On behalf of the Internal Revenue Service, the U.S. Justice Department appealed a March jury verdict in favor of St. David's HealthCare System, Austin, Texas, in a long-running tax case that has cost millions of dollars and seen the government defeated twice. The appeal was filed with the 5th U.S. Circuit Court of Appeals in New Orleans, which will set a briefing schedule in the coming months. St. David's and HCA own six-hospital St. David's HealthCare Partnership, a joint venture launched in 1996. The IRS revoked St. David's tax-exempt status in 2000 after ruling that the system no longer operated exclusively for charitable purposes because of the partnership with for-profit HCA. St. David's won an initial court ruling, lost on the government's appeal and won again in trial this year.
Carole Clark, an attorney who represented the system and is now its chief executive officer, said she is confident of victory. The appeal surprised some industry watchers. "The government has lost twice now at the trial level to a system that gives away a lot in charity care. This will be a tough appeal to win under the circumstances," said Gerald Griffith of Honigman Miller Schwarz and Cohn, Detroit, who is following the case but is not involved. The Justice Department declined to comment on the case. -- by Mark Taylor