Ravenstahl to challenge UPMC's tax-exempt status
By Jeremy Boren and Alex Nixon
Published: Wednesday, March 20, 2013, 12:01 a.m.
Pittsburgh Mayor Luke Ravenstahl is expected to challenge the tax-exempt status of health care giant UPMC at a news conference on Wednesday.
Officials in Ravenstahl's administration declined to discuss details, but spokeswoman Marissa Doyle said an announcement is set for 11:30 a.m.
It's unclear how city officials would mount such a challenge, but the concept is not new. Lawmakers and union officials repeatedly have accused UPMC of caring more about its bottom line than helping patients during its high-profile contract dispute with Highmark Inc., the state's largest health insurer.
“The challenge to UPMC's tax-exempt status appears to be based on the mistaken impression that a nonprofit organization must conduct its affairs in a way that pleases certain labor unions, certain favored businesses or particular political constituencies — in other words, the way that some local governments are also run,” said Paul Wood, a UPMC spokesman.
“If UPMC ran its affairs as poorly as some of our local governments, it would not have become the internationally known, world-class health care institution it is today,” Wood said.
Members of Pittsburgh City Council and Allegheny County Council each have held public hearings in the past year to question why the $10 billion hospital system deserves tax-exempt status as a nonprofit organization.
Pittsburgh officials negotiated with nonprofit groups citywide to persuade them to contribute payments in lieu of taxes to help the city improve its shaky financial position. Success has been limited.
A group of tax-exempt nonprofit organizations known as the Pittsburgh Public Service Fund agreed to donate $2.6 million in 2012 and 2013. The fund donated $14 million to the city from 2005 to 2007. UMPC officials have said it is among the largest donors to the fund.
In 2012, UPMC reported a net income, or profit, of $220.7 million. With more than 55,000 employees, UPMC is the largest employer in Pennsylvania. It has 19 hospitals and more than 400 doctors' offices.
UPMC has responded to criticism with a vigorous marketing campaign to defend itself, touting its $100 million commitment to the Pittsburgh Promise college scholarship program and $238 million in uncompensated and charitable care listed in audited financial statements.
UPMC is the biggest tax-exempt property owner in Allegheny County. Its holdings are estimated to be worth $1.3 billion.
Among the loudest critics of UPMC's tax-exempt status are labor union representatives from the Service Employees International Union, which is trying to organize UPMC employees. SEIU officials have said UPMC harassed employees trying to unionize and doesn't deserve to receive tax breaks from the communities in which it operates. UPMC has rejected such charges.
SEIU officials did not return a call seeking comment.
It's unclear how much UPMC could pay in property taxes.
Wood said UPMC pays real estate taxes on 49 percent of its property.
“Our hospital campuses comprise almost all of the remaining 51 percent of the land UPMC owns — those properties were tax-exempt when each hospital joined UPMC, they continue to operate as ‘institutions of purely public charity' in every sense of the phrase, and they are unquestionably tax-exempt,” Wood said.
By comparison, Highmark, a nonprofit Blue Cross Blue Shield company, paid $18 million in property taxes over the past five years to Pennsylvania municipalities where it owns property, spokesman Aaron Billger said.
In some cases Highmark is required to pay property tax on a building because it houses a for-profit part of its business. But the company chooses to pay taxes on all its property because “we think it's the right thing to do,” Billger said.
That includes a $100 million medical complex the insurer is building in Pine that is expected to open in 2014, the company has said. Highmark plans to pay property taxes on the elaborate outpatient center that will house doctors, labs and surgery facilities.
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