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State suspends review of Prime Healthcare application

March 30, 2013

WOONSOCKET – State regulators on Friday unexpectedly suspended their review of Prime Healthcare Services application to purchase Landmark Medical Center, leaving the status of the sale in limbo.
The decision came after the 20-hospital, for-profit chain headquartered in Ontario, Calif., had submitted some 1,400 pages of additional information to the regulators after Prime’s first application was deemed incomplete.
Despite the voluminous amount of paperwork they received, the regulators said Prime’s response failed to clear up the omissions and in some cases raised even more questions.
In a three-page letter to the transacting parties, the regulators complained that Prime’s response had burdened them with a chore they couldn’t possibly be expected to complete in the 10 business days they were given to do so.
“It is the applicants’ job to produce an Initial Application that is near to complete in the first round, only leaving a few follow-up pieces for deficiencies,” they said. “It is unfair to the Departments to expect that there will only be the 10-day follow-up time in which to review documents in excess of the original filing.”
The letter was signed by Deputy Attorney General Gerald J. Coyne and Michael K. Dexter, chief of health systems development for the state Department of Health.
Amy Kempe, spokeswoman for the attorney general’s division, said the regulatory agencies had one other option for responding to Prime’s second application in the condition in which it was offered – they could have rejected it. She said the suspension of the review, though not required by the Hospital Conversions Act, is not a rejection, but gives the transacting parties an opportunity to correct the omissions of the original application without starting from square one.
The decision, she acknowledges, leaves it entirely up to Prime to decide whether the company wants to pursue its acquisition of Landmark. If they choose not to, the sale process is over.
“The ball is in their court,” she said.
Also, Kempe said it would have been more costly for everyone, including Prime, Landmark and the state regulators, if the application were rejected and Prime wanted to submit a new one. The suspension allows the process to resume where it left off, conserving resources not only for the transacting parties, but the regulators, at a time when they are facing an unprecedented number of hospital acquisitions.
In addition to Prime’s efforts to buy Landmark, Westerly Hospital, Memorial Hospital in Pawtucket and the Fatima/St. Joseph group of hospitals in Providence are all in the process of partnering up at some level with broader health care networks.
“This is an opportunity for the transacting parties to supplement the initial application and provide any documents required by the regulators,” she said. “If we reject it, it would start the process all over again which places burdens on the time, money and resources of not only both the transacting parties but the regulators as well.”
Bill Fischer, a spokesman for Landmark Medical Center, did not immediately return telephone calls seeking comment on the latest bump in Landmark’s rocky path toward a merger.
Kempe declined to say what information is missing from Prime’s application, calling the matter confidential at this time. But the letter from the regulators faulted the company in several ways.
The most specific involves the ownership of Prime Healthcare Services and its relationship to two other entities identified as the KASP Trust and Prime Management Inc. The regulators said it’s not clear who the owners are. They also seemed befuddled by the applicants’ purported assertion that Prime Healthcare Services “has no employees.”
The regulators also said Prime’s application is deficient in form, because it was not incorporated into an “updated initial application document; that it lacks sufficient conflict of interest forms for Prime’s ownership entities; and some of the requested documents were still not provided.
A day earlier, speaking to members of the Rotary Club, Attorney General Peter Kilmartin seemed optimistic about the relationship between his office and Prime. He said that all the parties still had an open dialogue and he thought the process was moving forward.
“We don’t want to be onerous,” he said. “We don’t want to be a hindrance to any hospital merger. The ground is shifting dramatically within this state with regard to health care and the consolidation of hospitals. They can’t stand alone.”
At the same gathering, Landmark President Richard Charest told The Call that a recent health policy study calling for the elimination of one hospital in the state has been widely misinterpreted.
Charest said the study calls for the elimination of some 200 hospital beds statewide as a way to rid waste from the health care system and keep costs down. But he said the study envisions achieving the rollbacks by reducing the number of beds at many hospitals, not by closing Landmark or any other hospital altogether.
Charest called the study “a draft” and said that Landmark fared rather well overall. If the goals were actually approved by the state Department of Health, Landmark might lose 10 percent of its 214 acute-care beds overall.
In receivership since June 2008, Landmark has been under the control of court-appointed ‘special master” Jonathan Savage, a Pawtucket lawyer. On his recommendation, Superior Court Judge Michael Silverstein granted Prime exclusive bargaining rights to Landmark, making it the third hospital entity to attempt to purchase Landmark since it lapsed into receivership.
Savage says it is essential that Landmark merge with a financially sound health care entity in order to survive.
Two weeks ago, the hospital’s largest employees union, the United Nurses and Allied Professionals, signed a collective bargaining agreement with a New Jersey company that has made overtures for the local hospital, doing business as Landmark Medical Center Holdco LLC. The for-profit company owns two hospitals in New Jersey, but it has no court-approved bargaining position for Landmark.

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