Status Flipping: Nonprofit-to-For-Profit Hospital Applies to Change Back

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January 26, 2017; Valley Breeze (Cumberland, RI)

When the nonprofit Landmark Medical Center was converted to for-profit status in 2013, it immediately began paying taxes. Both the Rhode Island city of Woonsocket and the hospital had been on the verge of bankruptcy and both were in some form of receivership. Where it had previously contributed only $240,291 to the town through a state payment in lieu of taxes program, its tax bill expanded to $1.6 million.

But the California-based Prime Healthcare Services, which became the parent company when the hospital came out of receivership in 2013, now wants to revert it to nonprofit status by donating it to its own foundation, thus maintaining it as an acquisition—its 13th nonprofit acquisition to date.

The original change to for-profit status, complete with a purchase price of $62 million, required extensive review from the Rhode Island Department of Health and the state’s attorney general. It was reviewed in state courts, and finally authorized, by Rhode Island Superior Court Judge Michael Silverstein.

“The payment by Prime of substantial real estate taxes is a significant factor in this department’s decision with regard to the proposed transaction,” the October 2013 decision from the Attorney General’s office noted. “Prime has indicated that it has not and will not seek a tax treaty from the city of Woonsocket. The payment of real estate taxes to Woonsocket, that so desperately needs the resources, is a clear, tangible benefit directly resulting from the proposed transaction. While it remains a question whether this benefit will outweigh the possible risks of allowing Rhode Island hospitals to be purchased by for-profit entities remains to be seen, payment of real estate taxes to Woonsocket certainly represents a positive attribute of Prime.”

Now, Woonsocket’s mayor, Lisa Baldelli-Hunt, is resisting the reconversion:

I am deeply concerned and disappointed by Prime Healthcare Service’s recent filings with state agencies that indicate their attempt to revert their operations back to a nonprofit status. This move would have a detrimental impact upon taxpayers of Woonsocket by placing approximately $1.6 million of annual tax revenue in jeopardy and is not in the best interest of the city of Woonsocket.

I stand in opposition to this attempt and look forward to meeting with state officials and regulators.

Prime has done a number of these for-profit to non-profit conversions across the country.—Ruth McCambridge