While Columbia/HCA Healthcare Corp. once touted its property tax payments as a big community benefit, it's now trying to get property taxes reduced at four hospitals in Northern Virginia.
Nashville-based Columbia filed lawsuits in circuit courts in Arlington and Fairfax counties over the past year seeking a total property tax reduction of 57%, or $50.5 million, at the four hospitals.
Meanwhile in Florida, Columbia and Santa Barbara, Calif.-based Tenet Healthcare Corp. face massive property tax increases in Hillsborough County, this year (See chart). But neither company is willing to duke it out in court.
It's common practice for Nashville-based Columbia, the largest for-profit healthcare chain nationwide, to dispute tax assessments, says company spokesman Jeff Prescott. But this conflict is significant because Columbia once considered paying taxes to be a measurable community benefit equal to charity care.
In fact, at a Sept. 28 hearing for its certificate-of-need application to build a 160-bed replacement hospital in Springfield, Va., Columbia said its property tax contribution benefited the community.
The facility would replace 100-bed Dominion Hospital in Falls Church, Va., and 121-bed Reston (Va.) Hospital Center.
In the Virginia court cases, Columbia said it shouldn't be paying the hospital's assessed values, because the assessor didn't consider three key elements in valuing a property: replacement costs, market value and income that could be generated by the facility. Prescott says in Virginia, the assessor used only replacement costs, which didn't factor in income issues such as lower use of inpatient beds at Columbia's older facilities.
"This is a real switch," for Columbia, says Linda Miller, president of the Washington-based Volunteer Trustees of Not-for-Profit Hospitals. "To tie (tax assessments to) low occupancy, it's very questionable whether that should result in lower taxes."
According to Health Systems Agency of Northern Virginia in Falls Church, inpatient occupancy rates for the 11 facilities in the area averaged 60.3% in 1997.
The Columbia facilities that want a property tax cut are 282-bed Arlington (Va.) Hospital and 102-bed Pentagon City Hospital, Arlington; Dominion Hospital; and Reston Hospital Center. Columbia wants property taxes for various years reduced by 57%, to $50.5 million, for the four facilities from original assessments of $117.5 million. Lawsuits filed by Columbia are pending in Fairfax and Arlington counties.
Meanwhile, in Hillsborough County, Fla., Columbia's property taxes will increase by 59%, or $12.3 million, at its two facilities this year. Its 225-bed Brandon (Fla.) Regional Medical Center will pay $23 million in property taxes, a 53% increase from last year. South Bay Hospital, a 112-bed facility in Sun City Center, will face a 75% increase, to $10 million.
Tenet's taxes at its two facilities in Hillsborough County will jump by 66%, or $9.5 million.
Columbia and Tenet hired their own tax assessors to look at how the county jacked up valuations this year. While Columbia has had a long history of fighting assessments, this time it didn't even follow through on the appeal it filed with the county's Value Adjustment Board.
"We decided that it was something that we didn't want to pursue," Prescott says. "We thought (the assessment) was appropriate."
Prescott adds that analyzing tax assessments is fairly routine for Columbia; it challenges assessments such as those in the Virginia cases when it sees fit, he says.
But when Tenet received its bill, it went a little further. Originally, the county assessed Tenet's two facilities at $15 million each. After filing an appeal, which bought research time, Tenet showed that lower occupancy rates at its facilities meant the original estimates weren't accurate. According to Tenet, 148-bed Town and Country Hospital in Tampa, Fla., had a 30% occupancy rate, and 138-bed Memorial Hospital of Tampa had a 39% occupancy rate for 1997.
The director of commercial valuation agreed with Tenet and lowered the assessments 20%, to $12 million for each hospital.
While Tenet says it should have paid only $8.9 million for Town and Country and $5.9 million for Memorial, it won't take the issue to court.
"We will not be pursuing litigation," says Tenet spokesman Lance Ignon.
Tim Wilmath, Hillsborough County's director of commercial valuation, came to the county from private practice about a year ago and started changing the formula for valuing hospital properties.
Wilmath, who has experience valuing medical office buildings, says the county took a new approach this year. Previously, computer-generated valuations placed a dollar figure on a facility's worth per square foot, discounted outpatient services and valued the hospital's land.
"A lot of times the property appraiser is outgunned," Wilmath says. "Usually the large (for-profit hospital chains) like Columbia and Tenet hire people experienced in valuations and would tell (the property appraiser) what the hospital was worth."
Wilmath used a cost approach, valuing the land and the building and discounting depreciation. He compared the sales of each hospital with those of similar facilities nationwide. And he considered income based on occupancy rates minus expenses.
"This wasn't an arbitrary decision," Wilmath says. "We knew they would come in and challenge it."