In the months preceding the scheduled tax trial of Austin, Texas-based St. David's Health Care System, the six-hospital joint venture partnership with Nashville-based HCA waged a substantial public relations campaign.
The partnership hired a public relations firm, held press conferences announcing major expansions and industry awards, and sent out a slew of publicity releases. Those releases touted its $200 million capital campaign, service expansions and St. David's significant investment in the 10 counties of the central Texas community it serves. The partnership pointed out that it employed 5,000 and took in more than $1.2 billion in revenue in 2001.
Money, charity care, jobs and services were the themes of the campaign, not unlike the marketing plans of many hospitals.
But in this tax case there was a great deal more at stake.
St. David's attorney in the case, Carol Clark of the Austin firm Graves, Dougherty, Hearon & Moody, said if the system had lost the case it could have owed more than $40 million in back taxes to the Internal Revenue Service. In addition, it could have lost its tax-exempt status and been unable to continue functioning as a not-for-profit health system.
Fortunately for St. David's, U.S. District Judge James Nowlin in Austin ruled in the joint venture's favor in a last-minute decision that avoided a trial altogether (June 17, p. 8). In his 14-page opinion, the conservative, Republican-appointed federal judge said the health system deserved its tax-exempt status and ordered the IRS to refund St. David's $1.2 million it paid in 1996 taxes. The government has not yet decided whether it will appeal Nowlin's decision. Neither the IRS nor the Justice Department would comment on the ruling.
Did the timing of the St. David's marketing campaign have an effect on Nowlin's ruling?
Jack Segal, a senior vice president with Edelman Health, a division of Edelman Public Relations Worldwide, said it's not uncommon for not-for-profit organizations to step up their public profile in anticipation of potentially adverse events.
"Hospitals must remain open to the community and ensure that their reputations are as good as can be beyond the scope of whatever legal action they may be facing," said Segal, who has served in public relations positions with the American Medical Association, Michael Reese Hospital and Medical Center and the American Health Information Management Association, all based in Chicago.
"You want to make sure everyone knows the good things you're doing because patients are making important decisions about their healthcare and need that information," he said. "Hospitals are pillars of the community and really should be able to tell their story proactively on an ongoing basis, regardless of other circumstances."
But St. David's system President and Chief Executive Officer Neal Kocurek said there was no conscious "step up" in public relations beyond the system's usual marketing program.
"It was just coincidental," he said.
Kocurek said the system talked to the press when it filed a lawsuit in 2001 appealing the IRS' 2000 revocation of its tax-exemption. "But we tried to keep a low profile on the court case and focus on this legal action and do the best job we could do there," he said.
Kocurek said the partnership publicized its $200 million capital program and held a press conference to promote it in March, but denied any connection to the timing of the trial, which was to have taken place three months later.
"Hospitals do these kinds of things all the time," he said. "This was no different."
He said the partnership hired Austin public relations firm Christian-Hubble Media & Communications in March to help it organize the press conference on the capital campaign, a program he said had been planned for months.
"We do lots of work in the community and have for years," Kocurek said. "The timing on the press conference was brought about when we could pull the capital campaign together." Nonetheless, Kocurek said, the results of the campaign and the court decision were positive.
"I guess it didn't hurt any," he said. "It was a good opinion."
Segal said he's unaware of any studies on how such campaigns affect the outcomes of court cases. And he pointed out that hospitals routinely plan marketing campaigns months and even a year in advance to budget funds for such campaigns, potentially making the timing coincidental.
A spokeswoman for St. David's Austin rival, Seton Health System, declined to comment on the publicity campaign or its effect on Nowlin's decision.
Preston Gee, St. David's senior vice president of strategic planning, said Kocurek's approach to the trial was low key. Gee acknowledged that even though the partnership paid for the campaign, most people don't distinguish between the system and the partnership.
"Our strategy wasn't driven by the fact that there was this imminent trial," he said. "It was not one of the main or even ancillary objectives. We wanted to highlight that we're making a major investment in this community to the tune of $200 million and that was tangential to the trial. Neal (Kocurek) wanted to make sure the facts came out in court. If these events dovetailed, it was more a matter of serendipity rather than strategy and planning."