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UPDATED: Former suitor comes back for Landmark

September 28, 2012

WOONSOCKET – Landmark Medical Center has signed an asset purchase agreement (APA) with Prime Healthcare Services of Ontario, Calif, after Boston-based Steward Health Care withdrew its offer for the troubled city hospital.
If the name sounds familiar, it’s because Prime Healthcare was one of the four hospital entities that bid on Landmark after its first suitor, the now-defunct Caritas Christi network, backed out in late 2010.
Prime has also attracted a good deal of negative attention in California, where the company has faced allegations of “upcoding” – industry jargon for hitting Medicare and other government payers with fraudulently inflated claims. The company says health authorities have never found evidence to substantiate the allegations.
Court-appointed special master Jonathan Savage filed the proposed APA in Superior Court Friday along with a request for instructions on how to proceed. Bill Fischer, a spokesman for Landmark Medical Center, expects Judge Michael Silverstein to schedule a hearing in a week to 10 days.
“We’re very pleased to have Prime Healthcare back in the picture,” he said. “This opens a new chapter in our efforts to preserve Landmark for the foreseeable future and we’re very optimistic about where it goes from here.”
In a phone interview from California, Arnie Kimmel, Prime’s senior vice president for development, told The Call that the deal calls for a $60 million investment in the hospital over five years, plus an immediate $2 million cash infusion to prop up operations in the short term.
Court papers say the deal includes $4.5 million for physician recruitment and $45 million for new technology, capital improvements and facilities upgrades.
Prime also pledged to pay off no less than $4.4 million of the $7 million Steward loaned to Landmark while the prior APA was pending. The pact now requires Landmark to repay Steward.
Under the new APA Prime agrees to operate Landmark as an acute care hospital with an emergency room and independent medical staff for just three years after the closing.
With Steward out of the picture, Savage is now recommending the sale, saying Prime “addresses those elements which will assure the long-term viability” of Landmark and its affiliate, the Rehabilitation Hospital of Rhode Island.
“Prime is an award winning system,” the court papers say. “In 2012 it was nationally recognized as one of the ‘15 Top Health Systems in the Nation’ by Thomson Reuters, based on quality of healthcare and patient satisfaction...in just this past week the Joint Commission, the leading Medicare accreditation organization in the country, announced that eight (8) Prime hospitals earned national recognition as ‘Top Performer,’ (top 18 percent), in Key Quality Measures.”
A for-profit healthcare chain, Prime specializes in transforming fiscally troubled hospitals into model providers of efficient, quality health care, and the company believes it can do the same for Landmark, said Kimmel.
The 19-hospital network was founded in 2001 in California, where 14 of the facilities are located.
“Four of those hospitals were in bankruptcy, another three were near bankruptcy, and all 14 were financially distressed,” said Kimmel. “All 14 of those hospitals are profitable today. None has ever been closed. None have cut services. All have performed very well on quality metrics. They’re not just hospitals that perform well financially, they perform well from a quality of care standard as well.”
Prime also owns three hospitals in Texas, one in Nevada and another in Pennsylvania, most of which were acquired within the last two years.
Back in 2011, however, Silverstein openly expressed reservations about the company’s business model, which envisioned operating Landmark without revenues from private insurance companies, like Blue Cross/Blue Shield of Rhode Island. The company indicated that it expected to derive most of the hospital’s revenues from Medicare and Medicaid, the government’s coverage programs for the elderly, poor and disabled.
Yesterday, Ed Barerra, a spokesman for Prime, said the company is not locked into any particular business model.
“We’re open to contracts with insurance companies that work for both them, and us,” he said.
Prime’s most recent hospital acquisition just took place on Wednesday, when the California newspaper Sacramento Bee reported the company had taken control of the Dallas Medical Center, a 155-bed acute-care hospital in the North Dallas suburb of Farmer’s Branch.
The offer for Landmark includes the Rehabilitation Hospital of Rhode Island in North Smithfield, Kimmel said. The two hospitals employ a combined 1,200 or so nurses, technicians and support staff, about half of them members of United Nurses and Allied Professionals union.
Hospital President Richard Charest notified the staff of Prime’s intentions on Friday, according to Kimmel.
UNAP’s General Counsel Chris Callaci said Prime’s interest was great news for the workforce, the hospital, and residents of northern Rhode Island who deserve to have a full-service, community-based hospital in the region. He sounded a note of optimism regarding UNAP’s relationship with the company, saying the parties have already had some preliminary contact.
“We worked well with them back in 2011, and we expect we’ll be able to work well with them again,” said Callaci.
Landmark reportedly signed the asset purchased agreement with Prime on Thursday, the same day Steward formally announced that it had withdrawn its offer to buy Landmark.
Steward, a for-profit chain that evolved from the remnants of the former Caritas Christi network, had been pursuing Landmark and the Rehabilitation Hospital for nearly 18 months.
The company issued a statement that it had pulled out of the deal because the contingencies of the asset purchase agreement were unresolved.
The conditions at issue included reaching a memorandum of understanding with Thundermist Health Center regarding referral for clinical and in-patient services, as well as the acquisition of a cancer clinic on Landmark’s campus, owned mostly by a private, third party, 21st Century Oncology Associates.
Steward had said it would have been willing to waive those contingencies, provided it could reach a satisfactory reimbursement agreement with Blue Cross/Blue Shield of Rhode Island. But the state’s largest health insurer and the 11-hospital chain were unable to come to terms.

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