Property tax disputes involving the four not-for-profit hospitals in Harrisburg, Pa., are headed for court following the revocation of their tax exemptions by county officials and the officials' subsequent refusal to accept any payments in lieu of property taxes.
But a pending case before the Pennsylvania Supreme Court and a pending bill in the state Legislature have the potential of bailing out the hospitals before their disputes go much further.
The hospitals are 439-bed Milton S. Hershey Medical Center, 402-bed Harrisburg Hospital, 394-bed Polyclinic Medical Center and 157-bed Community General Osteopathic Hospital. Hershey Medical Center is operated by Pennsylvania State University, a state-supported institution. The other three are private, not-for-profit hospitals.
The hospitals' property-tax disputes date back to late December 1992, when the three-member Dauphin County Board of Assessment Appeals voted to revoke the long-standing tax exemptions held by the four institutions. The action marked the first time the hospitals' exemptions had been challenged.
"The board said it had been reviewing certain properties and determined that the hospitals failed the test of the HUP case," said William Wright, an attorney for Community General.
The "HUP" case refers to a 1985 Pennsylvania Supreme Court decision that created a five-part test organiza-tions had to pass to qualify for property-tax exemptions as "purely public charities." Under the test, for example, an organization must operate entirely free from a profit motive. Since then, any organization that generates excess revenues has become a target for local Pennsylvania tax assessors.
All four Harrisburg hospitals are profitable, and their 1993 property tax liability ranges from $276,455 to $1.9 million (See chart). The total tax liability includes county, township, city, school and library taxes.
The four hospitals appealed the revocations to the board, which held four sets of hearings on the disputes in June. Then, in late November, the board upheld the revocations, ruling that the hospitals weren't purely public charities worthy of tax exemptions. Late last month, all four hospitals appealed their cases to the Dauphin County Court of Common Pleas, which has yet to schedule trial dates.
In other tax challenges involving Pennsylvania hospitals, many hospitals have agreed to make payments to local municipalities in lieu of property taxes. However, in the Harrisburg cases, county officials aren't interested in settling and have declined to negotiate over any payments in lieu of taxes, said Allan Anderson, vice president and chief operating of-ficer of Hershey Medical Center.
Despite the hard stance by the county, hospital executives expressed confidence that their institutions will win back their tax exemptions in court.
"It is Polyclinic's belief that our charity care and community service are a fair basis for our continued exemption. As a community teaching hospital, Polyclinic funds are used to improve health services and to provide medical care for those unable to pay," the hospital said.
Meanwhile, a pending case before the state Supreme Court may resolve the battle between local assessors and not-for-profit hospitals (Oct. 18, 1993, p. 18). Also, a bill pending in the state Legislature would define organizations that qualify for exemptions as purely public charities and would allow them to pay a percentage of their tax bill as payments in lieu of taxes.