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Mayor asks Chafee to pressure regulators on stalled Landmark sale

June 26, 2013

WOONSOCKET – Mayor Leo T. Fontaine is calling on Gov. Lincoln Chafee to untangle the “inexcusable” red tape that’s knotting up the sale of Landmark Medical Center, which marks five years in receivership this week.

In a sharply worded letter, Fontaine reminded the governor that he stood in the lobby of Landmark in 2011 and promised to do everything in his power to save the struggling community hospital.

“Governor, I was there at your side as you promised the numerous Landmark employees and patients that we encountered in the halls that you would do all you could to save Landmark and its continuing mission as a full-service hospital for the people in northern Rhode Island,” Fontaine wrote.

“From my perspective, it is incumbent upon you, as Governor, to use the formal oversight authority and persuasive power of your leadership position to get to the bottom of the situation and end the pointless, destructive foot-dragging associated with the review process,” Fontaine wrote. “With the City careening toward financial instability, to have such significant investment proposed but tangled in bureaucratic process is inexcusable.”

The governor did not have any immediate response to the letter, but Attorney General Peter Kilmartin, one of the regulators overseeing the sale, fired back with both barrels.

“Unfortunately, the mayor has been conspicuously silent on this transaction for months,” said Amy Kempe, spokeswoman for Kilmartin. “Political expediency by him will not short-circuit the common law and statutory duties of the regulators.”

Kempe said the problem with the sale rests with the parties to the transaction, not the regulators. She said the mayor should be calling on the intended buyer, Prime Healthcare Services, and the court-appointed special master who is running Landmark, lawyer Jonathan Savage, to provide regulators with the necessary information to begin the review.

“We have afforded the transacting parties every opportunity and continue to do so, to complete the necessary disclosure for the regulators to move forward with the process,” said Kempe, “The Office has been diligent in requesting information from the parties and has had a number of meetings with the parties to discuss the information necessary to deem the application complete.”

In response to requests from the regulators, the transacting parties have supplied additional information, which is under review to determine if it completes the application, according to Kempe.

In a press release separate from the letter, Fontaine said he is concerned about the negative impact that the loss of the hospital would have on access to health care in Greater Woonsocket and the city’s already-teetering finances. The longer the hospital’s fate remains in bureaucratic limbo, the more likely it is to fail, he said.

Mayor since 2009, Fontaine is gearing up for a re-election bid against announced candidates State Rep. Lisa Baldelli-Hunt (D-Dist. 49) and independent Dave Fisher. He blames cuts in state aid for many of the financial problems facing the nearly bankrupt city, and likens the holdup of the hospital sale as yet another cut at the state’s behest.

In receivership since June 2008, Landmark has seen two asset-purchase agreements with potential buyers fall apart in the last three years. Now Prime Healthcare Services, a 21-hospital for-profit chain headquartered in Ontario, Calif., has made a court-approved bid for Landmark and its sister facility, the Rehabilitation Hospital of Rhode Island in North Smithfield.

Landmark, with over 1,100 workers, is a major employer, but it does not pay property taxes because it is a non-profit hospital. If the 214-bed, acute care facility were sold to Prime, however, it would instantly become the city’s second-largest taxpayer as a for-profit facility, a transformation that would go a long way to wresting the city from its financial crisis, according to Fontaine.

Prime has twice submitted applications to complete the merger to the regulatory agencies that have the final say on whether the sale is in the public interest – the Office of the Attorney General and the State Department of Health. On March 29, however, they suspended their review of Prime’s application indefinitely, saying Prime had not provided the required information for the review to even reach the starting point.

Prime tendered a $60 million offer for Landmark’s assets some six months ago, a deal that was accepted by court-appointed receiver Jonathan Savage and approved by Superior Court Judge Michael Silverstein. Two previous offers on the hospital were withdrawn, including one from the now-defunct Caritas Christi group of hospitals owned by the Roman Catholic Archdiocese of Boston. Later, Steward Health Care, a for-profit company that bought out the 10-hospital Caritas Christi network, renewed the overtures for Landmark and pursued the sale for 16 months before pulling out.

“The regulatory process appears to be stuck on a number of procedural points, possibly arising out of communication issues or lack of clarity, and I believe it is incumbent upon the Governor to break the logjam,” Fontaine said. “He is the only one with the standing to pull together all of the parties and get the process moving in the right direction.”

Fontaine said it has been particularly disheartening, in view of the city’s current financial crisis, to watch the Landmark merger “come up against one brick wall after another” while “hospital conversions in other parts of the state sail through.”

Bill Fischer, a spokesman for Landmark, called Fontaine “a loyal advocate” of the hospital whose support has helped keep the facility afloat for the past five years.

“That being said, there is a tipping point and we are fast approaching it,” Fischer said. “We believe we have made significant progress with regulators these past few weeks and remain hopeful that they are close to deeming Prime Healthcare’s application to purchase the hospital complete and allow the formal review process to begin.”

Fischer called Landmark “the second-largest economic driver in northern Rhode Island, adding, “Clearly, Mayor Fontaine understands the importance of Landmark Medical Center to his community.

“Everyone involved in this process should contemplate the economic and health care fallout if Landmark were to close.”

Follow Russ Olivo on Twitter @russolivo

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