Win in Wis­con­sin

Court rules in fa­vor of clinic in tax-ex­emp­tion suit

Modern Healthcare - - Regional News - Joe Carl­son

With cash-strapped gov­ern­ments across the coun­try look­ing to levy as­sess­ments against not­for-profit health­care providers, the Wis­con­sin Supreme Court sided with a hos­pi­tal that sought to ex­tend its tax ex­emp­tion to an out­pa­tient-care clinic.

A di­vided court on July 19 over­ruled a de­ci­sion by a lo­cal asses­sor in the Mil­wau­kee sub­urb of Wauwatosa that the five-story build­ing, St. Joseph Out­pa­tient Clinic, was sub­ject to tax be­cause it op­er­ated more like a doc­tor’s of­fice than an a hos­pi­tal.

Judges and out­side ob­servers said the case high­lighted a ten­sion in Wis­con­sin law in adapt­ing long-stand­ing statutes on tax ex­emp­tion to the re­al­i­ties of mod­ern in­te­grated de­liv­ery sys­tems, which can blur tra­di­tional no­tions of the idea of a “hos­pi­tal,” par- tic­u­larly in light of the strong push to move ser­vices into cheaper out­pa­tient set­tings.

Wis­con­sin Supreme Court Chief Jus­tice Shirley Abra­ham­son dis­sented from the ma­jor­ity opin­ion, not­ing that mod­ern out­pa­tient tech­nol­ogy and tech­niques al­low doc­tors to per­form ser­vices pre­vi­ously pro­vided only in acute-care hos­pi­tals. The evo­lu­tion chal­lenges the 34-year-old state law that grants ex­emp­tions to hos­pi­tals but not doc­tors’ of­fices.

In 2003, the asses­sor for Wauwatosa deigned that the St. Joseph Out­pa­tient Clinic was tax­able, even though three of its five floors were oc­cu­pied by an out­pa­tient clinic op­er­ated by two not-for-profit or­ga­ni­za­tions, Wheaton Fran­cis­can Health­care and Felician Ser­vices, through the or­ga­ni­za­tions’ joint hold­ing com­pany, Covenant Health­care Sys­tem.

Af­ter mixed rul­ings in the lower courts, the state’s high­est court ruled that floors oc­cu­pied by the St. Joseph Out­pa­tient Clinic should be ex­empt from taxes. At is­sue were about $7 mil­lion in taxes as­sessed be­tween 2003 and 2006.

The Wis­con­sin Hos­pi­tal As­so­ci­a­tion hailed the de­ci­sion, prais­ing the judges for rec­og­niz­ing hos­pi­tals’ ef­forts to mod­ern­ize care de­liv­ery.

“Wis­con­sin hos­pi­tals have re­sponded to our pa­tients’ needs for qual­ity care closer to home by lo­cat­ing ser­vices away from the tra­di­tional hos­pi­tal cam­pus,” WHA Pres­i­dent Steve Bren­ton said in a writ­ten re­lease.

But in a friend-of-the-court brief filed in the case, the League of Wis­con­sin Mu­nic­i­pal­i­ties pre­dicted fi­nan­cial harm to many of Wis­con­sin’s strug­gling cities and towns, as well as for-profit health­care providers that pay taxes.

“Non­profit hos­pi­tals will rush to seek ex­emp­tion for ex­ist­ing out­pa­tient clin­ics com­pa­ra­ble to the one in this case or, where they don’t have such clin­ics, will rush to build such out­pa­tient clin­ics to com­pete with ex­ist­ing lu­cra­tive and pri­vate clin­ics in af­flu­ent ar­eas,” the brief says. “If the prop­erty-tax ex­emp­tion were ex­tended to clin­ics owned and op­er­ated by non­profit hos­pi­tals, sim­i­lar pri­vately op­er­ated fa­cil­i­ties would be put at a dis­tinct com­pet­i­tive dis­ad­van­tage.”

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