POTTSTOWN — A Montgomery County judge has ruled that Pottstown Hospital can continue to be exempt from property taxes.
Earlier this month, Judge Jeffrey S. Saltz rejected a claim by the Pottstown School District that Reading-based Tower Health, which owns Pottstown Hospital, is more aligned with for-profit companies and should be paying property taxes like the hospital’s previous owner, the for-profit company Community Health Systems.
Saltz disagreed, noting that the school district’s claim that the push for ever-higher compensation by former CEO Clint Matthews, was not inconsistent with a non-profit organization.
The Montgomery County decision came just days before Chester County Judge Jeffrey Sommer issued a ruling that has the opposite impact in terms of Tower Health’s three hospitals there — Phoenixville Hospital, Brandywine Hospital and Jennersville Hospital. He ruled the company’s hospitals there were more aligned with for-profit than non-profit companies and should be paying property taxes.
“We are very pleased the court ruled decisively in our favor,” said Alan Fegley, superintendent of Phoenixville Area School District. “This saves the taxpayers of Phoenixville nearly $1 million per year in annual taxes which should rightfully be paid by the hospital.”
In his ruling, Sommer concluded the three Chester County hospitals did not qualify for property tax exemptions because they do not provide nearly enough free services, they cooperate financially with doctors at for-profit practices and structure lucrative executive compensation packages. Lucrative bonus plans that are tied to financial performance disqualified the hospitals from a tax exemption, the judge ruled.
Under Pennsylvania Supreme Court precedent, an organization must “operate entirely free from private profit motive” in order to qualify for a property-tax exemption. Sommer found that bonus plans mostly tied to financial performance disqualified the hospitals from tax exemption.
Pottstown Hospital’s removal from the tax rolls costs the Pottstown School District roughly $924,000 a year in property tax revenue.
The hospital’s continued absence from the property tax rolls also costs the borough more than $200,000 per year in property tax revenues.
“Our school district and our community are still feeling the negative financial effects of the loss of revenue generated by property tax,” said John Armato, the director of community relations for the Pottstown School District. “We will be reviewing the judgments from both cases in order to make a decision I will be in the best interest of the district and our community.”
Since 2018, the Pottstown School District has spent $204,153.63 on legal fees mounting the unsuccessful challenge.
The school board went into a closed-door executive session after Thursday night’s meeting but made no public statements about the Pottstown Hospital case.
“We are pleased the Montgomery County Court clearly determined that, as part of Tower Health, Pottstown Hospital unequivocally serves a public charitable purpose and should be exempt from real estate taxes,” Tower Health Public Relations Manager Jessica Belzer wrote in a response to a query from MediaNews Group. “We are particularly pleased the court acknowledged the more than $47 million in capital investments Tower Health has made at the hospital since its acquisition, and the more than $43 million in uncompensated care we provided in fiscal year 2020 alone. Tower Health continues to invest in Pottstown Hospital and its service to the community.”
The company was less pleased about the Chester County decision.
“Regarding the Chester County Court’s decision about the tax-exempt status of Brandywine, Jennersville, and Phoenixville Hospitals, Tower Health is disappointed in this ruling and will appeal based on what we believe are numerous factual and procedural errors, and a flawed legal analysis.”
Even before completing the purchase of Pottstown Hospital, Tower applied for and was granted a property tax exemption from the Montgomery County Board of Assessment. That did not occur in Chester County.
While Tower may welcome the decision regarding Pottstown Hospital, the Chester County decision poses a difficulty for the financially challenged institution.
Tower lost nearly $80 million from January through March of this year. It was an improvement over the previous quarter when it lost nearly $111 million. Only Reading Hospital did not lose money in fiscal 2021, which ended June 30. In a cost-cutting move, Tower is set to close Jennersville Hospital by the end of the year and is selling Chestnut Hill Hospital in Philadelphia.
Once known simply as Reading Hospital or Reading Health Systems, the transformation to Tower Health four years ago and overseen by Matthews, resulted in the $400 million expansion into the region. The funding was provided through a $590,500 bond issued by the Berks County Industrial Development Authority, according to Chester County court records.
“The plan was to compete with juggernauts Penn Medicine, Jefferson Health, and Main Line Health, drawing patients from the Philadelphia area away from the city’s academic medical centers to Reading for highly specialized care, an idea that many experts found implausible — and one that never broke through in the marketplace,” Harold Brubaker wrote in The Philadelphia Inquirer.
“As losses mounted and Tower struggled to halt a downward financial spiral, Matthews retired abruptly in February, leaving new management, mostly outside consultants, to unravel much of what he and a compliant board had done,” Brubaker wrote.
As the financial fall-out, combined with the body blows all hospitals took from the COVID-19 pandemic, Tower Health closed the maternity unit at Pottstown Hospital in 2020.
MediaNews Group Editor Fran Maye contributed to this report.
Source: Berkshire mont
Be First to Comment