Rhode Island officials fine Prime Healthcare $1M for improper transfer of hospital ownership

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Prime Healthcare has agreed to pay a $1 million fine levied by Rhode Island state officials.

The Rhode Island Department of Health has fined Prime Healthcare for not obtaining permission to transfer ownership of two of its hospitals, effectively making them nonprofit facilities.

Prime has agreed to pay $1 million in fines, in what is the largest fine levied in three decades by the department, reports Rhode Island Public Radio. Prime transferred ownership of Landmark Medical Center in Woonsocket and the Rehabilitation Hospital of Rhode Island in North Smithfield to its charitable organization to avoid paying millions in property taxes.

Prime will pay $500,000 to the state's treasury and $500,000 to the city of Woonsocket, according to the article. 

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Joseph Wendelken, a spokesman for the Department of Health, told the Providence Journal that Prime could have been fined as much as $5 million, but he said Prime was hit with a lesser fine because of its "economic contributions" to the state and city, and because it was in "otherwise good standing" with the state. 

Prime filed for the transfer on the last day of 2016, and it went through on the same day. However, it assured state officials for the next several months that the transaction had not occurred, according to the Journal. The organization finally acknowledged on Aug. 25 that the transfer had taken place, after the state acquired copies of financial audit documents.

"They were not forthright and submitted information that was not accurate," Wendelken told the Journal, when asked if Prime had lied about the transfer. 

RELATED: Feds excluded Prime Healthcare from short stay claims settlement 

Elizabeth Nickels, a spokeswoman for Prime, told RIPR that it had a provided the state with a "good faith application" to acknowledge that the nonprofit transfer was awaiting state and regulatory approvals, and that it agreed to the fines because it wanted to speed that process along. 

The California-based system was hit in 2014 with a whistleblower suit that alleged it frequently overcharged Medicare. The Department of Justice joined the suit in 2016, and it filed a complaint last summer alleging that the system's executives were directly involved in a scheme to drive up admission rates for Medicare patients, regardless of need. 

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