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UPMC doesn't exactly smell like a nonprofit

| Friday, March 22, 2013, 12:01 a.m.

It's all about aroma.

Few people were thinking fragrance this week as Pittsburgh, Allegheny County and state elected officials joined forces for a de facto declaration of war against medical behemoth UPMC. Pittsburgh Mayor Luke Ravenstahl was among the exceptions.

“Doesn't even pass the smell test,” he declared.

Ravenstahl referred to the self-described $10 billion global health enterprise's funhouse mirror insistence that it is a public charity, a legitimate nonprofit entity. The mayor tossed a large rock toward that mirror by announcing the city is legally challenging UPMC's tax-exempt status; shattering it could net the city $20 million annually.

After recently and abruptly dropping his re-election bid, Ravenstahl appears to have inhaled near UPMC's Downtown headquarters and choked. Interesting how a scent he found floral enough during the six-plus years of his tenure is now fetid after he decided to ditch the mayor's office.

But judging from the army of politicos joining Ravenstahl in a battle whose outcome is uncertain, he is far from alone in believing the redolence of UPMC's nonprofit claim is rancid.

UPMC vigorously contends it indeed passes the smell test. It considers itself the monolithic corporate equivalent of lilac bath salts whose soothing scent leaves the region feeling refreshed and reinvigorated after each use.

But how can UPMC successfully convey that position in court? What follows are strategies it might consider exploring in attempting to prove that it meets the nonprofit criteria the state Supreme Court established last year:

• Advances a charitable purpose: The numbers don't lie. According to UPMC's 2011 tax forms, only slightly more than 98 percent of net patient revenue was used for purposes other than financially assisting patients and charity care.

• Donates or renders gratuitously a substantial portion of its services: UPMC graciously donated the $5 million tab to demolish its Braddock hospital in 2010, even over the objections of many people who preferred keeping the facility open to accepting the company's generosity.

• Benefits a substantial and indefinite class of persons who are legitimate subjects of charity: Were it not for UPMC's largesse, UPMC's executive chef, the pilot of the corporate jet and the accountants who do the taxes of the more than 20 UPMC executives who earn salaries exceeding $1 million might have far less lucrative jobs.

• Relieves the government of some of its burden: UPMC annually relieves the government of having to calculate the property taxes and payroll taxes it would owe were it a for-profit venture. What a time-consuming burden that would be.

• Operates entirely free from private profit motive: UPMC doesn't amass profits, although its mission of delivering first-class community health care occasionally results in a modest, after-expenses cash excess. It happened most recently last year, when UPMC's net income totaled $220 million.

It's kept in the petty cash drawer.

Eric Heyl is a staff writer for Trib Total Media. He can be reached at 412-320-7857 or eheyl@tribweb.com.

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