The entrance to The Miriam Hospital on Summit Avenue in Providence, one of three hospitals in the city owned by Lifespan Corporation. Under a tentative agreement, Lifespan agrees to voluntarily make $1.5 million in payments in lieu of taxes to the city. (Nancy Lavin/Rhode Island Current)
A yearlong deadlock over voluntary tax payments from Lifespan Corporation to the city of Providence appears to have ended under a tentative agreement unveiled Tuesday.
The payment-in-lieu of taxes agreement marks the first time since 2021 that the state’s largest hospital provider will give the capital city anything in exchange for hosting its three Providence hospitals — Rhode Island, Hasbro and The Miriam. The $1.5 million payment to be paid in two, $750,000 sums in fiscal 2025 and fiscal 2026 is also the most the hospital network has given the city since 2014, according to the city.
The draft agreement, obtained by Rhode Island Current, also formalizes Lifespan’s in-kind contributions like health care, job training and employment, estimated at $50 million over a year.
The tentative deal with Lifespan will be introduced to the Providence City Council at its meeting Thursday before immediately being referred to its finance committee for further review, and later, a council vote.
As a tax-exempt not-for-profit, Lifespan doesn’t have to pay property taxes. However, if taxed at commercial rates based on 2024 property values for its city hospitals, the company would pay about $32 million, Josh Estrella, city spokesperson, said.
A year after city reached deal with higher eds
The hospital system had been locked in negotiations with the city regarding voluntary tax payments for a year. Adding pressure was an October 2023 deal inked with the four, nonprofit universities within city limits — Brown University, Providence College, Rhode Island School of Design and Johnson & Wales University— in which they agreed to pay a combined $223 million over the next 20 years.
Historically, Providence and other cities have struck deals with tax-exempt universities and hospitals in which the institutions agree to pay an annual sum — typically far less than they would owe if taxed — in acknowledgement of the city services they receive.
Tax-exempt nonprofits, including Lifespan, owned 40% of the city’s real estate, according to a 2022 city assessment.
Lifespan made voluntary contributions to the city totaling $3.6 million from fiscal 2012 to 2021. It has not paid since then, citing the “social services” it offers to city residents as reason for lack of payment.
The halt of payments coincided with intensifying financial woes in the wake of the pandemic. The hospital giant, which employs 17,000 workers in Rhode Island, with over 1,100 beds across five hospitals, reported a $77 million loss in fiscal 2022.
But now, Lifespan is back in the black and bolstered by an expanded partnership with Brown University, including a $150 million investment from the university over the next seven years alongside a name change to Brown University Health expected to be made this month.
Lifespan closes on St. Anne’s, Morton hospitals
And Lifespan is taking advantage of a stronger balance sheet, announcing in a separate statement Tuesday it closed the $175 million deal to buy St. Anne’s Hospital in Fall River and Morton Hospital in Taunton from bankrupt Steward Health Care LLC. The purchase of the southeastern Massachusetts hospitals is being paid for through debt financing, with the state of Massachusetts offering a combination of grants and bridge loans to Lifespan and other private buyers who agreed to rescue five of the former Steward hospitals in Massachusetts at risk of closure.
“Together, we share a vision and will create a thriving healthcare system that benefits patients in Rhode Island and Massachusetts, reinvests back into its hospitals and its people, and serves as an economic driver for the cities and towns we care for,” Lifespan President and CEO John Fernandez said in a statement. “We look forward to our continued work with the Commonwealth of Massachusetts as we integrate these hospitals and practices into our system.”
Fernandez struck a decidedly different tone in a separate statement regarding the proposed tax payments to Providence.
“Lifespan makes substantial contributions to the city and its residents, providing necessary health care, regardless of ability to pay, along with many programs and services in support of resident’s physical, mental and financial well-being,” he said. “Like much of the healthcare industry, Lifespan has faced financial challenges over the years. Our goal is to achieve an operating income, which will allow us to continue to invest in our health system, provide top-tier healthcare and community benefits to the city’s residents and the region, while working in partnership with our host city.”
Brown University officials similarly stressed their community contributions when touting separate payment agreements inked with the city last year, despite strong criticism from students, who pointed to their school’s multi-billion endowment and displacement of city residents for school buildings as reasons why the university should pay more.
‘Just the start’
The City Council begrudgingly approved the tax deals with Brown and other universities — albeit with five members absent from the vote — concluding that something was better than nothing.
Will they view the Lifespan deal through the same lens?
The tentative agreement, if approved, would last through fiscal 2027, though there would be no payment in the final year. Lifespan would agree to begin negotiating for a new payment plan starting in 2028. City Council President Rachel Miller stressed that the proposed tax payments are “just the start.”
“As the state’s largest hospital system, Lifespan needs to contribute its fair share,” Miller said in a statement. “$1.5 million is just the start, but Lifespan has much more to do to truly honor its commitment to Providence taxpayers who right now foot the bill for the city services Lifespan benefits from. In years to come, the City Council will continue pushing to ensure that Providence residents come out on top.”
Lifespan makes substantial contributions to the city and its residents, providing necessary health care, regardless of ability to pay, along with many programs and services in support of resident’s physical, mental and financial well-being.
– Lifespan President and CEO John Fernandez
Councilman Miguel Sanchez, who cast the sole vote against the university tax deals last year, called the Lifespan proposal “extremely disappointing.”
“I think we should definitely be asking for a higher amount,” Sanchez said in an interview Tuesday. “If I was in the role of negotiations, this would be completely unacceptable.”
However, Sanchez had not decided how he would vote, noting that even if the council opposed the agreement, Smiley could go over their heads.
“I think it’s important to at least voice opposition and concerns, with where [Lifespan’s] priorities are,” Sanchez said.
Lifespan declined to comment.
Smiley has made it clear he supports the proposal.
“Following last year’s historic agreement with our colleges and universities, I am proud to have once again negotiated a new payment in lieu of taxes agreement that ensures our tax-exempt institutions contribute directly to the Providence community,” Smiley said in a statement. “The financial contributions from this agreement would represent the largest annual voluntary payment Lifespan has made to Providence in over a decade and would finally ensure that every major tax-exempt institution in Providence has a formalized PILOT agreement with the City that meaningfully gives back to our community.”
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