Supreme Court rules against Wheeling Hospital in tax issue

CHARLESTON – The state Supreme Court has ruled against Ohio County’s Wheeling Hospital in its attempt to have state taxes refunded due to the reclassification of certain of its services provided to physicians.

Justice Allen H. Loughry delivered the March 28 opinion of the Court.

The hospital contended that services which it had originally classified as either “inpatient” or “outpatient” when filing 2003-2006 state tax returns, should have been treated as lower taxed “physician’s services.”

After receiving amended returns from the hospital alleging it had overpaid more than $2.7 million over the four-year period, the Tax Department performed an audit on the returns. The hospital slightly reduced the amount of the refunds it was seeking as a result of the audit.

In December 2007, the Tax Department awarded the hospital refunds totaling approximately $440,000. On March 4, 2008, the hospital filed a petition for refund with the Office of Tax Appeals, seeking the remainder of the funds it claimed.

The Office of Tax Appeal granted an additional $14,502 and denied the remainder of the request on the grounds that the statutory classifications and definitions prescribed by the West Virginia Health Care Provider Tax Act were controlling rather than the billing codes the Hospital used and argued should control.

The hospital appealed the Office of Tax Appeals ruling to the Circuit Court of Ohio County. The circuit court affirmed the decision of the Office of Tax Appeals, relying on the definitions of “inpatient services”, “outpatient services” and “physicians’ services” in the Social Security Act. The hospital appealed to the state’s high court.

“At the center of the case before us is the definition of the term 'physicians’ services' as it relates to the assessment of taxes pursuant to the West Virginia Health Care Provider Tax Act.,” Loughry wrote.

“We proceed to determine whether the circuit court correctly determined that the overhead items at issue do not constitute 'physicians’ services' under the Act.

“Upon our careful examination of the record against the applicable statutory and regulatory provisions, we are compelled to conclude, and now so hold, that a hospital’s provision of health care services, such as its physical facility; staff; medical equipment; drugs; and other incidental supplies typically regarded as overhead, to physicians not employed by the hospital does not come within the purview of 'physicians’ services' as that term is defined for purposes of the West Virginia Health Care Provider Tax Act.

“Not only do we agree with the circuit court’s conclusion that the overhead items at issue do not qualify as 'physicians’ services' under the Act, but we similarly concur with its conclusion that the health care provider tax is being uniformly imposed.

“Having determined that the trial court did not commit error in upholding the decision of the Office of Tax Appeals, the decision of the Circuit Court of Ohio County is affirmed.”