conditions;

Prime shall pay for the costs of RIDOH in performing such monitoring; evaluation and
assessment in an amount to be determined by the Director as he or she may deem
appropriate, which should be placed in escrow for a period of five (5) years;

 

 

 

 

Addendum 1

Model for Transitions of Care

With respect to the implementation of the provisions regarding EMERGENCY DEPARTMENT VISITS
and subsections a. through e. inclusive thereof, and HOSPITAL ADMISSIONS and subsections a.
through c. thereof, Landmark Medical Center shall at all times seek and obtain patient consultation,
input, and patient consent. Such implementation shall also be executed consistent with applicable
federal and state law and regulations.

1.

a.

EMERGENCY DEPARTMENT VISITS

Patients who have primary healthcare providers: When a patient seeks care from Landmark Medical
Center?s Emergency Department, the Emergency Department shall identify the patient?s primary
healthcare provider, and shall make every reasonable effort to contact the patient's primary healthcare
provider for a consult before admitting the patient. if the patient is not hospitalized, before discharge, the
Emergency Department shall make an appointment for the patient with the patient?s primary healthcare
provider, to assure appropriate follow~up care. The Emergency Department shall also transmit the
patient 8 Emergency Department record or a copy thereof if paper records are used to the patient? 3
primary healthcare provider.

Patients who do not have primary healthcare providers: if the patient does not have a primary
healthcare provider, and the patient is not hospitalized, before discharge from the Emergency
Department, the Emergency Department shall make an appointment for the patient with a suitable
primary healthcare provider within the hospital?s catchment area taking into consideration the
patient?s choice, the patient?s ability to access the primary healthcare provider geographically and
financially to assure proper foliow~up care. The Emergency Department shall also transmit the
patient?s Emergency Department record or a copy thereof if paper records are used to the patient?s new
primary healthcare provider. To facilitate these activities, the Emergency Department shall maintain a list
of primary healthcare practices located geographically within the hospital?s catchment area, and a list of
which practices are accepting new patients. The Emergency Department will keep a count of the times in
which an appointment with a suitable primary healthcare provider cannot be made for a patient who
does not have a primary healthcare provider, and report this count in writing to the Rhode Island
Department of Health [Department of Health) on a quarterly basis.

Documentatipn: The Emergency Department shall document in the patient?s Emergency Department
record the patient?s primary healthcare provider, all attempts to reach him or her, a summary of consults
with the primary healthcare provider, and specifics of medical appointments made before discharge.
Annually, Landmark Medical Center shall provide the Department of Health with counts of the number of
times patients primary healthcare providers were reached before admitting patients to the hospital from
the Emergency Department, and the number of times patients? primary healthcare providers were net so
reached

The EMS Innovations Project: Landmark Medical Center will join the Department of Health?s EMS
Innovations Project, to limit preventable emergency department use.

HOSPITAL ADMISSIONS

Patients who have primary healthcare providers: When a patient is admitted to an inpatient unit of

Landmark MediCal Center, before discharge, in order to facilitate an optimal transition-of~care from the
inpatient setting to the discharge setting:

 

 

 The physician of record shall discuss a patient?s transition-of?care needs regarding discharge from
the hOSpital with the patient?s primary healthcare provider in person or by telephone. If a primary
healthcare provider is not immediately available to discuss a patient? 3 transition?of?care needs,
Landmark Medical Center?s physician of record shall use the "Direct? e-mail feature of CurrentCare to
notify the patient?s primary healthcare provider of an impending discharge at least 24? hours prior to
discharge, and to leave the physician of record?s contact information. I

Landmark Medical Center shall provide nurse care managers and or community health teams access
to the patient for transitions-of?care planning.

0 Landmark Medical Center shall collaborate with nurse care managers and or community health
teams in the formulation of discharge plans.

- Landmark Medical Center shall also after consultation with and the consent of the patient make an
appointment for the patient with the patient?s primary healthcare provider, to assure appropriate
followup care. Landmark Medical Center shall also transmit a summary of the patient?s inpatient
record to the patient?s primary healthcare provider.

b. Patients who do not have primary healthcare providers: When a patient is admitted to an inpatient
unit of Landmark Medical Center, before discharge, in order to facilitate an optimal transition-of-care
from the inpatient setting to the discharge setting:

I Landmark Medical Center shall make an appointment for the patient with a suitable primary
healthcare provider within the hospital?s catchment area -- taking into consideration the
patient?s choice and patient?s ability to access the primary healthcare provider geographically
and financially to assure appropriate follow-up care. Landmark Medical Center shall also
transmit a summary of the patient?s inpatient record or a copy thereof if paper records are used
to the patient?s new primary healthcare provider. To facilitate these activities, Landmark
Medical Center shall maintain a list of primary healthcare practices located geographically
within the hospital?s catchment area, and a list of which practices are accepting new patients.
Landmark Medical Center will keep a count of the times in which an appointment with a
suitable primary healthcare provider cannot be made for a patient who does not have a primary
healthcare provider, and report this count in writing to the Department of Health on a quarterly

basis.

c. Documentation: Landmark Medical Center shall document in the patient?s inpatient record the
patient's primary healthcare provider, specifics of pre-discharge transition?of~care consultations and
collaborative discharge planning, and specifics of medical appointments made before discharge.
Annually, Landmark Medical Center shall provide the Department of Health with counts of the number
of times patients? primary healthcare providers were reached for discussion before inpatient discharge,
and the number of times patients? primary healthcare providers were not so reached.

 

 

 

 

 

?tate of labour detach accentuate jelsntaticns

DEPARTMENT OF ATTORNEY GENERAL
150 South Main Street Providence, RI 02903
(401) 274-4400 - TDD {401) 453?0410

 

PeterF. Attorney General

November 14, 2017

Vic Electronic and?egular Mail

Michael Dexter, Chief

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

Three Capitol Hill

Providence, RI 02908

. Re: Landmark?Medical Center and the Rehabilitation Hospital of

Rhode Island (the ?Tlospitals?j
Dear Mr. Dexter:

Thank you for your letter dated November 7, 2017 regarding the Change in Effective
Control applications of the Hospitals, currently pending before the Health 
Council Regarding the transfer of the Hospitals to the nonpro?t Prime He althcare
Foundation, Inc. (the ?Foundation?), the Department of Attorney General has reached certain
agreements with the Foundation and Prime Healthcare Services, Inc. and collectively,
?Prirne?), that will be further discussed herein.

First, following the Superior Court ?ling of the Petition of the Attorney General to
Enforce its Hospital Conversions Act Decision and the Asset Purchase Agreement, PHSI and the
Attorney General agreed to a Consent Order dated March 24, 2017. Therein PHSI agreed that
following CEC approval, and the donation of the Hospitals to the Foundation, the ?ve?year
commitments previously made in the Meet Purchase Agreement with the Court-Appointed
Special Master (the and the ?ve-year conditions Within the Attorney General?s Hospital
Conversions Act Decision (the ?Decision?), Would transfer to the Foundation. Since the transfer
of the Hospitals to the Foundation has occurred without CBC approval, the Consent Judgment

must be amended to account for responsibility for compliance these obligations since
December 31, 2016.

 

 

Michael Dexter, Chief

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

November 14, 2017

Page Two

In addition, Prime has agreed to attend the Retainer Agreement with the Attorney
General? 5 monitoring expert, Af?liated Monitors, Inc. (the ?Monitors?) for an additional two (2)
years through January 1, 2019. Accordingly, Prime will continue to report to the Monitors on
applicable Decision conditions, and the Monitors will produce reports on compliance for an
additionaltwo (2) years, for a total monitoring period of ?ve (5) years. Under this arrangement,
Prime will continue to pay monitoring costs. .

Conceming charitable assets of the now nonpro?t Hospitals, Prime has consented to
annual reporting, at a minimum, on any charitable assets, and disbursement of such assets, at
Landmark. Prime has represented to the Attorney General that Landmark does not maintain
charitable assets andhas not received charitable contributions since December 31, 2016.
Additionally, in response to CEO questions, Prime has said that the Foundation does not
fundraise and does not contemplate a charitable giving program in Rhode Island. However,
annual monitoring would enable the Attorney General to be informed if the Foundation changes
its position on ?mdraising or receives contributions for the bene?t of Landmark.

Finally, to con?rm their commitment to the Hospitals, Prime has agreed to continue to
operate Landmark Medical Center as an acute care facility with an open and accessible
emergency room for an additional ?ve (5) years following CEC approval. The original ?ve (5)
years required by the APA will expire on December 31, 2018, so their renewed commitment

. extends that ?ve (5) years from the date of CBC approval. Recognizing concems about
. dissolution as express ed in your November 7th letter, the Council may want to consider this

commitment as a condition of approval,

Regards,

Katie Enright
Assistant Attorney General 

ICE/din

 

 

REPORT OF THE HEALTH SERVICES COUNCIL

ON THE APPLICATIONS OF

PRIME HEALTHCARE FOUNDATION, 

PRIME HEALTHCARE SERVICES LANDMARK, AND

PRIME HEALTHCARE MANAGEMENT II, INC.

FOR CHANGE IN EFFECTIVE CONTROL OF

LANDMARK MEDICAL CENTER IN AND

REHABILITATION HOSPITAL OF RHODE ISLAND IN NORTH SMITHFIELD

Health Services Council

Victoria Almeida, Esq. (EX-Of?cio)

John J. Barry 

Stephen Boyle

Raymond C. Coia, Esq.

John X. Donahue

Linda Johnson

Lisa Lasky, CPA

Jeanette S. Matrone, RN, (Ex~0f?cio)
Tarah Provencal

John Sepe

Submitted to the

Health Services Council
to Review and Adopt
November 28, 2017

Adopted by the
Health Services Council
November 28, 2017

 

 

 

TABLE OF CONTENTS
213.9313.
1. SYNOPSIS 1
II. PROPOSAL DESCRIPTION 1
INTRODUCTION -. 2

I FINDINGS 2

V. RECOMMENDATION 9

VI. CONDITIONS OF APPROVAL 10

 

 

 

I. SYNOPSIS

The Health Services Council recommends that the applications of Prime Healthcare Foundation,
inc; Prime Healthcare ServicesmLandmark, and Prime Healthcare Management 11, Inc.
for the Change in Effective Control of Landmark Medical Center, an acute care hospital located
at 1.15 Cass Avenue in Woonsocket; and Rehabilitation Hospital of Rhode Island, a rehabilitation
hospital center located at 116 Eddie Bowling Highway in North Smith?eld, be approved.

11. PROPOSAL DESCRIPTION

Prime Healthcare Services?landmark, LLC a Delaware limited liability
company, currently owns and operates Landmark Medical Center an acute care hospital
located in Woonsocket, and Rehabilitation Hospital of Rhode Island a rehabilitation hospital
center located in North Smitb?eld (LMC and are collectively referred to as the ?Hospitals?).
Prime-Landmark?s current parent is Prime Healthcare Services, Inc. a California business
corporation. PHSI, through Prime?Landmark, acquired LMC and RHRI ori December 31, 2013 as
approved by the Rhode Island Department of Health and the Rhode Island Attorney General.

The purpose of the applications is for PHSI to donate Paine-Landmark to Prime Healthcare Foundation,
inc. (the ?Toundation?), a Delaware non?stock charitable corporation through the December 31, 2016
Membership Interest Transfer, Donation and Conveyance Agreement between Prime Healthcare
Services and Prime Foundation (?Donation Agreement?). The Foundation through its subsidiaries
operates thirteen (13) nonpro?t hospitals. Prime-Landmark will become a subsidiary of the Foundation
and will continue to own and operate two Hospitals. As a result of the donation, Prime?Landmark will
become a charitable entity and, thus, LMC and RHRI will change from for-pro?t to not-.fornproiit
entities.

Pre?donation and Post-donation organizational charts depicting the ownership of the Hospitals are
attached.

Pursuant to RIGL and ?Review process by department of health for
conversions involving for-pro?t hospital as the acquires?, any Hospital Conversion involving a for-
pro?t hospital as the acquiree and a not?forwpro?t corporation as the acquirer shall be reviewed by the
Department of Health in accordance with the provisions for Change of Effective Control (RIGL ?23-

17-143 and 

Prime Healthcare Management II, inc. (?Prime Management a California corporation, will provide
certain centralized services, including legal, risk management, clinical operations support, human
resources, pinchasing, public relations, ?nance and accounting to the Hospitals; The Reddy Family
Trust is the sole shareholder of Prime Healthcare Management 11. (Prime Landmark, Foundation, and
Prime Management are collectively referred to as the ?applicant?.)

The applicant has stated the proposed donation will have no effect on the Hospitals? operations and
Prime?Landmark will operate the Hospitals and continue to offer all services that are currently provided.

As state above, the proposed transaction is a donation. Pursuant to the Donation Agreement there is no
?nancing or capital cost associated with the donation of the Hospitals to the Foundation.

 

 

 

INTRODUCTION

Pursuant to the requirements of Chapter 23-17 of the General Laws of Rhode Island entitled
"Licensing of Health Care Facilities,? the applicant ?led applications for the changes in effective
connol of the subject?licensed facilities. This request is made because the statute requires that the
Department of Health shall review all proposed conversions involving a for?pro?t hospital as the
acquiree and either a for-pro?t corporation or a notufonpro?t hospital or corporation as the acquirer
in accordance with the provisions for change of effective control. Furthermore, the statute requires
that any proposed change in owner, operator or lessee of a licensed health care facility be reviewed
by the Health Services Council and approved by the state?licensing agency prior to implementation.

Staff reviewed the applications, found them to be acceptable in form, and noti?ed the applicant and
the general public by a notice on the Department?s website and e?mail that the reviews would
commence on April 15, 2017. The notice also advised that all persons wishing to comment on the
applications submit their comments to the state agency by May 15, 2017, when practicable.

Written comment was received from Senator Roger A. Picard of Woonsocket, Cumberland (District -

20) in a letter dated May 11, 2017, requesting if the applications are approved to place a condition
that requires LMC to keep its tax obligation to the City of Woonsocket. Senator Pioard asked that
the proposal? impacts on Woonsocket residents? physical and mental health that would result from
the loss of city revenue be considered in the decision.

Written comment was received from Deborah Garneau, Maternal and Child Health Director at
Rhode Island Department of Health, in a letter dated May 15, 2017. Ms. Garneau strongly
encouraged LMC to pursue a Baby Friendly certi?cation and noted that LMC is the only birthing
hospital in the state that has not been certi?ed.

The Health Services Council met on May 16, 2017, October 31, 2017, and November 14, 2017 to

review this proposals with the applicant in attendance at the meeting. At the November 14, 2017 

meeting, the Health Services Council voted seven in favor and none opposed (M) to recommend that
the applications be approved subject to the standard conditions of approval and to those conditions
outlined in the Attorney General?s letter of November 14, 2017, to be incorporated by reference and
be made part of the Council?s decision of approval, the referenced letter is attached.

Iv. FINDINGS

Section 23-17443, of the licensing statute requires the Health Services Council to consider speci?c
review criteria in formulating a recommendation for a change in effective control. The Council?s
comments and ?ndings on each of the criteria follow:

A. The character, competence, commitment, and standing in the community of the
preposed owners, operators or directors of the health care facility.

According to the applicant, there will be no changes in clinical operations, staf?ng, or changes
in contracts at the Hospitals due to the proposed donation.

The applicant stated both Hospitals have received full accreditation from the Joint Commission.

 

 

 

Prior to the Hospitals ownership by PHSI, the Hospitals spent ?ve years under Special
Mastership. has operated the Hospitals since January 1, 2014. According to the
applicant, since PHSI took over operations of the Hospitals:

- $4.5 million investment in primary care

- By the end of 5 years, committed to investing $45 million in equipment and in?astructure

(The applicant stated the capital expense from January 1, 2014 to December 31, 2016 is
$27 million. The Attorney General recognizes $18 million for this period because the AG
counts only actual cash spent, not the amounts committed on capital leases. The applicant
stated it anticipates a large IT capital expense in 2017 due to the implementation of EPIC
and Physician recruitment spending is on track for the $4.5 million commitment)

.. Midwifery Pulmonary Ortho OBGYN

- Increase births from 10 to 40 per month

- Wound Care Center

Cancer Center

- DaVinci Surgical robot

- InMotion Instant Arm robot (stroke rehab)

Plans for Level 111 Trauma Center

- Numererous infrastructure/related improvements

According to the applicant, LMC received an A rating from leapfrog Hospital Safety Grade
for Fall 2017, which was announced October 31, 2017.

A donation timeline provided by the applicant indicated $75 million in donations from 2005

to 2016 by the Foundation. This included, 

- $40 million to establish California University of Science and Medicine ?a non-pro?t
medical school

.. $5 million for medical equipment for Africa and Armenia

$5 million for scholarships and new health sciences buildings at Victor Valley

- Community College

- $450,000 to establish The Lodge at Lenape Valley Foundation in Bucks County, PA 
crisis services for behavioral health patients

Memos received hour the Center for Health Facilities Regulation 'of the Rhode Island
Department of Health stated RHRI had no de?ciencies and no enforcement actions in past
three (3) years.

The CHFR Memo additionally stated, on March 23, 2015 a'State complaint investigation
survey was conducted and on December 9, 2016 a modi?ed annual state licensure survey
and a new complaint investigation survey were conducted at LMC. State de?ciencies were
cited related to restraints, lack of a safe patient handling program, not signing and dating
MD orders (this was recited), not folloudng plan of care, lack of multilingual noti?cation,
infection control and not completed discharge forms. 3 last complaint survey on April
19, 2017 revealed no de?ciencies. There are no enforcement actions against LMC in the
past three (3) years.

The applicant has stated there has been no convictions and/or criminal offenses, and has
identified all citations, violations, investigations, and civil proceedings. Additionally, the

 

 

 

 

 

 

applicant stated there is a pending Department of Justice prosecution against the applicant
as described below.

Expert Review

RIDOH engaged an expert with Krckidas Bluestein LLP to conduct a legal review on the
impacts this transaction may have on the Hospitals. At the October 315?t meeting of the Health
Services Council, the expert presented her analysis and ?ndings based on the materials
provided by the applicant through June 2017. The expert stated based on the information

available, the proposed transaction appears to have a neutral/ positive impact on the Hospitals? 

operations. During her presentation, the exp ert indie ated that she still had several unan swered
questions on the transaction. At this meeting, the Health Services Council requested that
answers to the expert?s unanswered questions be addressed by the applicant prior to taking
any further action. 

A set of supplemental questions dated November 3, 2017 were sent to the applicant in order
to address the unanswered questions. Based upon the November 9, 2017 responses to the
supplemental questions by the applicant, the expert provided a second presentation to the
Health Services Council at the meeting of November 14, 2017. At this meeting, she noted that
the applicant did not or did not fully answer some of the questions and some of the responses
created con?icts with prior information provided by the applicant. At this meeting, the expert
again stated that the proposed transaction appears to have a neutral/positive impact on the
Hospitals? operations with the provisos and assumptions of any new or remaining unlmown
undocumented or unclear information and the exception for unknown and/or imquanti?able
risks to the Foundation.

The expert?s reports ?om the October 31, 2017 and the November 14, 2017 meetings are
attached.

RIDOH Consent Agreement

On October 30, 2017, RIDOH entered into a Consent Agreement With Prime Landmark, the
Foundation, and PHSI, because the applicant had transferred the Hospitals to the Foundation
on December 3 1, 2017, prior to review and approVal by RIDOH and in violation of RIGL 23?-
17.14 and RIGL 23-17.

Through the Consent Agreement, the applicant agreed to pay a ?ne in the amount of $1
million. Of this amount, $500,000 to be paid to the Rhode Island General Treasurer and
$500,000 to be paid to the'City of Woonsoeket 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, i.e. addressing social and
environmental determinants of health, eliminating health disparities, and ensuring health care
access to vulnerable populations.

The October 30, 2017 Consent Agreement is attached.

 

 

 

 

 

 

 

City of Woonsocket

According to the applicant, the Woonsocket community is economically disadvantaged, math
the median income below the state average and an unemployment rate higher than the state
average. The applicant noted LMC has a positive impact on the community, allowing those in
the area to receive quality healthcare locally.

Representatives of the City of Woonsocket spoke in opposition to the proposal at the May 16,
2017, the October 31, 2017, and the November 14, 2017 meetings of the Health Services
Council due to the approximately $1.7 million annual loss in property taxes that would result
from LMC converting from a for?pro?t to nonpro?t hospital.

At the October 31, 2017 meeting, Lisa Baldelli-Hunt, Woonsocket Mayor stated think
that it is important to remember that the taxation that would be lost ?om this particular
hospital going into nonpro?t status is very detrimental to the residents of the City of
Woonsockel?. Mayor Baldelli-I?lunt also stated, think it is very disingenuous on his part
and on the part of the hospital to lead us to believe that they would be doing something for
the State of Rhode Island, something for the City of Woonsocket in moving this to a
nonpro?t, into a profit status and 36 months later having a change of heart. And I know
Mr. Souza refers to the bene?ts that come along with being a nonpro?t hospital. They were
well aware of that when they moved forward with this acquisition. So, all the issues that
they present as to why it is so important and it"s so, you know, dire that they become a
nonpro?t, those are all areas that they were very well aware of prior to coming to us and
asking us to accept them as the buyer and to move forward in a pro?t status. So, this is not
a revelation that has occurred in the last 36 months. So, they were aware of it. They were
aware of it then. They are aware of it now. They baited us then and now they are
switching. 

John DeSirnone, Esq., Solicitor, City of Woonsocket, added to the Mayor?s comments
stating ?what I found somewhat disingenuous is the reference since the last meeting, which
I think was May of this year, Landmark said that they met with us, and you know, in an
attempt I think one of the members here asked if you tried to meet with the City. I can
tell you I was at that meeting. It was not constructive. There was no o?iars made.? Mr.
DeSirnone also brought forth concerns regarding the applicant?s character as it relates to
the October 30th Consent Agreement between the applicant and RIDOH.

1n the applicants November 9, 2017 reaponse to the supplemental questions, the applicant
stated: Dr. Reddy did not engage in a ?bait and switch?. Five years ago, Dr. Reddy
promised to save the RI Hospitals and he did. PHSI, Prime Healthcare ?s forapro?t parent,
acquired the RI Hospitals because it, rather than Prime Foundation, had the capital to
invest. .

At the November 14?h Health Services Council meeting the applicant stated, ?Mike [So uza]
has tried to explain how much we really do want to work with the City of Woonsocket. We
have been very, very supaportiire over the past four years, and we have tried to negotiate
with the'Mayor to come up with some kind of a reasonable payment. What we think is it
is just the discussions area productive because, at this time, the Mayor just wasn 't willing,
until the application is approved she is just not willing to compromise.?

5

 

 

 

 

In regard to the current property taxes paid by the applicant, at the November 14th meeting
Mayor Badelli?I-Iunt stated believe we stated the last time that they were cmrent with their
taxes.?

Department of Justice Prosecution

At the October 31St meeting, Mr. DeSimone, City of Woonsocket City Solicitor, referenced the
Department of Justice Case and stated: would refer you to the United States District Court
for the Central District of California, Western Division, that court case, which is
CV1108214PJW. It?s the Department of Justice case against Prime. And actually, in the
summary of the action, it pretty much spells out what I think they are doing here. Their business
model is to buy distressed hospitals and make them pro?table, which is good, but defendants
engaged in a systematic practice of maximizing revenues by, among other things, inducing
physicians who work at Prime hospitals to increase the number of inpatient care admissions of
Medicare bene?ciaries who visit the emergency department at a Prime hospital without regard

to whether an admission is medically necessary. The reason why you do that is when

you get someone to get into that type of care you getfour times the reimbursement So, the
United States Department of Justice ?led this complaint against them and like 13 of their
hospitals. Some of them are nonpro?ts. 

The applicant stated there is currently a pending case in the US District Court for the Central
District of California. The United States alleges various Prime Healthcare hospitals in
California improperly admitted Medicare patients rather than providing outpatient care in an
observation setting. Separately, there are allegations that the same Prime Healthcare hospitals
in California improperly up?coded Medicare claims in an effort to boost reimbursement. I?rime
Healthcare denies allegations and is vigorously defending the case. The case is currently in the

discovery phase with a trial date set for November 26, 2018.
Additional Public Comments

At the October 31St and November 14th Health Services Council meetings, public comment
in opposition to the applications was made by Elizbeth Ward, member of the general
public. Ms. Ward referenced the DOJ case pending against the applicant and other concerns
she had regarding the applicant? 5 character. Ms. Ward further addressed concerns regarding
the applicant?s character as it relates to the Consent Agreement entered into between the
applicant and 

Findings of the Council

At the November 141h meeting, the Council voted seven in favor and none opposed to
recommend approval of the applications. A member of the Council stated, think if we
look at, you know, the overall bottom line impact of the outside evaluation, it does positively
impact the hospital is condition with regard to other, you blow, obviously, financially,
which is quite challenging in today?s environment for hospitals, so I move approval.?

A second member of the Council stated, ?I'm going to vote yes, but I?m just going to say
I 'm doing it based on applying a totality of the evidence, so our requisite review criteria.

6

There was a lot here??om both sides ond?om the public, and I think, if we look at thefour
corners of what our requisite review criteria is, regardless ofhow we feel, legally, I think
we are bound and I vote on it.?

Fi ding: The Council finds that the applicant satis?es this criterion at the time, place
and circumstances as proposed.

. The extent to which the facility will provide, without material effect on its viability, safe

and adequate treatment for those individuals receiving the facility?s services.

According to the applicant, the Hospitals? names and operations will not change as a result of
the shift to non-pro?t status. This transaction is a donation. There is no ?nancing or capital
cost associated with the donation of LMC and RHRI to the Foundation.

According to the applicant they will have access to ample funds for capital and operating
needs. Because of the centralized services that will be offered by Prime Healthcare
Management 11, it will have a great economicand Operational bene?t. Also, the applicant
will be able to save costs because of the leveraged purchasing power of Prime Healthcare.

The following revenues and expenses were recorded at the Hospitals for FY 2014, 2015,
2016 and 2017:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Landmark Medical Center
FY 2014 FY 2015 FY 2016 FY 2017 Projected
Total Revenues $117,161,722 $122,882,888 $121,928,441 $125,684,439
Total Expenses $112,302,296 I $124,224,083 $122,216,264 $123,562,558
Operating Pro?t $4,859,426 $0 ,341,195) $(287,823) $2,121,881
Rehabilitation Hospital of Rho de Island
FY 2014 FY 2015 FY 2016 FY 2017
Projected
Total Revenues $8,665,781 $9,712,947 $8,749,869 $9,290,907
Total Expenses $9,247,579 $9,334,254 $9,487,881 $9,292,685
Operating $(581,798) $378,693 $038,013) ,778)
Pro?t 

 

 

 

 

 

 

According to the applicant, the Prime Healthcare System does not have any formal budgets,
whether operating or capital. It makes ?nancial decisions as decisions are required. ExPenses
are managed through a daily dashboard that displays infonnation including: census, 
per occupied bed, length of stay, and Emergency Room visits among other metrics. According
to the applicant, CMS has no issues with Prime Healthcare?s budgeting and strategic planning
process shared with local management (board) and Manger review daily operations (statistics,

7

 

 

 

 

revenues, expenses) on a daily, and annual basis through the use of dashboards 
living budge to include current month, previous month and same month last year, along
with trend reports to see each month over a long period of time.

The applicant ?nther stated, if the applications are approved, Prime Landmark, will use the
December 31, 2016 effective date. If CMS inquires about this date, Prime Landmark stated
it will exPlain that it delayed notice, pending approval from Prime Landmark
further stated it will ?le a Change in lnfonnation, notifying Medicare of the change in
membership of Prime - Landmark. Prime Landmark will provide similar notice to the State.

According to the applicant, on a consolidated basis, LMC and RHRI are taking steps to
increase productivity at new practices. The availability of the Loan Repayment Program for
nonpro?ts allows eligible professionals, including doctors, nurse-n?dudves, nurse
practitioners, nurses and pharmacists, among others, to participate in the program. To qualify,
the professional has to work in a public or non-pro?t health care facility located in a Health
Provider Shortage Area (HPSA) on an outpatient basis. Woonsocket is a HPSA for dental
care, primary care and mental health. LMC clinicians maybe the bene?ciaries of the program,
to repay professional school loans in exchange for up to six (6) years of outpatient care in a
HPSA. The applicant stated possible recruits will allow Landmark to make better choices
about the physicians that it engages.

The applicant stated participation in the 340(b) drug discount program could produce savings
of about $890,000 annually. However at the November 14th meeting the expert noted do
want to note that one of the math items that they have pointed to are the 340 the additional
revenues that would come ?om the 340(2)) program in terms of pharmacy discounts. That is
really under attack right now in Washington. So, there?s a possibility that the 340(b), the
bene?ts that are being expected will be greatly diminished.?

Finding: The Council ?nds that the applicants satisfy this criterion at the time, place
and circumstances as proposed.

. The extent to which the facility will provide safe and adequate treatment for individuals
receiving the health care facility's services.

See (A) above.

I Finding: The Council ?nds that the applicant satis?es this criterion at the time, place
and circumstances as proposed.

 

 

 

 

 

 

 

 

 

 

D. The extent to which the facility will provide appropriate access to traditionally

under?served populations.

The following payer mix were recorded at the Hospitals for FY 2014, 2015, 2016 and 2017:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Eandrnark Medical Center
2014 2015 2016 2017
Medicare 50% 51% 50% 51%
Medicaid 23% 23% 24% 22%
Blue Cross 11% 11% 11% 11%
Commercial SelfLPay 2% 2% - 3% 3%
Other: 8% 7% 5% 7%
Total 100% 100% 100% 100% 1
Rehabilitation Hospital of Rhode Island
2014 2015 2016 2017
Medicare 60% 54% 53% 58%
Medicaid 13% 14% 15% 13%
Blue Cross 11% 13% 13% 12%
Commercial SelfnPay 0% 0% 0% 0%
Other 11% 14% 12% 110/:
Total 100% 100% 100% 100%/?

 

 

 

 

 

 

According to the applicant, they are committed to supporting underserved populations and,
since PHSI acquired LMC, that tradition remains unchanged. They do not disc?minate on
the basis of a patient?s ability to pay.

According to the applicant, the Foundation and PHSI Hospitals have contributed $4.6 Billion
in free care from 2010 through December 2016. The applicant stated LMC provided charity
care from 2013 to October 2016 as follows:

 

 

 

 

 

 

 

Charity Care at LMC 7
2013 $4,618,643
2014 $2,251,000
2015 $1,840,228

$2,139,000 4

 

 

The applicant plans to continue using their charity care policies already in place.

 

Finding: The Council ?nds that, based on the evidence presented and representations
made by the applicant, the applicant satis?es this criterion at the time, place and
circumstances as proposed.

V. RECOMNIENDATION

After considering each of the review criteria as required by statute and the representations made
by the applicant, the Health Services Council recommends that this request for the changes in
effective control be approved.

Approval and implementation of the applications will result in the tennination of the existing
hospital license to Landmark Medical Center and the existing rehabilitation hospital center license
to Rehabilitation Hospital of Rhode Island and the issuance of a new hospital license to Landmark
Medical Center and a new rehabilitation hospital center license to Rehabilitation Hospital of Rho dc
Island with the Foundation as the sole member of Prime Healthcare Services Landmark, LLC.
VI. CONDITIONS OF APPROVAL

The Council recommends that approval of the instant applications shall be subject to the following
conditions: - I

1. that the applications be implemented as approved;
2. that the applicant shall abide by those conditions outlined in the Attorney General3 3 letter
of November 14, 2017, to be incorporated by reference and be made part of the Council?s

decision of approval (the referenced letter is attached);

- 3-.- that the applicant shall comply with those previous Conditions of Approval as contained
in the February 17, 2014 Amended Decision With Conditions;

4. 1hat the facilities maintain an accreditation from a nationally recognized accrediting
agency within two years of licensure;

5. that the applicant shall conduct national background checks on its employees; and

6. that data, including but not limited to, ?nances, utilization and demographic patient
information, be ?m?shed to the state agency, upon request.

10

 

 

 

 

 

 

 

 

?ats at inborn Mm am: ihtaotbeme iBIantattatw

DEPARTNIENT OF ATTORNEY GENERAL
150 South Main Street - Providence, RI 02903
(401) 274-4400 - TDD (401) 453?0410

 

Peter F. Kthnarttm Attorney General

November 14, 2017

Via Electronic andReguIar Mail

Michael Dexter, Chief

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

Three Capitol Hill

Providence, RI 02908

Re: Landmark-Medical Center and the Rehabilitation Hospital of
Rhode Island (the ?Hospitals??

Dear Mr. Dexter:

Thank you for your letter dated November 7, 2017 regarding the Change in Effective
Control applications of the Hospitals, currently pending hefon: the Health Services
Council Regarding the transfer of the Hospitals to the nonpro?t Prime Healthcare
Foundation, Inc. [the ?Foundation?), the Department of Attorney General has reached certain
agreements with the Foundation and Prime Healthcare Services, Inc. and collectively,
?Prime?), that will be further discussed herein.

First, following the Superior Court ?ling of the Petition of the Attorney General to
Enforce its Hospital Conversions Act Decision and the Asset Purchase Agreement, PHSI and the
Attorney General agreed to a Consent Order dated March 24, 2017. Therein PHSI agreed that
following CEC approval, and the donation of the Hospitals to the Foundation, the ?ve?year
commitments previously made in the Ass et Purchase Agreement with the Court-Appointed
Special Master (the and the ?veuyear conditions within the Attorney General?s Hospital
Conversions Act Decision (the ?Decision?), would transfer to the Foundation. Since the transfer
of the HosPitals to the Foundation has occurred without CBC approval, the Consent Judgment
must be amended to account for responsibility for compliance with those obligations since
December 31, 2016.

 

 

 

 

 

 

Michael Dexter, Chief

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

November 14, 2017

Page Two

In addition, Prime has agreed to extend the Retainer Agreement with the Attorney
General?s monitoring expert, Affiliated Monitors, Inc. (the ?Monitors?) for an additional two (2)
years through January 1, 2019. Accordingly, Prime will continue to report to the Monitors on
applicable Decision conditions, and the Monitors will produce reports on compliance for an
additional two (2) years, for a total monitoring period of ?ve (5) years. Under this arrangement,

Prime will continue to pay monitoring costs. .

Concerning charitable assets of the new nonpro?t Hospitals, Prime has consented to
annual reporting, at a minimum, on any charitable assets, and disbursement of such assets, at
Landmark. Prime has represented to the Attorney General that Landmark does not maintain
charitable assets and has not received charitable contributions since December 31, 2016.
Additionally, in response to CEO questions, Prime has said that the Foundation does not
fundraise and does not contemplate a charitable giving program in Rhode Island. However,
annual monitoring would enable the Attorney General to be informed if the Foundation changes
its position on ?mdraising or receives contributions for the bene?t of Landmark.

Finally, to con?nn their commitment to the Hospitals, Prime has agreed to continue to
operate Landmark Medical Center as an acute care facility with an open and accessible
emergency room for an additional ?ve (5) years following CEO approval. The original ?ve (5)
years required by the APA will expire on December 31, 2018, so their renewed commitment

1 extends that ?ve (5) years ??om the date of CEO approval. Recognizing concerns about
. dissolution as expressed in your November letter, the Council may want to consider this
comrninnent as a condition of approval. -

Regards,

Katie Enright
Assistant Attorney General

KE/dm

 

 

 

 

 

 

09.5 I - Dapam?nehtofHealth

  

Three Capitol Hill
Prmridente?l 02905-509?
1* 71 
293? .gov
VIA ELECTRONIC MAIL
November 73 2017
Ezn?ilgl?z5 Esq!

Assistant Attorney General.
Dapartment of Attorney General
1-50 South-Main Street
Providence? RI 02903

Dear Atter?ey Enrighi,

AS Yen I-?Iealfheare Services, the Health Services
Council on Tuesday, October 31, 201.7 to presentiheir hospital comersfons applications for the
Changes 111; Effective Centre] '01" Landmark and the Rehabilitation Heepi?tal of
Rhode Island (pelleefively; the ?HespitelSRJ. The request is; for I?r?Ime-tq receive femal approval
from ?le Rhode Island Department ef Health 1?0 donate the Hospitals to P331116
Healtheere .E?etmda?er?x, Inc. (the ?Fozmdetion??), thus Hemaitals ??emsferapro?t to
notufermpr'ez?t e?tities.

During this meeting, an expertengag?ed by RIDOH delivered a pgesentatiiezi on the pbseible impacts
of the propesed donation The expert?s presentation lediceiedihet upon disselution?he Hospitals?
assets Will go to the Eeuada?en? and ?that don-amine made to the Hespitals are-heated as if made to
a branch or (ill-vision of the Foundation. Based in part eafthese of the wipers, members of
Health 'Senziees Ceuaell hadguestioneregarding the pessihle effects- this transfer may have oil the
Hospitals,- including:

.1 .Slmuld the app'lieat'ioe' be {alppievecla 1f were is dieselu?en under the meda?on where do
.the assets lathe Rhode Island Attorney ?General invelVed,3if at all?

2-. lab: appropriateendfor permeable for denatienamadete'jhe Hespitals to be SWept up. into
the emda?ci on?

At this point, Prime is scheduledlto, appear againb'e'fore the Health Services Celmeilen Nosember
I4, 2017;.

If you have any questions glease content {401) 222?2788.
Sincerely;

?Mew

Michael Kl Dexter
Chief
Center for Health Systems Policy and Regule?orls

State of'?hode Island and Providence Plantatlms

 

I 2'

 

 

 

 

 

STATE or RHODE ISLAND
DEPARTMENT OF HEALTH

CONSENT AGREEMEET
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?1 7 and 2347.14, 1 7. 14-HCA, 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 Hospitai Centers; and

WHEREAS, Section 1.10 of the HCA Regulations de?nes Conversion as ?any trassfer 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 talenty 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 membelship or
voting rights or interests of the hospital or of the assets of the hospital, or the removal, addition or
substitution of a partner which results in a new partner gaining or acquiring a controlling interest in
the heapital, or any change in membership which results in a new person gaining or acquiring a
controlling vote in the hospital?; and

WHEREAS, pursuant to RIGL 2347.145 and Section 2.0 of the HCA Regulations, any?
hospital conversion shall require prior review and approval from RIDGE in accordance with the
provisions of Chapter 23-1114 of the Rhoda Island General Laws, as amended, and the HCA

Regulations; and

 

 

   

 

WHEREAS, pursuant to Section 6.1 Review of Other Conversions of the HCA Regulations,
shall review all proposed conversions involving a for-pro?t hospital as the acquiree and a
not-for?pro?t cotporation as the acquirer in accordance with the provisions for change of effective
control pursuant to sections 23~i7- 14.3 and 23-! 7-144 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 - .

WHEREAS, pursuant to RIGL 23-17-6, 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 proposed change in the owner, operator, or lessee of any licensed health care
facility, the Health Services Council shall speci?cally consider: I

The character, commitment, competence, and standingin the of the proposed
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 licensurc 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 underserved populations and in consideration of the proposed
continuation or termination of health care services by the health care facility; and

WHEREAS, pursuant to RJGL 23-1 7.14-30, 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 fora 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 fine of not more than one million dollars ($1,000,000) or impose a prison torin of not more than ?ve
years; and 

WHEREAS, pursuant to RIGL 23~ 17-17, any person establishing, conducting, managing,

or Operating any health care facility without a license shall be ?ned not more than five thousand I

5 ,0 00) 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 Sewices 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

 

 

 

 

 

 

REDOH, HOSOOIB and Rehabilitation Hospital of Rhode Island a. rehabilitation hospital
center located at 116 Eddie Bowling Highway, North Smith?eld, with a Rehabilitation Hospital
Center License granted by RIDOH, ill-1002103 (?coiloctively, the and

WHEREAS, Prime Healtheare Foundation, inc. (?Prime oundation?) is a Delaware non-
stock charitable corporation; and

WHEREAS, Prime Healthcare Management II, Inc. (?Prime Management 11?) is a California
. corporation and a wholly owned-subsidiary of The Raddy Family "must; and

WHEREAS, Prime Healthcare Services, inc. (?Prime Healthcare Services?) is a Caiifoinia
business corporation and a wholly owned subsidiary of Prime Healthcare Holdings, 1:10., itself a
subsidiary of KASP Trust No. i, KASP Trust No. 2, and KASP Trust No. 3, each with. 1X 3 ownership
interest respectively; and

WHEREAS, On December 31, 2016, Prime Foundation, Prime Management II, Prime-
Landmark, 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 RCA Regulations'C?P ending Applications?); and

WHEREAS, the purpose of the Pending Applications is for Prime Healthcare Services to
seek approval from RIDOH to donate Prime-Landmark to Prime Foundation, and thus, Prime?
Landmarlc would change from a for-profit 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 Services and Prime Foundation on December 31, 2016

(?Agreement?); and

 

 

WHEREAS, on January 3, 201?, RIDOH requested and, on January 5, 2017, Prime provided

continuation that the Tiensaction had not yet taken place and represented a ?possible retroactive
transaction? for 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 23, 2017, in response to the March 17, 2017 resubmission, RIDOH
issued a second set of ivritten de?ciencies via email to Prime and on April 11, 2017, Prime replied to
the second set of de?ciencies with a resebmission 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 octane-red, RIDOH
determined the Pending Applications were acceptable in form and the formal review initiated on April
15, 20-17; and .

WHEREAS, on April 25, 2017, pursuant to RIGL 23411443, in order to effectuate the
purposes of the Heepital Conversion Act, engaged an expert; and

WHEREAS, on May 16, 2017, Prime appeared before the Health Services Council to provide
an initial presentation of the Pending Applications; and

WHEREAS, on May 23, 2017, RIDOH sent supplemental questions to Prime basedon the
expert?s review 'with respect to the Transaction, Applications and Prime?s presentation before the
Council, with a reopense 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 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
Prune-Landmark 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 hetvreen representatives of Prime and
representatiues 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 RIDOI-I approval is received, as well as, individual statements signed and notarized by
each of the members of the Board of Directors of Prime Services and Beard of Directors
of Prime Foundation af?rming that the December 8, 2016 Unanimous Consents of the respectch
Boards did not re?ect that, in fact, the donation occurred on December 31, 2016; and
WHEREAS, on July 13, 2017, Prime Foundation submitted a letter to RIDOH and, on July
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 ?3 July 25, 2017
letter recognized that RIDOH approval is required prior to operating LMC and RHRI as non-pro?t
hospitals; and I
WHEREAS, uponreview of the July 13, 2617, 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, 20 i 7 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, 2.017; Governing Board Minutes ofthe RHRI Ineeting of April 20, 2017;
Governing Board Agendas for the July 2017 quarterly meetings and agendas, minutes
and resolutioiis of all meetings of Prime Healthcare Services and Prime Foundation that were held in
2017 to date; and audited ?nancial statements of Prime Healthcare Services for 2016; and

WHEREAS, during the July and August 2017 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 December2016; and

WHEREAS, Prime did not provide a written response to 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
control of Prime-Landmark, prior to review and approval by RIDOH and, thus, they could not provide
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 1

WHEREAS, Prime herein con?rms that the Trans action occurred on December 3 1, 20l6 and
thus Prune?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

the occurrence of the Transaction prior to review and approval by RIDOH is a
violation of RIGL 23-174, and R101. 23-170; and

WHEREAS, pursuaot to RIGL 2347,1460, Prince?s violation of RIGL 2347.146:
regarding the HCA Application of Landmark Medical Center allows a ?ne of up to one million dollars
and

mania, pursuant to RIGL 2347.14.30, Prime?s violation of RIGL 23-11146
regarding the HCA Application of Rehabilitation Hospital of Rhode Island allows a ?ne of up to one
million dollars and i

1 WHEREAS, pursuant to RIGL 23? 17-17, Prime?s violation of RIGL 23-17-4 and RIGL
by Prirne 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 ?ne of apploximately one million ?ve hundred thousand dollars
and

WHEREAS, pursuant to RIGL 23-1747, 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 men ?ve thousand dollars ($5,000) per day for a total of 300 days, as of
October 27, 2017, fora total possible ?ne of one million five hundred thousand dollais?

and

 

 

WHEREAS, pursuant to RIGL and RIGL 23-17-17, Prime's violations of
RIGL 2347.145, RIGL 2347-4, and RIGL 23-176 for the Hospital Licenses of LMC and
RHRI allow a total possible ?ne of ?ve million dollars 

NOW, THEREFORE, to avoid disruptionof the care to Rhode Island residents receiving
services, RJDOH has agreed to maintain in full force and effect the Hospital Licenses of LMC and
RI-IRI 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. Folthemlore, in consideration of the contribution that Prime has tirade to 
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 Rhoda 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 mumal 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. Prime shall pay a ?ne in the amount of one million dollars 0f the total
?ne, Prime shall pay ?ve 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. Ofthe total fine, Prime shall pay ?ve hundred thousand dollars payable to the
City of Wconsocket, 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, Len addressing social and environmental determinants of health,
eliminating health disparities; and ensuring health care access to Vulnerable populations.

2. Prime, pursuant to RIGL 234714?28 shall comply with Conditions 20 and Zl
of the February 17, 2014 Amended Decision With Conditions of the Hosp ital 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 home by Prime through an Escrow Agreement with an escrow amount to be
determined by RIDOH. Prime shall ?illy cooperate with all requests for infomation by the
Independent Third Party.

3. Prime shall continue to seek review and approval by the Health Sewices Council and
approval by RIDOH for the Pending Applications RIDGE will make its best efforts to provide the
. expert?s report to Prime by October 26, 2017, the expert having stated to RIDOI-I 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 the Health Services Council and decision by RIDOH, then Prime will implement a reversal of the
Transaction and thus Prime-Landmark will '1'evert from a subsidiary of Prime Foundation and a
charitable entity to a subsidiary of Prime Healthc are Services and a for-pro?t entity within thirty (3 0)
days after all appeal rights are satis?ed.

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

forth herein.

10

 

 

 

 

6. ntire A room at end eats and ers. This Agreement contains the entire

agreement (including representations, warranties and covenants) among the parties hereto pertaining
to the subiect triatter 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 uniess 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. ?everabilitg. 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
permitted bylaw.

3. Elm Except as may otherwise expressly be provided herein, any notice required
or desired to be served, given or delivered hereunder shall be inwriting, and shali be deemed to have
been ralidly 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, in the case of mailed notice, seven (7) days after deposit in the mail, with proper

postage for registered or certi?ed mail, return receipt requested, prepaid, or in the case of notice

?11

 

 

 

 

 

 

by Federal Express or other reputable overnight courier service, two (2) business clays a?er delivery

to such courier sewice, addressed to the party to be noti?ed as follows:

If to: Prime Healthcare Foundation, Inc./ Prime Healthcare Services, Inc.

Prom Roddy, MD

President

Prime Healthearo Foundation, IncJ Prime Healthcare Sewioes, Inc.
3300 E. Guasti Rd.

Ontario, CA 91 7 61

Michael Souza -

Chief Executive Of?cer

Landmark Medical Ceateo? Rehabilitation Hospital of Rhode Island
115 Cass Avenue -

Woonsocket, RI 02895

With a com: to:

J. Warren, Esq.
Cameron 8; Mittleman LLP
301 Promenade Street
Providence, RI 02908

If to: Rhode Island Departinent of Health

Sandra M. Powell

Associate Director

Division of Policy, Information Communications
Rhode Island Dop artment of Health

3 Capitol Hill, Room 410

Providence, Rhode island 02908

Michael K. Dexter
Chief

?Center for Health Systems Policy and Regulations

Rhodc Island Department of Health
3 Capitol Hill, Room 410
Providence, Rhode Island 02908

With a copy to:

Stephen Morris, Esq.

Deputy Chief Legal Co'unsel
Rhode Island Dep ailment of Health
3 Capitol Hill

Providence, Rhode Island 02908

12

 

 

 

 

 

or to Each other addeess or telecopy number as may be designated in writing 

time to nine in aoeoniance herewith.

9. ?yccesgog?s. This Agreement shall be binding upon, and

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

have any right, bene?t or obligations hereunder.

10. W. This Agreement may be

which shall be construed as an original, and all of which together shall constitute one

instrument.

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

Consent Agreement effective 

PM HEALTHCARE SERVICES 
LANDMARK LLC

Bin--. .- 
Mohael Souza

Chief Executive Of?cer, Landmark Medical
Center and Rehabilitation Hospital of Rhode
Island

PRIME HEALTHCARE FOUNDATI 

9

2017

RHODE ISLAND DEPARTMENT OF
HEALTH

 

By:

Michael IQ Dexter
Chief, Center for Health Systems Policy and
Regulations

Michael Sarian, President
Peime Heal?ieare Foundation, Inc.

PRME HEALTHCARE SERVICES, 1N0.

 

By:
Michael Mar, Chief Financial Of?cer
Prime Healthoare Services, Inc.

11 (linked 263615311}
1 3

3! any party from

inure to the bene?t of the

executed in one or more counterparts, each of

and the same

 

 

 

 

 

     

 



or to such eager may be de?signatsd in writing by any pm?ty??om 

?rm ?to time 

9, W: This Agreement shall be bindi?g upon, and 11mm in the bene?t of 1116? 

heirs, execuxaraE summers and p?gt?mittedas'signees' of the, palms-hereto, and 1m nth??persm shall 

have-any right, hnna'?'t or obligations hamundar. .

10:. ?9qu ThisAgl?rsement may be, executed in one (Er-mum cmmterparts, each of 

E.

. . which 911131111132; summer} as an?m'iginalrarid all. ofrwhich toge?ther shall constitute one and the. Same . 

E.

ins?t?rumem. 

IN WITNESS WHERECF, .the parties, by their agents duly authorized, have extzbuted this a 

i

Cbns?ent Agraement? affactiire. 451%? 3 f? ,?201?1 . 

SERVICES RHODE ISLAND DEPARTMENT OF. a
LANDMARK LLG HEALTH 

. - 2 1

By: . . . By: {ii/357?? 

W?ohacl?Souza . Ma?aal K. Dexter 5' i 1
Chief Erie eutive Officer, La admtirk M?dioal Chi ef, 10 mm for He alth? systems Policy and 
Ccnt'cr ah'd Rehabilitation Hosgital of thde Reguiations
Island
mums HEALTHCARE EGUNDATI 
INC.


 

 

Michael Sarian, President 6 E:

   

mime? He althcam Faun Elation, km 

By: - - .. 
Michael 1-1' er, ChiefFinanoiai Uf?mr 
mime Heal?icara Services; Inc. 






1


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CURRENT ORGANIZATIONAL CHARTS

 

   

                               

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Prime Services -- Sherman Oaks. LLC I Prime Hgalma Sewiat?? Monmlair LLC
dba: Shaman Oaks Hospital day: MomdaIrHospital Medical Center

 

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Prime Heallhcare Huntington Beach LLC 1
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1 dba- HJn?nginn Beech Hospital dba: En?no Rosana] Madam} 

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dba: ampa Regional Medic; Gamer Prime Heahhcam Founda?on? 596mm Reg-anal. LLC

dba: Scutham Regional Marital Center
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a Texas nonpro?t carpma?an {m Management Group, LLC Surgary Care, LLC

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dba: ta Pam Intemommunity Hosyitai I (GPCEEVGW

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{Pending Acquisition} 

 

 

 

dba: Dushantm Cami}: Mm?zl Hos-pin!
[Pending Acm?si?nn!

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All are DEenEEes miss: :31ka noted. I

 

 

 

 

 

 

ORGANIZATIONAL CHARTS

 

 

 

 

Prime Heallhcare
Fomdaticn. Inc.

 

 

 

 

Prime Sherman Oaks, LLC

  
  

 

 

dba: Sherman Oaks Hospital

 

 

 

 

dba: Munlclair Haspilal Medical Center

 

Prhne Hea Iii-mm Servines- Manmtair LLC

 

 

 

 

Prime Huntington Beach LLC
dba: Huntington Beach Hospital

 

 

 

Prime Heallhcare Servicea Pampa. 

Prime Healthcare Services? Encinm LLC
dba: Ermine Hospital Medina} Center

 

 

 

 

Prime Heallhcare Fwnda?on Bouihem Regional. LLC

 

dba; Pampa Regional Medical Center

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dba: Southern Ragfnnal Medina; Center

 

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a Texas mnpm?tcorpm?on 

 

 

 

Southern Region! Physicians

mamas-mam Group. LLC

 

 

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Sun-gay Care, LLC

 

 

 

 

Prime Heailhaareba Fatima. LLC i
6139: La Palma Hosphl 

 

 

 

 

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Prime Hea?hmre Services Glandura, LLB
(GP of 

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a 53mm Nut-19mm Pub?c Bene?t Corpora?m I

 

 

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Prime Heawmare Services- Bucks County Insurance. Lid.
dba: Bucks Insurance
{Cam Islands}

 

 

 

 

 

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Prime Ha?asmare Sen-?ees? alumna Hospital. LLC 

dba: Suburban Heaths!

 

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a: Goal; mam Gamay armorial Haspllal

 

 

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dba: Landmark Med. Ck.

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dba: Salem Hasp?a!
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dba: Em limpet)! Cay Hanna! 

 

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{Imam}

  
  

Victor Valley. LLC
{manna}

Effec?ve 1f 10??

 

 

 

 

 

 

 

   

HEW-zirrw?e: -

 

 

Je-v'nnifer GallOp, 

Partner

Krokidas 8: Bluestein LLP
Providing legal services in the areas ofpubli'c, non~profit and for?profit gene
al estate development, finance and proper

social services law, education law, re
private civil litigation, labor and employment law,

ral corporate law, health and
ty management, public and

 



 

 

 

 

 

 

en. .- - - 

 

 

Donor: Prime Healthcare Services,?lnc. (PHSI)

Licensee: Prime Healthcare Services- Landmark LLC (Hospital
LLC)

Owner/ Operator of the ?Hospitals":
?at: Landmark Medical Center
is: Rehabilitation Hospital of Rhode Island

Manager: Prime Healthcare Management, Inc.

El Non-Profit Entities:
Recipient: Prime Healthcare Foundation, Inc. (Foundation)
3 Licensee: Same Hospital LLC, but converted to non-profit
a New Manager: Prime Healthcare Management II, Inc. (identical?)

 
 

ism 

n1 TURN-5V5

 

 

 

 

El Legal engagement limited to corporate/transaction review
of information received through June 2017 regarding the
following questions:

Does the form of the proposed transaction as a charitable
contribution, and (ii)the proposed organization and governance
structure of the Hospitals under Foundation?s ownership post-

. transaction,gmaterially impact Ell

the current business posture of the Hospitals, and or

the ?character, commitment, competence and
standing in the community? of the Hospitals? operator?

No review of state/ local tax; Rl/ national operations

 

 

or! 

 

Kim mmsmawxasmm



 

 

 

 

 

 

 

 

 

neutral positive impact on Hospitals? operations.

El ll. Considering related identity of the Applicants and I
the required tax exemption compliance, the proposed
transaction should not adversely affect character,
commitment, competence and standing in the
community. 

These. conclusions are with the following provisos and assumptions:

Exception for unknown, undocumented or unclear information
(examples herein)

3 Exception for unknown and or unquantifiable risks to the Foundation
(he. tax exemption compliance; unfunded successor liability); and

 

xtzozgmn3t331?g??j?


 

 

 

 

Form of PropOSecl Transaction

 

Type of Conveyance: Membership Interest Transfer,
Charitable Contribution'anol Conveyance
Agreement (hereinafter the ?Donation Agreement?)

Allocation of Risks Benefits: Indemnification;
Assignment Assumption, Agreement


n?r?rcutz-uavs 

 

 

 

 

 

 

 

Donation Agreement

 

Hospital LLC ?free and clear of all liens,
encumbrances and liabilities?; no new capital
investment or financing

 

Hospitals Hospital Assets remain intact for transfer

Applicant?s used independent Qualified Fair Market
Valuation of Membership Interest booked
at 

El With Foundation as its new sole member, Hospital
LLC becomes non-profit disregarded entity


magma.

 



 

 

 

 

 

 

 

Non-PrOfit Hospital LLC: What is a

    

LLC @wholly- -owned and controlled by a
exempt organization (Le. Sole Member)

For federal tax purposes: It LLC does not make
election to be treated as a corporation, and Prime has
stated it has not:

a it is disregarded as an entity separate from the parent
charitable organization/owner the activities are
treated as a branch/division of the owner and no form

1023 or'form 990 Is filed for the 

the income, assets and operations of the disregarded entity
are treated as the owner 5 for tax and information
reporting purposes, except for employment and certain
excise taxes;

 

BASE BI: 

 
  

 

 

 

   

to the disregarded entity are tax de

made to a branch/division of the parent
owner (the ?donee?); and

cit donations to the
ors will be honored;

a contribution
and treated as i
charitable organization
a Note: Foundation states no intention to soli

Hospitals but that wishes of occasional don

any federal tax liabilities excess benefits, loss of
exempt status, but not employment and excise taxes)

pertaining to the disregarded entity likely assessed to

owner.
From a state lawperspective, the disregarded entity
LLC is treated as a separate entity, providing protection

to the owner from liabilities.

 

 

 

more: ms amuse-r rim

:11. 3?39.? 

 

 

 

 

Ema 

 

 

1: All for?profit Hospital accrued and unpaid liabilities (inc.
accounts payable, accrued payroll, accrued paid time-off, accrued
payroll taxes, third party expenses, current pOrtion of long term
debt, other liabilities, retrofit costs transferred to/ assumed by 
at closing) 

:1 Representations, Warranties and. Covenants of PVHSI and for-profit
Hospital LLC for the period prior to Donation (including
indemnification) survive 2 years 

Non-profit Hospital LLC remains responsible for for?profit Hospital
LLC liabilities that:

(1) predate Donation but arise after the 2 yr survival period expires; or
(2) do not qualify for indemnification

El Non-profit Hospital LLC liabilities do not flow automatically to
Foundation

 

TURBLY5

 

 

 

 

 

 

 

PHSI Rolemc Dr. Reddy

 

:1 President PHSI, Sole Member of l-lospi?ral LLC
Director of PHSI

[j Grantor of KASP Trusts, sole shareholder of Prime
Healrhcare Holdings, Inc., sole shareholder KROMM SEELUESTMN . -: 
iaTi?GiLHL'i'b I 



 

 

 

 

 

 

 

 For- Profit Hospital LLC

 

El :Hospital LLC [5 owner/ licensed operator of the
Hospitals

Hospital LLC Governing Board does not overlap with
board

El appoints Hospital LLC Governing Board Chair

Hospital LLC Governing Board minutes evidence some
active local governance, subiect to PHSI for maiOr
decisions .

a NotesBoard requested more involvement in hospital
operations, more than quarterly meetings, communications

a Internal invites and more dacumentation were suggested

go 131:. .3 ss 1413.5123me 

 

 

 

 

 

"Applicant Approval lm plementation? PrOcess
for Donation - uestion

 

censulting Hospital Governing Board
[1 No documentation of grounds/ criteria for decision

[3 Applicants filed with in advance of notifying Hospital
LLC Governing Board

Transaction documents reflect retroactive Effective Date of
donation; no information other than 201 6 financial
statements re any activities preceding RIDOH approval:

Escrow of documents; liabilities assigned; regulatory filings re
change of ownership Medicare/ Medicaid current flow
of funds (inc. any current subsidization of hospitals); new
financing; Foundation contracting

a From when does indemnification period commence?

sea at 
511? 3'1

 
 

 

 

 

 

 

 

Who is Prime Foundation (Delaware

 

 





AT ET :5

 

0

Since 2009, Foundation Wacquired 13 hospitals through donation and acquisition, and medical school
Note: Financials refer to Foundation as CA Corporation

   
 


Wme??WMw?d

Ongoing federal prosecution regarding billing practices
No OIG Corporate Integrity Agreement

No other material compliance issues or settlements reported by
Applicants

Appears Foundation will play a comparable role to with
respect to the Hospitals, except:
Foundation activities regulated as a tax-exempt, charitable organization

a Foundation also has outside charitable interests

Appears Hospitals will interact with New Manager vis a vis the
Foundation similarly to current Manager

  
 

 

 

 

 

 

 

 

Although he does not control the Foundation per se, Dr.

an influential role: 

CEO (in addition to Michael Sarian who is listed as ?President/CEO", a
Manager employee serving as an officer)

Reserved powers as Sole Member under both governance documents
and Delaware law 

C1 Dr. Reddy?s role is limited by, fiduciary tax law requirements:

Board must operate in furtherance of exempt purposes, and earnings
may not inure, directly or indirectly, to benefit of any private individual
or entity

Unclear if Delaware has any enforcement of public charities laws 
regarding transfers of assets particularly in other states)

Not a director; there is also no director overlap of Foundation
directors with directors

 



v.1 l-U (013:1? 

 

 

 

 

Dr: Reddy?s Rights as Foundation?s Sole

  
   




 

Member der Governance Documents

 

 

 

 



 

 



 



Member entitled to appoint up to 20% of Foundation Directors.

of 4 directors is an interested party/ employee of New Manager and serves as
chair

 

a Note: Foundation refers to 4 5 community directors, but fifth also is manager employee

Under Delaware Law, a member who appoints directors also has the powers describe on next
slide.

Dr. Reddy is Chair Emeritus
80% of Foundation Directors elected by the Member-appointed director
Member?Appointed Directors may only be removed by Member 

DEED

Quorum is maiority of full board 3 4 directors currently)
:3 3 directors appointed by Member-appointed director could constitute quorum.

El Vote is by maiority of quorum 2 3), provided that maiority includes directors
who are members (of which there are none)

3 Foundation states will amend bylaws to remove this requirement

1: Officers are current Manager Secretary and CFO and may influence board



 
 

n'i'Tsz-t r-i 213?s

 

 

 

 

DE Non?Protit Law'-- Member Powers

 

CI Except as provided below, under DE law, Member/ Director rights
and powers are generally determined by the governing documents.
However, Members Will always have the following:

a, Power to adopt, amend or repeal by-laws

Rights to review corporate books and records (subiect to form and
manner requirements)

a Right to sue to enforce rights .. - 

Where Members have the power to elect directors (as Dr. Reddy does),
those Members will also have the power to approve:
Mergers 
Sales of All/Substantially All Assets
Dissolution

NOTE: Directors hold rights to amend the Certificate of Organization, except as otherwise provided in the
governing documents. In this case, under the Foundation?s Certificate of Organization, the Member must consent to
amendments to the 4th and 7 ih articles of the Certificate (Le. appointment of directors, authority to amend the
certificate of organization and bylaws concerning member).

   

mo Ki DASQELUHSTEIR

[1 11' .5

 

 
 

 

 

 

 

 

 on Hospital LLC
Governance 



 

 

 





 

 

 

      

Per Certificate of Formation (CF) Amended and
Agreement Provisions (as well as Hospital Governing Body bylaws

[3 Foundation becomes Hospital Sole Member; Hospital LLC
becomes disregarded entity of the Foundation

Hospital LLC operates exclusively for charitable purposes (IRS
(501(c)(3) (and certain laws applicable to public charities operating
in RI (RIGL Section 

Hospital LLC also-operates for benefit of Foundation Member (CF,
1.3, 5.2) 
Member must be tax-exempt and 100% owner (CF, 2.1, 2.2, 7.3)

Upon dissolution, Hospital LLC assets go to Foundation (CF, 8.2) - not RI
Charity 

Hospital LLC may not merge with or convert to tor-profit (CF, 1 .3)
Assets may only be transferred in exchange for FMV (CF)

 

 



IRE-Z 5 

a

 
 

.51 

 

 

 

 

 

Governance - Cnt?d

 

El Hospital LLC Is managed by Foundation/Member 
Member can delegate to HOSpital LLC officers (of which
there are none besides 

A I: Foundation/Member has reserved authority for Maior
Decisions (4.3) (see also 6.7 of Hospital bylaws).

:1 Foundation may authorize distributiOn of Hospital LLC net
revenues to itself as Member (5.2).
Foundation comingles all of its hospitals? revenues

It uses revenues exclusiVely for Foundation hospitals but may be
used for any Foundation hospital (not limited to RI hospitals).

[3 Foundation maysubSidize hospitals (not documented), but
Member has no personal liability 0.1)

?4110 KEDMRELUESTEIN .

 

h?l' TO :4 111' 

 

 

 

 

 




 

 

 

 

lmpacted?E




 




5-51: WW 

[3 Souza remains President/ CEO Chair

 

Same Hospital LLC Governing Board members continue to serve

El Hospital LLC Governing Board Bylaws unchanged except for
Foundationas sole member. Still reflects:
Broad CEO responsibilities delineated (2.3): Payer contracting, strategic
plan and development of budget and capital plan

a Note: Applicant uses ?dashboards" not budgets, so documentation does not reflect all
practices. Note also that Medicare Conditions of Participation (CoPs) require budgets.

a Hospital CEO ?selected by? (confer with Member) and reports to (but is not
discharged by) Governing'Board (2.1, 3.8m). Parent interviews candidates
(likely become Foundation (or New Manager) role).

Note: Hospital Policies, procedures, practices not reviewed

 





:15 LTS

 
 
 

 

 

 

 

 

ospitafGovernance N?OT?lmpacted I 
Exceptw re Hospital LLC 

 

El Local Hospital Board Governance Continues:

Directors appointed by Member (3.2): Unclear if meet requirement of 25%
community members (2/l -

May be removed byMember after 2/3 vote of Member?s directors or of
Governing Board

Maior areas of responsibility (2.1): Management and control of operations,
including legal compliance re facility health and safety, overseeing credentialing,
quality and risk management, review of financial performance, strategic planning.

Specific Duties (3.8): Extensive duties similar to those of CEO, appointment and
replacement of CEO, CFO, CMO and CNO after conferring with Member. (Also
refers to budgets (which do not exist).)

Quorum (6.6): Majority (even if directors depart during meeting)
a Voting (6.7): Majority of those present, with certain Member votes required

Powers Reserved to Member (but Member may consult Governing

Board) (6.7)

a Election of Governing Board, removal of CEO, approval of capital and operating
budgets (which do not exist), approval of financing and expenditures



1 It. 5

 

 

 

 

 

 

New Management "of Hospitals Prime

 

 

El Reddy Family Trust sole shareholder
[1 Dr. Reddy President/ CEO and sole director

13 Management Staff: Prem Reddy and the 5 employees, some of
whom serve as Foundation officers

:1 Single Management Agreement for all Foundation-owned hospitals 

a No ioint liability; no cross default of hospitals

a Term of 5 years commencing eff. Date and ending 1 1/2021. This
would be under 5 years for Hospital LLC (6.1) 

El Termination (unlikely -- related party): 6.2 missing language.

a Note: High standard for Manager breach. Cure periods for breach are mutual,
but uncapped for and bin)

[1 Mutual indemnification
a ii. Note: obligation is potentially diluted. (8.5)

 

 

 

 

New Management of Hospitals?

LJ

 

 

Manager Compensation:
a Fee is 6% (5.1) of net patient revenues 7.5% plus
profit sharing for for?profit hospital manager)

Fee subiect to FMV and excess benefit transaction

requirements (1 
.- Manager may also collect:
a Allocated corporate services

a Additional overhead (5.4)
can be deferred for specified

circumstances. with interest. (5.1 
Manager spends available hospital funds (which
Foundation may subsidize). (l .10)

 

(5.2), but not overhead (5.4)

Payment of Fee

 

 

2531.93.11?sz 

 

5.1? 05'. 5

 

 

 

 

 

Management Agreement docu
operations delineation of resp

Standard management 5
and finance, contracts lea
legal risk management, comp

Manage
undocumented related

a Board minutes reflect banking,

As there are no Budgets,
pre?approved operating or

Unclear how strategic plannin

ment may not describe actual

ervices deleg
ses and purchases,
liance, licensing

continues to provides centralize
party agreements 

payroll, materials mana

Manager not spec
capital board approve

g, oversight,

onsibilities in full

ated to Manager (1 .6) (accounting
billings and collections,
accreditation).

services on an as needed basis,
Le. Bio Med, Billing, insurance)

except for

gement and HlM?by Manager.

ifically limited as being within
budget or plans

and proiect development and

implementation take place without budget process

Manager owns all policies and
Mana

Other servi
by hospital management staff

mggmasa BLUissTriitN

 

1' L: Ill" 5

 

 

ger may subcontract without 
ces as needed per Exhibit (any?)

procedures provided during Term (9)

otice .7)

 

 

 

 

appear to be items handled

 

 

 

 

New Management ConsideratiOns

 

 



.1111}!le L11:

Reserve power for ?Maior Decisions? at Hospital local board level
(1.4)

Ci Manager?s Reasonable iudgement in absence of hospital direction

(1.6)

:1 For avoidance of doUbt, Manager role is limited in areas reserved to
Hospital Boards. (1.12)

Gray Areas:

a Hospital Board bylaws appear to encompass areas that have been delegated to
Manager, but per responses, Manager only provides services as needed.

Manager given much authority e.g. re contracting, but Governing Board gives
CEO authority of contracting. (Hospital approval required under 1.7)
Hospitals do not have regular meetings with Manager;
individuals meet and speak as needed. (2.0)

Other undocumented related party arrangements are stated to be
same

 

 
 
 

 

 

 

 

 

 

 

Hospitals to Acquisition by Foundation

[3 PSHI describes this transaction as comparable to
other similar transactions
[1 As of June 1 3, 2017, Foundation has not sold any

 

of its hospitals

 

0 3 13' as 3' LU EST 1'33". hr - "555.553" a . 1'21 .. ?5 {51115-3 xii-'2'" 3'5: 2:39:51: 
.. 131? Tap); 1.3315 . . . . 1 . n. . :12. :31l'qu-E? -. -. 1:1Tc?. ?mu?final . 

  

 

 

 

 

 

Financial Resources of Foundation

 

 

Mira sactio ns Impact on Financial Viability of Applicant Hospitals including
re Acc esso of Underserved to Charitable Care

I: Stronger Indicators that 

Current Ratio of Foundation (total current?assets/ total current liabilities) 1.96
PHSI indicators likely weaker assumes accrued liabilities of donated hospitals.

5 Days Cash on Hand lOl; Aging of Payables 33.5

Hospital LLC released from financing (except for items that survive);

ioin 5 Foundation financing (note: unable to compare terms of new
?nanan g)

No other debt or known liabilities not being assumed

Other than USDOJ FCA Prosecution Kaiser arbitration- No knowledge of
compliance settlements or maior litigation - and PHSI role

Ij No notice that charity care commitment has not been honored

I: Foundation receives charitable donations (e.gl related parties) and makes
significant grants

I3 Hospitals benefit from tax exemption (3403; loan grants)

 

Mm 

 

 

 

 

 

 

l. The proposed transaction appears to have a neutral positive impact
on the operations of the Hospitals as indicated by the following: The
Foundation 

is continuing the existing commitment to maintain all Hospitals?
services through December 31, 2018, and performance
improvement plan

Appears to have comparable or stronger financial resources than


Payer contracts remain intact
In addition to its various hospital subsidiary assets, Foundation
historically has received cash donations leg. from related parties)

stated it Will subsidize Hospitals? capital needs operating losses as
has dOne, though not legally bound to do so



ATTIC 5&5 

 
 
 

 

.. m. .. .. . 

 

 

 

 

 

 

 

 

 

Known liabilities of Hospitals leg. accounts payable)

at transfer.
required to repay 

The Foundation/ Hospitals also not
subsidies to Hospitals through 2016

Note, however:

a Foundation is not releas
to change of ownership leg. government in
for Foundation for unknown

a provides only 2 years of indemnification

liabilities of Hospitals at transfer
a Sufficient reserves for USDOJ FCA prosecution)?

Estimated expenses for management and undocumented related
party services to be paid under Foundation New Manager less than

existing expenses
No profit sharing with Manager

5 approx. in

 

ed from unknown liabilities that arise out of actions prior
vestigations)

El

 

 


9' 43.11..

 

 

 

.. - - 1r - 4- 15- =33; . . . 299-. so?: . xix, 313-415? 
is. R0 5. 13.31:: 333:5. 2.15:: tag-I sass-t: ans-g: .255; 32-13;. 524:}; {rt-get 93-25 saga?=- 22.125 a. 
Wm .. ?"24 .hjvn'z' 1' 

relatedness of the Applicants, and thefact that tax exemption
compliance wouldbe required, the proposed transaction does
not adversely affect character, commitment, competence and

standing in the community,
This is demonstrated by the following:

El Management and control over Hospitals will be substantially
similar to current operations except that Foundation will be
sole member rather than'PHSl as sole shareholder, and there

. are additional restraints pertaining to 501(c)(3) status:

Dr. Reddy?s role with Foundation is limited by tax laws, and also
by independent board members.

and New Manager are related parties to Foundation

 

 

 

 

 

 

 

 

Conclusions ll I I Cnt?d

 

Ongoing compliance with IRS requirements prevents Foundation from
entering into transactions with for?profit entities and related
parties) that could result in private benefit, private inurement and or
excess benefits to disqualified persons,?and conflicts of interest

a Note: Related party agreements undocumented.

Manager?s employees appointed by Foundation directors as the
Foundation?s officers. They are non-voting, but note:

Foundation Secretary and CFO are the some as the New Manager secretary
and CFO

Foundation bylaws do not prohibit officers from serving as directors
a Hospital LLC Governing?Board, the governing body of each of the
Hospitals, does not change

Note: Governing board only meets quarterly in coordination with other
hospitals system-wide, as required by PHSI.

a Management: New and Prior Management Agreement and
management personnel substantially similar

 
 

KRGKIDASERMJESTEIN i

A 13' 5

 

 

 

 

 

 

 

  

. . . . . -. .. .. . . . . 

1 

 

El The nature and?structure of the prOposed donation
Transaction in and of itself should not have an adverse
impact on the governance and operations of Hospitals
or their character commitment, competence and
standing in the community as compared with the status
quo.

El Foundation ownership may have positive impact due to

public charity status, assuming regulatory compliance.

El Foundation structure and operations have track record

and positive financial indicators.

Unable to predict impact on the Foundation of future

growth (via addition of hospitals) and unanticipated
liabilities.

 

 

 

 



 

 

 

 

ConClusions ll Cnt?d

  

El Lack of observing documenting clearly and in full the
relationships of owner/ manager/ hospital governing
board make it difficult to evaluate the nature of the
current and future relationships as well as legal risk:
(i)minutes and votes documenting evaluation and considered
approval of the pr0posed donation transaction by 
board or on timely basis by hospital boards 

(ii) Management agreement v. Hospital bylaws

lack of documentation of related party arrangements

(iv) lack of budget process strategic planning and related
policies and procedures

1: Certainty and predictability could enhance compliance

and strengthen local governance

 

 

5 no K1 
1"1?01131 

 

 

 

 

El Amendments to governance documents

Confirmation re sufficient community board
representation involvement I

Clarification of documents pertaining to operations

El Future notice-of changes in tax exempt status,
governance, management, related party
arrangements and key policies 

El Steps to retain Hospital assets in RI, including upon

dissolution

 

- A 
1y? - 

 

 

 

 

 

 

 

 

 

           

Hi





ill!

 

i



 



600 Atlantic Avenue
Boston, MA 0221 I
(617)482-7211 

 

 

 

 

 

 

 

 

 r- -

 

 

5W.
fer Gallop, Esq.
Partner

Jenni

Krokidas Bluestein? LLP

Providing legal services in the areas of public, non?profit andfor?profit general corporate
social services low, education law, real estate development, finance and property managern
private civil litigation, labor and employment low.

low, health and
ent, public and

 



 

 

KRO we a mugging

 

 

 

Applicant Parties

 

El For-Profit Entities:
Donor: Prime Healthcare Services, Inc. (PHSI)

 

- Licensee: Prime Healthcare Services- Landmark LLC
(Hospital LLC)

a Owner/Operator of the ?Hospitals?:
Landmark MedicalCenter
in Rehabilitation Hospital of Rhode Island

- Manager: Prime Healthcare Management, Inc.

Non-Profit Entities: 

. Recipient: Prime Healthcare Foundation, Inc. (Foundation)
- Licensee: Same Hospital LLC, but converted to non?profit
New Manager: Prime Healthcare Management ll, Inc. .

 

 

 

:zeog:oasmaziuxasmm
Hi: 5: ms

 

 

 

 

 

 

 

General Comments- Conclusions re
Res onses I





 
 
 

Applicant did not or did not fully answer some questions

[3 Some responses create conflicts with prior information
provided by the Applicants

CI Note that Applicants did not update their responses to
the original application and previous responses 
information about identity of new directors) except
where specifically asked

Applicants stated it had no plans to clarify any
ambigUities or contradictions between the management
agreement and governance documents

KROK 3.3313 53 BLUESTE-EN
3; 1? -.

 

 

 

Governance I

 

:1 Foundation:

a Dr. Reddy no longer CEO. Michael Sarian is President/CEO, and is an
employee of management companies

a Two new directors listed

Applicant states all directors are approved by Member, inconsistent with
Section 3.2 of Bylaws limiting Member role to 20%

a Draft correction of Section 3.13 Quorum Provision

Hospital LLC Governing Board:

a Applicant states that AGO has approved plan 10/27/17 to bring 
board composition into compliance with 25% community representative
requirement 

a New directors will participate in January 201 8

 

111' '1 1i?l' 2?

 

 

 

 

 

 

. No public charity requirements in Delaware

. Files California exempt organization annual information
return (Form 199; not reviewed) 

I If Foundation lost tax exemption, so would Hospital LLC

El Manager employees are not prohibited from serving as
directors for either Foundation or Hospital LLC
Governing Board.

1:1 Governing Board Meetings

No details of changes regarding board request for more
regular and extensive involvement -- only a sample board
agenda which is comparable to prior ones

 

 

 

 

 

 

 

 

 

eement:

a New manager does not differ in terms of governan
relationship with Hospital LLC Governing Board

To be evaluated prior to November 2021 termination

Related Parties:

Copy of- Unsigned
Will it be assigne

Hospital Business Services,
fin?ancials was not provided
olicies: Confirm notation in policy that Foundation coverage
ck to 1988 (endorsement 1, pg 38Foundation (or

ce, operations or

(medical asset management).
ew rates?
5 referenced in

2015 Bio?Med Services
or remain in place with 
lnc. arrangement that i

lnsurance 
for the Hospitals extends ba

cover Hospital operations prior to trans
iust to'Foundation if PHSI has tail in place)

 



 

 

 

Liabilities Retained by PHSI

 

allocated for Foundation to address potential liability
of Hospitals; Foundation has no reserves.

PHSI will not extend indemnificationperiod to 4 years
Schedule 12 - Liabilities Retained:
- Not totaled

Unclear what are the entries pertaining, to other PHSI
hospital transfers. Does PHSA direct Hospitals to transfer
funds to other affiliate hospitals? Will Foundation operate

this way?

 

 

Knowoa 


 

 

 

 

El Foundation has subsidized hospitals, and used
charitable contributions investments to do so

FoUndation has not committed in writing to subsidize

the Hospitals

:1 Applicant states that Foundation has not made
assessments on its hospitals (but See Exhibit 1 2).

 

 

 

 

 

 

[1 Applicant stated CMS has not identified issues with
dashboard method to date 

:1 Planning is Undertaken iointly between Hospital LLC I
Governing Board and Manager

- Proiect lists are developed, reviewed and expenses
tracked instead of operating budget as a planning tool

 

- No current proiect list provided reviewed

 

 

 



 

 

Financing Liability 1

 

El has no specific hospital donation criteria;
donations must be approved by lenders

El Hospitals already released from PHSI financing

[1 Hospitals already subiect to Foundation financing
- Foundation Hospitals are iointly and severally liable up

to 

:1 No comparison between the two financings Was
provided

K1 DA 3 LUIS STE: 13f
{1'1 TO 5: LT ?i

 

 

 

 

 

 

Applicant commits that Hospitalsbe maintained through
at least 2018

1:1 Unclear how muCh of the capital commitment
remainsconfirmed.

El Neither nor Foundation has ever closed a hospital

Upon sale or closure of hospital, Applicant states that
?Hospital assets? would remain in Rhode Island but
?proceeds from sale? would flow to Prime Foundation.

This is subiect to the AGO.

8.23.0 Ki IDA S- a BLUESTEIN

 

 

 

 

 

 

 

appraisal

Hospitals and physician organization operate at a loss
Days cash on hand is low unless related party fees are deferred

Tax' exemption should positively impact the Hospitals?
balance sheet (current ratio),dashboard measures (days
cash on hand) and income statement (net income)

But note that 3403 program benefits may be deferred and
diminished due to proposed federal cuts; and

a No estimate was given of the value to Hospitals of allowing its
Clinicians to qualify for loan forgiveness 

El Foundation 5 overall viability remains evident in updated

financials

 

saw K: mesa 
1'11"! {39.343.1'5

 

 

 

 

 

 

If approved, Applicants will make regulatory filings

with retroactive date, explaining that delay was
due to awaiting regulatory approval from RIDOH

E: If not approved, Applicants did not say how they
would disentangle steps already taken: 

- Other than cash flow (which was redirected), only the
changes to financing and insurance appear to have
been implemented after the cash flow was reversed

 

a No new carrier contracts will be required

- . Expiring contracts will be addressed

KROKED 

 

 

 

 

 

  

 

El The prOposed transaction appears to-have a
neutral/positive impact on the Hospitals?

Operations.
This conclusion still has the following provisos and
assumptions: 

I Exception for new or remaining unknown,
undocumented or unclear information; and

- Exception for unknown and or unquantifiable risks to
the Foundation tax exemption compliance;
unfunded successor liability)

 

   



 

 

 

 

 

   

 

. . . .
. 
. . .

 

 

 

 

 

 

 



600 Atlantic Avenue
Boston, MA 0221 
(617) 482?721 1