Giant employer UPMC claims no employees
By Aaron Aupperlee
Published: Wednesday, Oct. 23, 2013, 12:01 a.m.
Sometimes, UPMC has more than 52,000 employees.
Other times, it employs no one.
Two Internal Revenue Service filings the health care giant prepares annually assert both statements are true.
An inability to resolve the matter definitively abruptly halted a pretrial hearing on Monday on the city of Pittsburgh's legal challenge of UMPC's tax-exempt status.
UPMC's website says it is Pennsylvania's largest employer, with more than 55,000 employees, but lawyers for UPMC, whose logo tops Downtown's biggest skyscraper, argue the city sued the wrong entity.
Common Pleas Senior Judge R. Stanton Wettick must decide whether UPMC has employees or its subsidiaries — hospitals and clinics — employ the executives, doctors, nurses and staff.
“The city would have to go where the employees are,” said Nicholas Cafardi, a Duquesne University law professor. “They would have to weigh the benefits against the detriments. Children's is a very popular charity. Mercy is a very popular charity.”
Another expert suspects UPMC hopes to shift the public focus of the tax fight from executive salaries and swank office suites to kids with cancer and nuns helping the indigent.
“There is just about nothing that touches the heart more than the idea of parents struggling with the health of their children,” said Peggy Outon, executive director of Bayer Center for Nonprofit Management at Robert Morris University in Moon. “By making the city sue individual subsidiaries, they are evoking a whole different set of images in the mind of the public about who UPMC is, and that will be of a great advantage.”
The cash-strapped city sued UPMC in March to collect payroll and property taxes — estimated to be $20 million a year. UPMC's nonprofit status makes it tax exempt under the law.
The question of whether UPMC or its subsidiaries employ people is not new. In June, UPMC called the city's tax challenge a sham because it is a parent company that has no employees subject to a payroll tax. But the claim appeared to stun Wettick.
“Obviously, I was not prepared for this, as I did not think it would be an issue until I asked the question,” said Wettick, who adjourned the hearing.
UPMC spokesman Paul Wood said the city improperly named UPMC as a defendant. A federal 990 tax form filed with the IRS as “UPMC” — the parent holding company, Wood said — shows it has zero employees. UPMC is a parent company for its subsidiaries, he said.
CEO Jeffrey Romoff and other executives are employed by UPMC Presbyterian Shadyside, which operates hospital campuses in Oakland and Shadyside, and their expenses are dispersed across the company's 37 subsidiaries, Wood said.
“I can't explain why the city would choose to sue an entity that does not have employees or payroll,” Wood said.
Ronald Barber, an attorney with Strassburger, McKenna, Gutnick and Gefsky, disagrees. He represents the city.
“The statement that UPMC has no employees contradicts their public statements and their federal 990 filings,” Barber said.
Another federal 990 tax form filed by the health giant under the name “UPMC Group,” indicates it has 52,418 employees.
Barber promised Wettick he would produce a tax form that would show UPMC has employees on Monday, when he is expected to file an amended lawsuit. UPMC will have 14 days to respond.
Aaron Aupperlee is a staff writer for Trib Total Media. He can be reached at 412-320-7986 or email@example.com.
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