Hospital-owned ASC doesn't get tax exemption, Pennsylvania court says

Excela Health's hospital-owned ASC in Greensburg, Pa., doesn't qualify for property tax exemption, a Pennsylvania appeals court ruled on July 19.

The court ruled 2-1 that Latrobe Area Hospital couldn't extend its status as a tax-exempt hospital to Laurel Surgical Center — which was previously a private business — by purchasing the facility. The case was remanded to trial court for further proceedings.

LAH qualifies as a tax-exempt hospital under the General County Assessment Law. The hospital originally requested tax-exempt status for Laurel Surgical Center in 2015, having purchased it from Laurel Property Associates in 2014. A board denied LAH's application on the grounds that the property was licensed as an ambulatory surgical facility and was in competition with similarly licensed businesses.

LAH appealed to the trial court, which held a hearing in 2017. After hearing testimony from seven Greensburg-based Excela Health employees and reviewing more than 30 exhibits from the health system, the trial court ruled that LAH met its burden of proving the property was entitled to tax exemption.

The decision said that "Laurel Surgical Center operations are subject to the same policies and procedures in effect at all of the hospital's facilities, including its main facility ... in Latrobe," despite being about 7 miles away from the hospital's main location.

This July, the Commonwealth Court of Pennsylvania reversed the trial court's decision, saying the tax exemption doesn't automatically apply to all hospital-owned properties.

"We are not persuaded that a hospital's purchase of a separate business entity and its integration and control of the entity's activities is sufficient to transform a business enterprise, whether an ambulatory surgical center, a diagnostic imaging center, or a medical laboratory, into a 'hospital,'" the court's memorandum opinion said.

The opinion also said the trial court erred in concluding that Laurel Surgical Center isn't used to compete with commercial enterprises.

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