PeaceHealth backs compromise plan on Bellingham B&O tax


​​The following article was written by Barbara Lupo, Board Chair, and Peter Dillon, MD, Chief of Staff, PeaceHealth St. Joseph Medical Center and appeared in the Bellingham Herald Whatcom Opinion Column May 6, 2014.

It’s about partnership.  Specifically, it’s about a partnership between a not-for-profit health care organization and a city to ensure access to health care for all in the community they both serve.  A recent decision by the Bellingham City Council has put this critical partnership in jeopardy.

That decision -- to forward an ordinance to repeal the religious exemption for the City’s Business & Occupancy (B&O) tax -- could lead to a tax increase to PeaceHealth St. Joseph Medical Center of $1.2 million per year.

To be clear, PeaceHealth does not oppose the repeal of the religious exemption for B&O taxes.  It is our provision of charity care that defines us.  While that is rooted in our Catholic sponsorship, it transcends any specific denomination.  Charity Care takes many forms -- for example, to ensure that a low-income woman with mental illness has a place to turn to or that an unemployed young man will not be saddled with debt from medical bills -- and is seen in the patients we treat every day. 

This is work that we do not do alone. Many community organizations such as Whatcom Alliance for Health Advancement, Interfaith and Sea Mar Community Centers and others work closely with PeaceHealth to carry out this important service.  PeaceHealth, in turn, supports these organizations with dollars, in-kind donations and technical assistance. Up until this latest decision, the City recognized its role as a part of this team to aid its most vulnerable citizens – a role that nearly every city in the state of Washington takes seriously by supporting its not-for-profit hospital through either a B&O tax exemption or hospital district tax revenue.  These cities recognize that if they didn’t support health care safety-net providers, the burden would fall to city government. 

We understand that City government needs to look under every rock for resources.  So does PeaceHealth.  It was in this spirit of collaboration that PeaceHealth offered to help the City recoup the approximately $350,000 per year in tax revenue it lost when the privately held Madrona Medical Group and North Cascade Cardiology joined PeaceHealth in 2008 and 2011.  In fact, the Mayor and PeaceHealth support a proposal that would tax not-for-profit health care providers in the City at the same lower rate.  This proposal would allow the City to recapture the entire amount of revenue it lost, ensure that PeaceHealth would pay taxes on any future mergers or acquisitions, and maintain City support of the health care and social service safety net that many of our citizens require.

$1.2 million is not a trivial amount that PeaceHealth St. Joseph can simply absorb.  As much as we would try to mitigate the effect of such a loss, it will be difficult to do so without it impacting jobs and programs.  With labor costs representing close to 60 percent of our expenses, a $1.2 million tax hit would reduce our annual payroll by $700,000. As would happen with your own household or business budgets, we would have to take a sharp pencil to our budget and reduce our expenses.  That comes at a cost in jobs and services; there’s no way around it. 

This potential revenue loss to PeaceHealth comes at a particularly challenging time.  More than 15,000 people in our community are newly enrolled in the Medicaid program through the Affordable Care Act.  While certainly positive for these individuals and families — and for our community as a whole — Medicaid pays hospitals  considerably less than the actual cost of providing care, and considerably less than commercial insurance.   We’re serving more people, for less reimbursement. And while we are seeing some decline in our charity care expenditures, that may be offset by the need to help lower income people who have high out-of-pocket expenses.  It’s too early to know if the ACA saves or costs the hospital money, which is one reason why the timing for this tax increase couldn’t be worse. 

For its entire history in Bellingham, St. Joseph Hospital (now PeaceHealth St. Joseph Medical Center) and City government have been inextricably linked. Mutual respect combined with commitment to the disadvantaged among us led both organizations to identify ways to maintain the health of all in our community.  The City Council’s apparent intention to levy a tax on PeaceHealth St. Joe’s at a level that is considerably more than triple the amount it lost runs counter to our tradition of collaboration. 

On behalf of the people we jointly serve, we encourage the City Council to consider the City staff’s recommendation to support the compromise tax position, one that keeps the City coffers whole without placing a significant financial burden on PeaceHealth, our caregivers and our patients.

Barbara Lupo, Board Chair 
PeaceHealth St. Joseph Medical Center

Peter Dillon, MD
Chief of Staff
PeaceHealth St. Joseph Medical Center

Read Bellingham Herald Whatcom Opinion Column