Utah County Ex Rel. County Board of Equalization v. Intermountain Health Care, Inc.

ordinary negli- of care than er lack _” gence COUNTY, Id. 215.1 body politic, By UTAH Through the COUNTY BOARD OF argues defi- The State Berchtold EQUALIZATION COUNTY, OF UTAH disregard” permit of “reckless nition Utah, Plaintiff, State of motor stat- a conviction under the vehicle “knew” or ute for action which a defendant danger- highly have known” was “should CARE, INTERMOUNTAIN HEALTH true, Although ous to others. INC., and Tax Commission of the change the required results this does Utah, State of Defendants. statute, manslaughter case. Under the No. 17699. actually have known of the defendant must risks; disregarding risks which he simply Supreme Court of Utah. of is sufficient should have been aware June 1985. provision. to sustain a conviction under that he could also have been convicted un- But Rehearing Sept. Denied 1985. actually motor vehicle statute if he der the risks, jury as the case

knew the It that the defendant

found. is irrelevant been

could not have convicted risks known, but

about which he should have did premise Accordingly,

not. opinion

Court's main the defendant convicted under either the

could been

manslaughter vehicle statute or motor act, precisely

code for the same punishments, wholly valid.

different reasons, foregoing petition

For rehearing is denied. DURHAM,

HALL, C.J., JJ., HOWE and BALLIF, Judge, E. District GEORGE

concur. J.,

ZIMMERMAN, participate does not

herein. 76-2-103(3) person all (1978) ordinary under would exercise conduct defines Section recklessly: from the actor’s performed as viewed that is circumstances standpoint. consciously aware of but dis- he is [W]hen congruent test Berchtold unjustifiable with the regards risk This test is substantial and did not exist or the result will Berchtold that the circumstances the nature of the risk. place negligence be of such a nature occur. The risk must test in establish criminal gross disregard degree constitutes recklessness. that an of care standard deviation Wilkinson, Gen., Atty.

David L. Noall T. Wootton, County Atty., Lynn Utah W. Da- vis, Provo, Deputy County Atty., Ted Can- non, Salt County Atty., Lake Bill Thomas Peters, Sp. Asst. County Atty., Salt Lake City, plaintiff. Allred,

Daniel Dazey, M. Michael D. Salt City, Lake for St. Marks. Dibble, A.

Jonathan City, Salt Lake Holy Cross. Sullivan, Colton,

Alan L. S. David A. Jaynne Allison, City Salt Lake for Inter- mountain Health Care. McDonald, Craig Cook,

John H. S. Salt City, Pathology. Lake DURHAM, Justice: County Utah seeks review of decision of the Utah State Tax Commission revers- ing ruling of the Utah Board Equalization. The Tax Commission ex- empted Valley Hospital, owned and operated by Intermountain Health Care (IHC), Hospital, and American Fork leased operated IHC, from ad valorem tion, of its can At issue is whether such assets inure property taxes. constitutionally permissi- private person. benefit of exemption is that, facts in this We hold on the ble. policy respect IHC’s to all record, not, we reverse. charges is to make possible services whenever it is St. Amici curiae have entered case. charges Hospital paid by so. are either do Hospital Hospital Holy and Cross Mark's private by companies patients, insurance position, supporting filed briefs IHC’s Shield, Blue Blue or by such as Cross and County has filed a brief and Salt Lake programs governmental such as Medicare County. that of Utah Patholo- supporting and Medicaid. IHC and its individual hos- (PAL) gy supports Laboratories Associates pitals recipients private are the of also be- County argues allowing non- Utah endowments, quests, and contributions by operated such as those profit amounts not established in the record. exemption, enjoy a addition IHC status, gives them County Utah seeks the resolution of two advantage competitors over such unfair (1) U.C.A., 1953, issues: whether 59-2- §§ PAL, By for-profit corporation. minute (1974) (1974),1 59-2-31 which ex- Court, IHC’s motion to strike entry of this empt meeting from taxation cer- granted to the extent of PAL was requirements, brief tain constitute an unconstitu- factual issues not expansion exemp- that the brief deals with tional of the charitable XIII, proceedings below. We set raised tion in article section of the Utah Constitution; pertinent (2) Valley hereafter those facts whether forth Utah Hospital lim- established the somewhat and American Fork have been XIII, exempt from taxation under article record us. ited before section 2 of the Utah Constitution. nonprofit corporation that owns IHC is seriously dispute does not operates twen- operates or leases Utah. comply two in this case throughout that the ty-one hospitals the intermoun- 59-2-31, with sections 59-2-30 and but con- area, including Valley Hospital tain unlawful- tends instead that these statutes Hospital. Fork also and American IHC exemption granted ly expand the charitable subsidiaries, including at least owns other XIII, section 2 of the Utah Con- by article entity. supervised by It is for-profit one 1982), (1895, pro- amended stitution pay. without of trustees who serve board pertinent part: vides stock, pecuni- or It has no and no dividends state, cities, coun- ary paid property or incor- of profits are trustees towns, districts, ties, municipal school porators. corpora- Upon dissolution ly, religious purposes clarify the charitable or This section is intended to § 59-2-30. organization. scope exemptions used (3) by operated worship property is used or exclusively religious or not for either person organization or so as to purposes provided other section charitable director, officer, trustee, any share- state benefit Article XIII of the Constitution member, holder, lessor, employee, contribu- intended to ex- Utah. This section tor, through any person the distribu- scope exemptions. or pand or such limit charges profits, payment excessive Any use is to reli- tion of property whose dedicated compensations. purposes or gious worship or includ- charitable dissolution, (4) Upon liquidation, ing property rea- which is incidental any part pro- sonably necessary accomplishment of of the user abandonment use will inure worship purposes, derived from such religious ceeds such any private person. benefit of an indefinite intended to benefit number exclusively (1) Property used exempt § 59-2-31. persons taxation if all of from educational, employee religious, hospital, following requirements are met: purposes which use produce representation, (1) organized or welfare user is not requirements complies of section 59- property. with the profit the use of the from 2-30, charita- be used for (2) earnings, shall be deemed to any No net exemption provided ble within the property, inures to the benefit use of the any private individual, Constitu- Article XIII of the for in section 2 of shareholder Utah, 59-2-30. and section directly tion of the state earnings used or indirect- shall be net libraries, corporations lots would otherwise be required to perform.3 buildings with the thereon used exclu- rationale, A concurrent by some sively religious for either worship or courts, is the assertion the exemptions purposes, ... exempt shall be granted because charitable from taxation. burden, entities government relieve of a but also because their activities enhance ruling upon validity of a stat community beneficial goals.4 values or Un- purports meaning ute which to define the theory, der this provision, a constitutional benefits received we are obli gated community language scrutinize the believed to offset reve- Constitution with nue-lost considerable care. It is reason of the exemption. true, explained in Justice Howe’s dis A consideration of the reasons for ex- sent, degree a significant of deference emption provisions important in deter- legislative is due to a construction of the mining proper standards under which meaning of a constitutional term. his But they should be reviewed. opinion itself, in accord with well-estab A liberal exemption construction of principles judicial review, lished of ac provisions results in major the loss of a knowledges obligation that this Court’s municipal source places of revenue and a serve the “final ques arbiter” of the greater burden on nonexempt taxpayers, tion of what pur constitutes “charitable thus, provisions these have generally poses.” 2 grants “Section art. of XIII a strictly been construed. For the same exemption and our statutes can parties seeking exemption reasons expand scope limit of ex bear of proving the burden their entitle- emption or To it. the extent the defeat ment to it. The doctrine of strict con- effect, they statutes have that are not val struction and the taxpayers difficulties Loyal id.” Moose, Order v. #259 of bearing have in the burden of proof ex- County Equalization, Utah, Board 657 of plain why taxation 257, has been the rule (1982) (emphasis P.2d 261 origin in the exemption al).2 has been the exception. In however, jurisdictions, some the doctrine power govern- of state and local of strict construction has been eroding. levy property ments to taxes has tradition- jurisdictions Courts in these pay “lip ser- ally been limited constitutional and stat- vice” to the doctrine fail apply it utory provisions such as those at issue to exemption provisions. this exempt case that certain property from Comment, taxation. These exemptions confer an Real indi- Estate Exemption Tax subsidy usually rect are justified Federally as the Housing Corpora- Subsidized quid quo tions, pro 1094, for charitable entities 64 (1980) under- Minn.L.Rev. 1096-97 taking (footnotes functions and omitted).5 services that the state emphasize regard 2. We language they comprised this general of to 1971 of 64% reve- XIII, governments. article 2 Advisory section itself: nue raised local Relations, Intergovernmental Comm’n state, tangible property All in the ex- Property Changing Tax in a Environment 99 States, empt under the laws United (1974). 1972, In 84% of local all tax revenue Constitution, under this shall be taxed.... Const, government 36.4% all local revenue XIII, (1895, 1982) Utah § art. 2 amended property from all sources came from taxes. added). (emphasis Census, Dep't Bureau merce, U.S. Com- Fisch, Schachter, 3. E. D. Freed & E. Charities Statistical Abstract United States 787, 242, (1974). Fisch, and Charitable 602 § Foundations at 245 See also E. D. Freed & (1974). Schachter, 3,] [supra E. note at 599-60. ("Property important taxes are an source of 4. Id. 603 & n. 42. at governmental revenue subdivisions which finding increasingly it difficult to obtain following article This also contains infor- (footnote adequate omitted)); funds.” O. Old- significance mation of local tax revenues: Schoettle, man F.& State and Local Taxes Property important (1974) ("As taxes the most producer source and Finance 137 municipal revenue, example, property revenue. For 1970 tax ranks second

269 givers charity the fore also constituted the courts described in its Unlike comment, recently sole beneficiaries. We were re unable going this Court any gift general public. to find to the case to the doctrine affirmed its commitment quoted approval there We United applied to the charita construction strict v. Presbyterian Association Board exemption provision contained ble Commissioners, 485, County Colo. Loyal Order Utah Constitution. 967, (1968): 503, 448 P.2d 264, Moose, “[W]here at we determined that 657 P.2d reciprocity alleged material recipi between “used exclu exempting property the clause alleged ents donor exists—then purposes” is to sively ... charitable Manor, Friendship does not.” XIII, construed, Const. art. strictly Utah 2d 487 P.2d at 1279. Similar Lake Tax 2. Accord Salt § ly, Local P.2d at Laborers No. Laborers Local No. ex rel. Commission was we held that union not entitled Utah, P.2d exemption to a tax for condominium office granted entity may a chari An space primary purpose because property under for its table members, use was benefit union only if meets the the Utah Constitution general public. gift there was no to the if “charity” definition complexities Given the of institu purposes. exclusively for “charitable” organization, financing, impact tional definition is the element of Essential to this life, community on modern there community. weighed which must number factors Charity or dedica- is the contribution particular determining a institu whether something of value ... the tion using property “exclusive tion is fact prop- good_ By exempting common ly purposes.” Utah ... charitable purposes, erty used for charitable (1895, 1982). XIII, 2 Const. art. amended § sought en- constitutional convention (1) factors are: whether the stated These courage group or sacrifice for individual entity provide signifi purpose of the is to a community. An es- the welfare to others without immediate cant service charity is an act sential element reward; (2) expectation material wheth giving. and to what entity supported, er the ex Lake v. Tax Commission Salt (3) extent, by gifts; and whether donations Lake Recreational Facil rel. Greater Salt “charity” required recipients of the (1979) (em ities, Utah, 643 596 P.2d received, in whole for the assistance added). phasis gift community A to the (4) income received part; or in whether substantial donations, can be identified either pay and (gifts, from all sources exchange “profit” in the between imbalance recipients) produces from ment services or recipient and the of its income entity in the sense that the to the lessening government long-term burden operating of a mainte exceeds (5) through charity’s operation. Laborers the benefi expenses; whether nance J., (Oaks, at are restricted or “charity” No. 658 P.2d 1198 Local ciaries restricted, and, concurring). Friendship Corp. if whether the Manor unrestricted relationship Commission, 26 Utah 2d 487 bears reasonable v. Tax restriction (6) objectives; and entity’s declined to charitable 1272 this Court P.2d other form of or some used as a whether dividends exempt property from taxation benefit, dissolu upon or assets alleged financial elderly because home Corporation tax_"); Nursing Nonprofit Home Cy- personal income to the federal Corpora- Closely tions, Associated pen, to Health Care Services Access For-Profit (1979) Limitations, Creighton 1332 12 L.Rev. Existing Programs and Poor: ("The exempt property taxable (1976) (“To freely of tax ratio U. Miami L.Rev. increasing. steadily Because inevitably exemptions ... allow revenues, resulting local loss of tax depletion of revenue of sources result in the eye Note, jaundiced cast taxation.”); Supreme government subdivisions Nebraska from exemptions.”). upon property tax Exemption Property Approves Tax State Court tion, interests, private are available to complex trial Nonprofit 1980’s. hos- entity organized operat whether the pitals traditionally treated as tax-ex- ed so that commercial activities are empt because, charitable institutions until subordinate incidental late in the 19th century, they were true provide, believe, ones.6 These factors we providing charities custodial care for those guidelines analysis useful for our of wheth who were poor. both sick and hospi- purpose er a charitable in any exists tals’ income largely was derived or entirely ’ particular emphasize case. We that each voluntary from donations, facts, case must be decided on its own government subsidies, taxes, patient foregoing equal factors not all of fees.7 The function and status of significance, nor always must institution began change in the late 19th century; qualify under all six eligi before it will be the transformation was substantially com- exemption. for an ble pleted by charities, the 1920’s. “From de- Because the “care sick” has tradi- pendent voluntary gifts, [hospitals] de- tionally activity regarded been an as chari- veloped into market institutions financed law, table in American and because the increasingly payments out of from pa- dissenting opinions rely upon decisions tients.” The transformation was multidi- jurisdictions from other in turn incor- mensional: were redefined from porate assumptions unexamined about the social welfare to medical treatment institu- hospital-based fundamental nature of medi- tions; their charitable foundation was re- care, important we cal deem it to scrutinize placed by basis; a business and their orien- contemporary social and economic con- tation “professionals, shifted to text such care. We convinced that patients,” away assumptions traditional bear little “patrons relation- ship to the poor.” economics of medical-indus- Minn.L.Rev. 1096 n. 17. 9.Id. at 147-48. pro- This transformation was pelled (1) significantly by professionaliza- adapted 6. This six-factor standard has been nursing (2) doctoring, tion of advances from the test articulated the Minnesota Su- science, particularly in hygiene medical in and preme Court in North Star Research Institute v. quality anesthesia. Not did the medi- 1, 6, Hennepin, County 754, Minn. 306 236 N.W.2d improve, importantly, cine prac- but more the (1975). rapidly tice of hospi- medicine became linked to Consequently, hospitals being tals. ceased cus- Starr, 7. Paul The Social Transformation of holding poor todial institutions the for and in- (1982). “Voluntary" American Medicine at 150 treatment, stead became centers of medical es- hospitals, hospitals (which like evolved attractive, time, pecially surgery, the first to dependent poor), per- from almshouses for the private physicians paying patients. and A ma- formed a “welfare" function rather than a medi- jor consequence change great of this was a curing poor cal or function: the were housed in establishing operat- increase in the cost of wards, themselves, large largely cared for ing hospitals. "Hospital budgets beyond soared expected often were not to id. recover. See at capacity charity the to meet them.” Id. at 145, 149, Early hospitals voluntary 160. had costs, change 160. While the increased it also paternalistic, communal social structures in "enlarged potential Many peo- the for income. which benefactors, entered at sufferance of their ple coming hospitals were now to who could children,” "had the moral status of pay, hospi- afford to and since the real value of religious help and received more moralistic and increased, charges tal care had would not drive 149, than medical treatment. Id. at 158. away." Hospitals' ability them Id. at 161. to Voluntary hospitals were charities for the paying patients, attract and financial need for quite they obvious reason that housed tend- turn, greatly power physicians increased the i.e., ed poor, to those who were both sick hospitals century over at the turn of as charity. those without resources and in need of "feeders," physicians controlling acted as hospitals performed Because no medical treat- paying patients hospital traffic of to beds. Id. at largely ment function and because were “Hospitals gone treating 178-79. had poor, nonpoor institutions for the in need of poor charity treating for the sake to rich treating private medical treatment and their revenue_” (For for the sake of Id. at 159. physicians overwhelmingly avoided them. See history change hospi- case of this in New York Starr, generally supra. tals, Rosner, A Once Charitable see David Enter- (1982).) prise 8. Id. at 146. significance Also of our magnitude

The and character considerable to suggested by increasing change care is review is the irrelevance (1) composi- The nonprofit for-profit number of factors. social distinction between hospital patients appears discovering tion century 20th changed early operations. until The element their population at quite models, similar to the became literature indicates that two de- Starr, large. below, Paul The Social appear large scribed to describe a Transfor- Medicine at mation American nonprofit hospitals number of func- change (1982). architecture The today.10 tion private (large replaced wards (1) “physicians’ cooperative” model rooms) away movement suggests the same nonprofit describes operate (2) patients. Id. poor paying from the primarily participat- benefit of percentage pa- of paying number ing physicians. Physicians, pursuant percentage tients increased did model, enjoy power high income This patient fees. revenue derived from through their direct indirect control over percent amounted to over revenue nonprofit hospitals they bring to which country as a whole general hospitals patients. The form nonprofit is be- appropriations amounted by 1922. Public by physicians lieved to facilitate the control income percent; endowment about for-profit Pauley better than the form. & percent; 3.6 and donations amounted to Redisch, Hospital as a The Not-For-Profit (3) The percent. at 161. added 5.7 Id. Physicians’ Co-operative, 63 Am.Econ. permitting physicians to practice of not 87, (1973). Rev. 88-89 This model has also charge patients for their services private “exploitation hypothesis” been called the peri- during this was abandoned physician because the “income maximiz- 1880, according study, to one od. ing” system is hidden behind the By hospital permitted physician fees. Clark, hospital. facade of the Does England hospitals 52 New sur- 47 of Nonprofit Fit Form Indus- charge veyed permitted physicians 1436-37 try?, 93 Harv.L.Rev. private patients. Id. at 163-64. services theory is A minor variation of the above (4) percent less than Before hospi- argument many nonprofit hospital privileges; by had physicians operate as “shelters” within which tals hospital privileges. 6 physicians 5 of had businesses, operate profitable physicians (5) hospi- The number of Id. Starr, supra, at 438. as laboratories. such increased, according figures, tals census (2) enterprise” model “polycorporate 4,000 Id. from 178 in 1872 to over in 1910. increasing of non- the number describes (6) there at 169. Between 1890 Here, power is profit hospital chains. growth for-profit a hos- was substantial administrators, not largely in hands of the corpora- pitals, organized physicians and Through of hold- physicians. the creation tions, profit in the opportunity the as hospitals have companies, nonprofit ing improved. Id. at business large groups into of medical enter- grown All of above factors indicate a substan- for-profit and non- containing both prises, hospital; change tial in the nature of Nonprofit corpo- corporate entities. disap- profit change gradual part of was the corporations for-profit hospi- rations can own pearance of the traditional charitable nonprofit tax losing their federal poor. without tal known, reasons, charity, engage many attempt this characterize tp 10. The dissents point it. The nonprofit en- entities withhold opinion terprises. "equating” profit and as re- opinion the essential any purpose. this is to reiterate The We such disavow any emphasize quirement entity claiming the Utah Constitution analysis what- point is to of this must charitable use enti- exist between such ever distinctions salient rely upon field, they entitlement and not provide no its demonstrate unexamined health care ties in the automatic of assumptions and anachronistic presuming, existence predicate its For-profit about status. entities uses. long the profits for-prof- status as as the hospital in Moberly granted was corporations it are used to further non- exemption largely on the basis its non- profit organization. parent structure, profit for the Missouri court held (IHC Id. at 437. owns at least for-prof- one it no account that gave subsidiary.) emergence of hospital charity in an percent amount less than 1.4 organizations for-profit with both and non- of the pa- amount collected from paying profit components increasingly has de- tients, that this so-called “charity” included stroyed the pretentions of non- debts, some bad and that for four organizations: profit “The extension of the eight years at issue no all was voluntary hospital profit-making into busi- given by hospital. Id., 422 S.W.2d at penetration corpo- nesses and the of other 293. Similarly, Vick Cleveland Memori- hospital signal rations into the the break- Foundation, al Medical 2 Ohio St.2d down traditional boundaries of vo- N.E.2d does on not insist Increasingly, polycorporate luntarism. identifying orga- the element of in an hospitals likely multihospital to become practices nization’s before it can be held systems competitors profit-mak- charity. Moberly Vick, Both chains, ing HMO’s other health care dissents, well other cases cited in the corporations.” Id. at 438. therefore inconsistent holdings with the foregoing discussion of the economic this Court. See Laborers Local No. environment in which modern 1192; 658 P.2d Greater Salt Lake Recrea- function is analysis critical to our in this Facilities, 641; tional 596 P.2d Friend- case analysis because it is an which is ship Manor, 26 Utah 2d 487 P.2d 1272. generally not present of the cases Having discussed the standards for the upon by relied dissenting opinions. application of exemp- Utah’s constitutional cases, view, Those in our do not take into tion for pur- used for charitable account the revolution in health care that poses, and the economic and historic con- has “healing profession” transformed a review, text in which we conduct this we into an complex industry, enormous and respecting now examine the record the two employing of people millions and account- (“the defendants”) eligibili- whose ing for a proportion substantial our ty challenged by has County. been gross product. national Dramatic ad- We note that this examination ex- focuses knowledge vances in medical and technolo- clusively what the record before us dem- gy equally have resulted dramatic regarding hospitals, onstrates these two rise the cost of medical services. At the hospitals. policies, these time, same comprehensive elaborate and practices, and structure of Intermountain organizations third-party payers Care, Inc., Health are relevant to ex- recently, perhaps evolved. Most as a fur- amination as they insofar have been shown evolutionary response ther to the unceas- operations in this case to affect ing services, rise in the cost medical hospitals. concerning these Evidence provision of such services has become operations functions highly competitive Furthermore, business. system appears entirely IHC to be even the more recent cases cited irrelevant, exempt as the status of the dissenting opinions contradict the rule this hospitals those is not now strictly adopted construing Court has our before us. provision, Loyal constitutional Order of regarding The Moose, purpose stated of IHC the requiring every 657 P.2d at and operation hospitals clearly of both meets gift. to show an element of Com- least of the first criterion we have munity Memorial City of Mo., determining of articulated for the existence Moberly, S.W.2d 290 as example, incorpo- contains no mention a charitable use. Its articles of of the ele- identify ment of “corporate purposes,” that this Court has held crucial ration meaning among things, the of charity. appears provision It the “care that sick, afflicted, infirm, capital and donation to was treatment identified the aged injured Valley Hospital, without the case of Utah within and/or there was no prevents impact The same demonstration of the State of Utah.” section of that dona- any earnings support, maintenance, this tion the “part Corpo- of the net on current private and operation to inure to the benefit of of that in the ration” tax Furthermore, year any question under in this The individual. anoth- lawsuit. evi- section, corporation hospitals er that charge assets dence was both rates upon may comparable dissolution likewise not be dis- for their services being to rates any private entities, charged to benefit interest. other similar and tributed showing was made that donations iden- factor is second we examine charges tified to patients resulted below hospitals supported, whether the are and to prevailing market rates.11 Presumably extent, by gifts. The what donations and differentials, exist, they such if could be findings ambig of the Tax are Commission quantified and introduced into evidence. element, regard uously worded in to this provide defendants have failed to such they any do make since distinction be evidence, and it is who bear the bur- patient charges, third-party pay tween showing eligibility den of their exemp- private govern ments from insurers and tion.12 programs, “gifts ment entitlement and (wills, contributions).” dissenting opinion and endowments Justice Stewart’s argues finding giv “The of reve that the element of charitable reads: sources ing primarily pa private nue IHC are derived from from donors and benefactors Cross, more, (Blue a charges, parties nonprofit entity, tient third without satisfies Shield, Medicare, Medicaid), requirement “gift” gifts Blue in the definition (wills, contributions).” purpose” endowments “charitable under Therefore, Although argument we the testimo Constitution. that is have examined attractive, ny this we that it ques and exhibits in evidence on believe is inconsistent precedent, the language tion. The latter that current with our demonstrate Constitution, Many operating expenses hospitals public policy. insti both entirely by largely partly almost tutions are created and covered revenue from by gifts, do patient charges. Although supported but not therefore a substantial Jones, Q. dissent that we errone- Mr. what the sources Justice Howe’s asserts money Care ously which Intermountain Health uses conclude that the rates of services of the purchase capi- change operate its case if two in this upheld. improvements hospitals? exemption empha- in those tax is not We tal Well, course, money, thing opinion A sources size that the that, this concludes record, patient primary revenue. And these have en- source defendants we, again, accepted change say we a tirely if I can it stew- failed to demonstrate that such case, responsibility unpaid artship and the [sic] would occur. This is "record” trustees, defendants, very suggests which we intense- strongly volunteer feel record below dissenters, ly, provide which is health service our took the view that like Therefore, the revenue in- to an without communities. comes, entitled automatic daily things compared, evidentiary showing if all bed any of the existence services, rate, ancillary are all the use. things x-rays like lab services that, get right you mix if which it’s hard to rely upon 12. The dissenters a statement in appendix people two have the same had board record from the chairman IHC’s that, get hospitals, you’d it’s hard to two than effect rates were lower those list, you just price compare if will. charged by for-profit hospitals. A careful exam- charge significantly less We feel we testimony to of the record shows that ination admission, will, you but in addi- if the same opinion been identified as a mere and not course, to that as a source revenue —of tion any comparable upon examination of rate based Cross, Blue all with Blue we are familiar data from information. No "break-out” is, party, third which we call offered, Shield was the context of patient. It provider is a [nor] neither testimony it clear that no makes chairman’s Medicaid, which is party, Medicare third opinion. his His actual foundation was laid for provider payer health care. major of were as follows: statements automatically qualify exemptions for tax change of services money. for Between property. Examples might for their in- 1978 and the value of the services schools, nonprofit museums, given away private, charity by clude as hospi- these two organizations, libraries, percent tals planetari- research constituted less than one of zoos, gross ums, Furthermore, their consulting revenues. groups, scientific en- record also shows that such free agencies, professional service as vironmental research deliberately did exist was associations, advertised and so forth. out of fear of a “deluge people” of trying significant One of the most of the factors advantage Instead, to take every of it.13 to be considered review of a claimed was effort made to payment recover for exemption is the third we identified: services Valley rendered. Hospital recipients whether the of services even offered assistance to who entity required pay to for that assist- inability claimed to enter into bank ance, in in part. whole or The Tax Com- agreements loan to finance hospital mission in this case as found follows: expenses. policy hospitals] of is to [IHC’s argue great The defendants that the ex- hospital charges collect from pense of hospital modern care and the uni- it possible whenever reasonable availability versal of govern- insurance so; however, do person in need of ment health care subsidies make the idea solely medical attention is denied care on of solely supported by philan- basis a lack of funds. thropy an anachronism. We believe this The record also shows that neither of the argument exposes itself the weakness hospitals in this case demonstrated position. precisely defendants’ It substantial imbalance between the value of because such system a vast of third-party provides the services it payments and the it payers developed has expense to meet the apart any gifts, donations, receives modern care that the historical endowments. The record shows that the distinction for-profit nonprofit between vast provided of the services by For-profit has eroded. govern- these paid two for provide many of the primary same care programs, ment private compa- insurance hospitals organized services as do those as nies, or the receiving individuals care. Col- nonprofit They entities.14 do so at similar lection of such remuneration does not con- charged by rates as those defendants. The giving, stitute but is a reciprocal mere ex- doctors and administrators directors, provision chairman of IHC's board of tertiary care services could example, qualify charity testified as requisite gift follows: as a if the community were to be demonstrated. In this provide policy [W]e Intermountain case, no effort was made to demonstrate for the charity level, Health Care a certain types record whether certain of care were actu- say say and when I I certain level should that ally being "given away” either institution provide try publish we We health. provided whether could not fact with- care, everybody charity because wants off-setting exemption, out the factor a tax good all consider them as least to the extent of the value of the facilities away. people cases. We don’t turn provide needed such We do not care. rule availability exemptions of tax Valley 14. The under such record does reflect that Utah Hos- pital circumstances in the provider tertiary context of this undevel- is the sole care for a however, oped emphasize, large record. We geographic region. that Jus- unique Because care, sophisticated tice Howe’s assertion “no institution can character medical it qualify” may pur- under this rule possible identify well be a substantial poses exemption is exchange inaccurate. This case Valley imbalance in the between Utah care, recipients decided on this record. We tertiary decline describe policies qualifying lessening government the activities and tion, of a through or a institu- of a burden that, case, finding only offering light in this care. activities such of our state- Moose, Loyal policies hospitals, ment in of the two defendant Order 657 P.2d at record, short, "any separate part building occupied established in this fall several important respects, exclusively and used ... the constitutional stan- qualifies exemption," may possible dard.

275 hospitals for is even opportunity any way the same earmarked for for personal remuneration their services use in their or even in facilities Utah Coun- counterparts for-profit hospitals. do their ty. In view of fact that Intermountain Georgia Osteopathic Hospital, Inc. v. See facilities, operates Care Health owns and 663, 665, 124 S.E.2d Alford, Ga. for-profit nonprofit, throughout this states, and in are particular- state we ly concerned is no showing that there on suggests The of Justice Stewart dissent surplus generated the record that funds by “ability not a pay” that the fact that is system one will not be uti- is criterion for admission IHC’s facilities for the question lized benefit of facilities in other dispositive of the of “charitable counties, Utah, purpose,” regardless pure- of the actual amount outside the state of argu ly system provided free This therein. for administrative costs for-profit fact in ment overlooks the that itself. implement poli may stitutions well similar Indeed, it is to see a significant difficult cies, reasons or either for relations (as operation op- difference between the by their by regulations virtue of mandated structure) posed corporate form receipt pay of federal- state-funded of defendants’ facilities and the operation Hill- ments. Institutions constructed with for-profit hospital in Budge, where funds, example, required Burton Budge Hospital William Memorial had a qualify provide free care under policy collecting charges, similar in all Furthermore, many for-profit act. service possible, cases where was the servic- providers provide free care and write both pa- es and accommodations furnished its debts,” thereby satisfying this off “bad tients. 79 Utah at 3 P.2d at 260. In reasoning would criterion. The dissent’s Budge, single we were unable to find a pro require therefore health care distinctive charitable feature that marked accepted regardless vider that institution, Budge Memorial as a charitable ability eligible deemed profit though no had ever even benefits for-prof exemption unless the actually been to or received distributed it/nonprofit distinction is to become corporation. of the owner the shareholders pur identifying “charitable sole means of at 3 P.2d at 263. The 79 Utah This poses” Constitution. under Utah Memo- apparent Budge difference between rejected that test in Wil Court unilateral and the defendants is rial v. Mau Budge liam Memorial nonprofit corpo- adopted in this case have P.2d

ghan, legal organization. format in their rate adopt should persuaded we we decisively rejected, we have Budge Yet it now. noted, all non- already the contention that is question The consider fourth we corporations are entitled to a charita- profit all whether the income received from tax- ble hospitals is in excess sources these IHC Manor, Friendship 26 Utah es. also See ex- operating of their and maintenance 1280; at 487 P.2d at Greater Salt 2d the vast of their penses. Because Facilities, 596 P.2d Recreational Lake for, hospi- nonprofit paid services are significant difference between capital as do tals this case accumulate hospital corpora- for-profit profit-seeking counterparts. is, effect, method of distribu- tions capi- this record indicates that accumulated corpo- upon of assets dissolution tion is the construction of addition- tal used for ration, rare itself a occurrence. throughout facilities al and other profits most large portion A ex- provision system the IHC capital im- is used for-profit entities us panded services. record before new, updated equipment, provements point, undeveloped there similarly hospitals here and the defendant capital nothing to indicate that the therein opera- in excess of expend their revenues by either of defendant accumulated doubt, expenses. tivity There can be no in certainly tional which was of at the heart by reviewing the references in the record original exemptions rationale for tax staff, members of administrative IHC’s hospitals. Otherwise, ap- for charitable it system, as IHC well the two pears they meet this criterion. On the question, consistently gen- in has interests, question private of benefits operat- sufficient of erated excess funds certainly appears that no individuals who ing rapid costs to contribute to and exten- employed by are or administer the defend- growth, building, competitive employ- sive any ants receive distribution or of assets benefits, professional ee and salaries and income, some, such as board of IHC’s very sophisticated management and a members, trustees volunteer their services. true no structure. While it is financial noted, however, We have that IHC a owns profits private benefits are available for-profit entity, as well as subsi- interests in the form of stockholder distri- diaries, and there is in addition consid- advantages, ownership the user butions eration private that numerous forms of clearly entity generates this ease sub- enterprise, commercial such pharmacies, “profits” in the of stantial sense income laboratories, and contracts for medical ser- expenses. that exceeds This observation vices, necessary a conducted as imply not intended to that an institution hospital operations. the defendants’ must consume its assets in order to be being on taxpayer burden to demon- eligible exemption tax require- —the eligibility strate exemption, for the the in- giving may obviously ment of be adequacies questions in the record on these point met before that is reached. How- by speculation cannot be remedied in the ever, question regarding there is a serious favor. defendants’ propriety the constitutional of subsidies County taxpayers being summary, from Utah after reviewing give certain competi- light entities substantial facts this case in of the factors we edge essentially identified, tive in what is a commer- have we that the believe defend marketplace. cial None of the defendants ants this case confuse the element of any in this case made effort to demonstrate community, entity to the an which they any operating would suffer losses qualify must demonstrate in order to aas any or have to discontinue services if Constitution, charity under our with the ineligible property concept benefit, community any which taxes. Justice Stewart’s assertion that the private enterprises might countless pro county taxes levied would have to be quarrel vide. We have no asser passed patients in higher on to the form of Hospital Valley tion that Utah and Ameri charges any is without foundation in the great impor can Fork meet logical assumption evidence. The far more persons within tant needs of their commu that growth system the IHC meeting for medical nities care. Yet this slowed, possibly is no but there indica- by provision need services tion a likelihood that current and future distinguishing cannot the sole character jeopardized. levels of care would be istic that leads to an automatic exemption. usefulness of an “[T]he final two factors we address enterprise is not sufficient basis for relief whether the beneficiaries of the services sharing from the burden of essential costs way the defendants are “restricted” in Marple government.” of local In re New private and whether interests are benefited District, 39 town School Pa.Commw. organization operation Such a 395 A.2d policy IHC is Although defendants. restrictions, equally “usefulness” rule would have to be impose there were some for-profit hospitals privately applied testimony incidents recounted in the which entities, pro care also suggested see owned health that these institutions do not patients. services to their We being pro- themselves as vide medical business note, example, increasing viding hospital “for ac- that the em poor,” competition “gift,” nonreciprocal in health care servic contribution phasis expansion resulting significant community. es Laborers Local No. pro health care activities roles of opinions The dissenting P.2d at 1195. fail including hospitals, both generally, that, viders acknowledge worthy however nonprofit. Laboratory ser for-profit and principles public policy they articulate services, vices, “birthing” pharmaceutical be, may the standards advocate would centers, outpatient surgical units are require us ignore to overrule or both becoming to adjuncts common traditional given construction to pur- the “charitable impossible It to hospital care. would be pose” in language past by the this Court distinction, justify a within the constitution analytical approach and the strict we have activities, of be al boundaries “charitable” in such construction. Under these services, surgical for ex outpatient tween circumstances, the extensive to references provided by an ample, on owned authority jurisdictions from other in the provided private IHC those on persuasive dissent on the question are not ly property, owned where both are identical us; they if before would become so we As at the same rate. remunerated contemplate to were abandonment of our out, showing pointed we have there was no precedent, approach own an is not the in the record that either of openly sought here either the defend- billing ma question rates which differ uses dissenting ants or the members of the terially charged rates for the same Court. by for-profit hospitals, that the services Neither this can we find on record change rates or would defendants’ services government the of burdens substantial- required pay county proper if to were ly of the lessened as result defendants’ ty taxes. The record provision of services. indicates Furthermore, “importance” if the County approximately budgets that Utah public resulting operation from the benefit $50,000 annually payment hospi- for the enterprise pri- to the become Furthermore, indigents. tal care the mary for a constitutional test described two instances within a evidence purpose, imply, the dissents this Court where, period three-month after a Utah accomplish impos- to required would be the had to official declined authorize determining sible task of the relative value person emergency payment for a the public community or to the room, Valley ad- Utah refused to performed by any entity function and its person the of that injured mit the on basis consequent to a “charitable” entitlement inability pay.15 county to offi- person’s Moose, exemption. Loyal tax Order See instances either cial was told these This 657 P.2d at 263-64. cannot be get” or to “come and payment authorize precedents rule under our established hospi- on person. behavior Such Moose, Loyal 657 P.2d Order of its argument inconsistent with tal’s It No. 658 P.2d 1192. Laborers Local government of a that it functions relieve be, public may very well as a matter of out, Likewise, pointed as we have burden. hospitals, for-profit non- policy, that all tax showing has there been granted exemption tax profit, should be significant permit- exemption is a factor great public because of the need thereby operate, ting these defendants to power beyond serve. But it is relieving government of the bur- arguably public Legislature grant policy- such a establishing its own medical den of language exemption based under fact, government already providers. This as it now reads. Constitution operat- carrying share recently a substantial clearly and affirmed Court has defendants, in expenses the form ing necessity identifying the element emergency care. testimony clearly least need of medical established in at 15. The cases was one of those individual third-party payments pursuant tax exemption: “entitle- absent “Even if the programs ment” such as Medicare and organization surplus uses expand such Medicaid. services, benefit thereby remain ing within the definition of nonprofitability, we noted in the As introduction expense does so at the of the benefi opinion, theory tax exemp “burden” ciaries whom it was created to serve.” traditionally tions has been based Ginsberg, Property The Real Exemp Tax organization notion that a charitable should Nonprofit tion Organizations: A Per eligible exemption it per because spective, Temp.L.Q. 317-18 government forms a task perform. otherwise have to The basis for practice While the of courts has often exemption quid pro quo: is a “pri the tax logic deviated from the strict “bur- perform vate charities functions that theory, den” general pattern is that required state would undertake and “burden” jurisdictions require generally pro granted quid quo as a degree some of almsgiving unpaid ser- performance for the of these functions and vices for the granting of a charitable tax Fisch, services.” E. D. & E. Freed Schac exemption. “Consequently in these states ter, Charities and Charitable Founda operations primarily financed entirely or 787, (1974) (footnote tions at 602 omit § supplied funds the beneficiaries are ted). A hospital, whether or for- Fisch, classified as noncharitable.” E. profit, provides paying its services to Charities, supra, 791, at 610. § public because, no relieves burden find, record, We cannot on this the essen- absence, government in its would not community, tial element of to the ei- (or to) duty provide would have no free ther through nonreciprocal provision health able to for through services or alleviation Note, Exemption treatment. See Edu government burden, consequently we cational, Philanthropic Religious In hold that the defendants have not demon- Property stitutions Real State Tax property strated that their being is used es, 64 Harv.L.Rev. If non exclusively purposes charitable under profit hospitals, charge fully which the Utah Constitution. services, their tax exempt be made theory, for-profit under “burden” hos hold, Because we so it follows that pitals logically ought to be treated U.C.A., 1953, provides 59-2-31 no safe § provide public same manner since both harbor Loyal for defendants. In Order of Indeed, might with the same service. Moose, prin 657 P.2d we reiterated the argued for-profit hospitals relieve a ciple expand that our cannot statutes greater portion public “burden” be scope exemption granted tax arti they provide cause medical care without XIII, cle section of our Constitution. “To public subsidy. tax-sup All use effect, extent statutes services, ported public road including con they are valid.” at not Id. 261. Accord maintenance, police protec struction and Laborers Local No. 658 P.2d at 1193- tion, protection, fire water and sewer main Property exclusively hospital used tenance, removal, and waste to name a few. not automatically being Exempt hospitals use those services at the purposes, even where expense nonexempt provid health care hospital nonprofit. taxpayers, ers and other commercial and Furthermore, grant We reverse the Tax Commission’s nonprofit hospi individual. of an generate ad valorem tax surplus tals that from their operations ought exempt being defendants unconstitutional. be tax un theory emphasize, contrary der We to the assertions the “burden” because dissents, opinion more passing along exemp the benefit of the this is no public charging principles tion to the unless than an extension of the of strict required Loyal set less for services than would be construction forth in Order of XIII, Moose, “record” 657 P.2d 257. This is a under Article Section 2 of the Utah case, U.C.A., 1953, judgment and we make Constitution and that 59-2- § institutions, ability of these others which defines eligibility holding for constitu- unconstitutional. demonstrate noncharitable, tionally permissible exemptions opinion to be note, however, ignores literally We that reliance the donation of tens of future. heretofore, exemptions granted private millions of dollars automatic worth of public hospital kind of efforts to show funds for and on the minimal erection of record, buildings purchase equipment will no reflected dedicated to the longer suffice.16 welfare of the large. ignored by Also is the The circumstances of this decision hospitals’ expenditure thou- of hundreds of Loyal to those in very similar Order of indigents sands of dollars the care of Moose, gave P.2d rise to and several millions of dollars for direct holding effective respecting that case’s subsidization of care to low income relied for date. The defendants here have groups. The facilities are made interpretation of many years statutory on a persons, irrespective available to all provision, opinion a constitutional and this race, ability religion, origin, national question impres- resolves a difficult of first pay.1 delay en- sion. Because substantial litigation holding precedent retroactive process, tailed in the The Court’s is without requiring application the assessment either Utah elsewhere the United might majority unrea- taxes well in an States. The seeks to dismiss back result array jurisdictions in this burden on defendants solid of law from other sonable enti- from similarly and on other situated with the assertion that the “decisions case operat- changes jurisdictions incorporate in their other ... unexa- ties. Substantial assumptions ing budgets, record-keeping, and admission mined about the fundamental care_” policies holding. hospital-based It may result from our nature of medical adjustments accounting may that That assertion erroneous. be policies practices and other enable will majority opinion The asserts that these defendants and to But only on the “facts of this case.” based qualify in the future for the constitutional anomalous, this case is much more than an In to exemption. order avoid the unreason- legal controlling departure one-time from might placed that otherwise be able burden principles It that are principles. enunciates them, this ruling on we hold that of gift to define what constitutes intended applied only, prospectively case shall be submit, will, of I result in the taxation that January date 1986. with an effective of pri- nonprofit virtually hospitals, all both care, The tertiary in the state. mary and HALL, C.J., SAM, District DAVID opinion is rationale of the basic Judge, concur. exists between that no essential difference STEWART, (dissenting): nonprofit hospitals Justice and that for-profit and not show that hospitals in this case did

I. INTRODUCTION gift public or relieve any make to the essentially government burden and are any A holds that Utah Court hospitals. Hospi- equivalent for-profit Valley Hospital and American Fork conclusions, rea- reaching the Court’s property these are not entitled ad valorem tal hospital soning sweeps every exemptions as institutions majority’s these facilities requirement opinion intimation that 1. The There is no in this institution; pay is imposed any there is cannot available to those who taxes be only are not directly claiming requirement findings contrary the'explicit that institutions exemptions proof put their charitable eligibility. record. See Commission and to the Tax infra. pa- IHC, that receives substantial revenues from trustees of who serve without remu- payors. third-party tients or kind; (4) neration of any part “[n]o proceeds will inure to the benefit majority opinion The effect of will any private person” upon dissolution of the far-reaching. likely According corporation. following facts are undis- Care, chairman of Intermountain Health puted, although (IHC), Commis- tertiary Inc. the taxation of care findings. sion’s hospitals, provide sophis- Boards which the most Trustees technologically ticated and Valley lay advanced medi- IHC Utah boards care, jeopardize cal will their existence. whose members volunteer Both time. result the majority’s immediate hospitals are tax exempt under Section holding already high cost 501(c)(3) of the Internal Revenue Code. hospital care will be increased. If Hospital Valley is an acute care hos- Valley Hospital treated Utah and Ameri- pital 1,700 employed per- as of 1980 can Fork required ad sons and had 385 beds. American Fork valorem taxes at Hospital, City which was built level, they $26,- pay $371,274.07 Fork, primary American is a 177.58, respectively, in cost addition to the employs approximately people services. In the case of Utah operation has beds. IHC took over its Valley Hospital, that amounts an addi- and, the City since case was approximately tional overhead cost of initiated, has new physical constructed fa- $1,000 per $1,000 day approximately per hospitals accept cilities. Both all per year. bed race, regardless religion, origin, national ability pay. THE

II. FACTS Care, Inc., Health Intermountain is a

nonprofit eorpoi’ation which owns Utah III. DEFINITION OF CHARITY Valley Hospital, nonprofit corporation, ago, Two centuries Lord Chancellor operates Hospital, American Fork also England declared that is “[a] nonprofit organization, which American general use, to a extends to City Fork IHC and leased IHC. owns rich,” poor as as well to the v. Jones manages a of twenty-one hospitals, total Williams, (cited in 2 Amb. 651 Matanuska- which, including Valley fifteen Borough Camp, v. King’s Susitna Lake Hospital, formerly were founded and Alaska, 441, (1968)). 439 P.2d 446 Justice operated by owned and the Church of Jesus Crockett, opinion concurring in a in Benev- Latter-Day They Christ of Saints.2 & olent Protective Order Elks No. 85 v. Inc., transferred Health a Services Commission, Utah, 1214, Tax 536 P.2d nonprofit corporation, church-controlled (1975), 1219-20 on overruled and then transferred to in The IHC 1974. grounds, Loyal v. Order Moose No. 259 (1) hospi- Tax Commission found that IHC Utah, County Equalization, Board 657 provide tals re- medical services without (1982), 257 stated: P.2d (2) gard patient’s ability a pay; for compass, The term ... in is broad primarily IHC revenues are derived from having meanings. a number of related (wills, “gifts and endowments contribu- giving poor it includes and While tions),” patient as and charges well as needy, Cross, it is not restricted that narrow third-party payors such as Blue Medicare, concept.... Safeguarding Medicaid; (3) promot- no IHC has pays general one capital prof- ing stock welfare of citizens is dividends or government. incorporators governing responsibilities its to the Religious played major organizations percent in a of the beds the United 25 Clark, sponsoring nonprofit hospitals present. Nonprofit role at States Does estimated, generally. Hospital Industry? been 93 United States It Form Fit the Harv.L.Rev. has 1416, (1980). example, for for that Catholic account 1458

281 holding them in Foundation v. Tax trust for the object Accord. Youth Tennis Commission, Utah, (1976). sustaining hospital, 220 554 P.2d conduct- Indeed, ing long purpose its affairs for the recognized that adminis- courts have tering healing to the comfort and of the qualify an institution to as a charitable sick, expectation right without institution, not in its beneficiaries need immediately of those interested needy. digent or Matanuska-Susitna Bor corporation compensation to receive Camp, King’s supra; Ding v. ough Lake benefit, own 483, public a charita- Cal.App. 267 P. Seymour, v. well Moreover, ble institution. (1928).3 XIII, proposing In Article [fact] a corporation established for the mainte- 2, the framers of our Constitution Section public hospital, by nance of a its rules premise group acted on the individual requires payment its for their furthering community action according board to their circumstances “By objectives encouraged. should be ex receive, and the accommodation ... pur for charitable empting not render it the less a public [does] poses, sought the constitutional convention charity. [Footnotes omitted.] encourage group individual sacrifice community.” for the of the Salt (Second) welfare See Restatement also Trusts (1959). v. ex Supreme Lake Tax Commission rel. The Court of Ne § Lake Recreational Facili in Evangelical Greater Salt braska Lutheran Good Sa ties, Utah, (1979). Gage County, 596 P.2d Society maritan v. Neb. 831, 151 N.W.2d stated that represents majority’s ruling sharp hospitals operated institutions singular legal with traditional break universally “are classed charitable insti principles. It is letter law that non- black support tutions.” cases which operated profit hospitals which proposition legion. Many are referred large, benefit to in Justice Howe’s dissent and need not group individual or benefit repeated here. individuals, and whose revenues are used proposi- affirmed that basic This Court organiza- for the charitable tion Budge in William Memorial tion are charitable institutions. follow- Maughan, 79 Utah 3 P.2d 258 ing passage 15 Am.Jur.2d Charities holding for-profit hospital that a (1976) the set- 183 at 220-21 summarizes § organized corporation as a was business tled, law: well-established organization within the a charitable popular “hospital” The word us- XIII, meaning of Article Section institution; age denotes it Court held that test deter- “[t]he may income be used where hospital is charitable or mines whether a profit cor- owners is, purpose, is its that whether otherwise A poration charity. corpo- ceases to be profit, advantage, gain, is maintained for object provide ration which of is 523, P.2d 261. or 79 Utah at 3 at not.” persons, general hospital having sick making Budge applied and capital provision stock The rule stated was or of profits, by Supreme Court deriving or its funds elaborated dividends Virginia City Richmond v. public private charity 1960 mainly from of deserving worthy of haps members Dingwell, more the court stated: may poor society under than the ne’er-do-well Any poor, may person, the rich as well as the objects proper chari- be certain conditions injured be or and be- fall sick or wounded Luke, charity. public subject chap- ty. maintain a St. A establish and come a fit 10, may misery unhappiness trust ter verses 30-37. A be often institution where nature, uses, degree, is person high or low rich giving poor. It true without alms sanely poor, may dealt considered and be which, poverty even when is a condition purview of the within the with would come by brought about indolence and waste life’s charity. public of a definition opportunities, the attention and com- arrests 267 P. at 333. charity. per- Yet the consideration mands 282 Hospital, 86, mission, 669, 151 202

Richmond Memorial Va. 24 (1944); Cal.2d P.2d 109 79, 116 82 Hungerford Hospital S.E.2d which construed a Convalescent Ass’n Osborn, Fla., Virginia provision (1963); v. 150 constitutional similar to So.2d 230 Eld er XIII, Egleston 2 v. Henrietta Hospital, Article Section Consti- Ga. (1949); 53 S.E.2d 751 Gundry v. Virginia Supreme tution. The Court R.B. stat- Ass’n, Hospital Smith Memorial 293 Mich. ed: (1940); 291 N.W. 213 Community Me Whether these are “conducted Mo., Hospital morial v. Moberly, profit, exclusively not for as chari- (1967); S.W.2d Intercity Hospital ties,” meaning within the of the constitu- Squire, (W.D. F.Supp. Ass’n v. provision, depends upon tional not Wash.1944). generally See Eastern Ken number who are treated free tucky Rights Organization v. Si Welfare charge, but the nature of the institu- mon, (D.C.Cir. 506 F.2d 1288-89 tions, purpose opera- of their 1974), grounds, vacated on other v. Simon institutions, tions. The nature of these Kentucky Eastern Rights Orga Welfare purpose and use to which nization, 426 U.S. 96 S.Ct. put, all combine to show that (1976); L.Ed.2d 450 84 C.J.S. Taxation operated “exclusively as charities.” 282(b) (1954). § pay ... Patients who are able do legal concept of charity does not pay, and those who cannot do not require, majority apparently as the re pay. The citizens who contributed to the quires, that a incur a deficit to get hospitals can never return mon- qualify aas charitable institution. Charita ey from their contributions. char- ble hospitals need not be self-liquidating. corporations permit it, ters do not In City v. Richmond Richmond Memo expect and the donors do not it. rial Hospital, supra, held court wording 183(3) There is ho in Section extent amount of free service ren requiring free care or free service. The controlling dered is as long charities,” phrase “exclusively as de- hospital willing render free service. scribes the to exemp- institutions entitled The actual extent of free service designate It tion. does not whether the Virginia Supreme critical. The stat Court service rendered them shall free to language ed in directly relevant here: recipients. If the framers legal interpretation phrase Constitution had so intended it would profit, “not for but exclusively as chari- been easy speci- and natural have ties”, is not controlled free service to rendering fied the free service as the indigent poor. Nonprofit hospitals exemption. for the basis sick, which are devoted care of (1902) The framers Constitution maintaining health, aid presumably knew that such charitable and contribute to the advancement of YMCA’s, organizations asylums, science, medical should re- customarily charge for servic- garded as charities. es. Thus while some or all of the chari- 116 S.E.2d 84. Accord Gundry R.B. specified 183(e) may ties in Section ren- Ass’n, supra. Smith Memorial service, der more or free less lan- image One court has “The noted: guage of the Constitution contains no voluntary orga- institution as a charitable requirement. such nization, financing its care of to a charging of fees for services ren degree through philanthropy substantial dered, receipt and even the of revenues in largely Philanthropy, ... is anachronistic. expenses, does excess of not make a non though increasing, not able has been to hospital profit surplus noncharitable if the match demands health the redoubled for for purposes is used the charitable of the Kentucky Rights care.” Eastern Welfare Simon, organization. Scripps E.g., 506 at 1288 Organization Memorial v. F.2d Thomas, Hospital Employment (quoting v. n. 20 William Com Professor California

283 assets, replacing capital cost as well Hearings on Conditions Problems of Homes, Nursing Subcommit- Nation’s operations. as to meet the costs of current Care, Longterm Spec. Committee on on tee Hospital Allegheny West v. Board of Sess., Senate, Cong. 1st Aging, U.S. 89th Assessment, 236, Property 500 Pa. 455 15, 55). (Feb. 1965), p. 2 California Pt. (1982), Pennsylvania A.2d 1170 Su- per- declared that the Supreme Court has preme hospital held that a main- Court free rendered imma- centage of services is by public part private tained Memorial, 24 Scripps Cal.2d at terial. taxes, exempt was from real estate even 678, P.2d at 114. And in a statement 151 though hospital passed approximate- on directly point, the law that is Vick v. ly percent acquisi- 70 the cost of capital Foundation, Medical Memorial Cleveland paying patients.. tions to 30, (1965), 2 de- 2 Ohio St.2d 206 N.E.2d clared: It is that the in this case true profit a not for corporation Where receive from third- substantial revenues operating hospital primary pur- a for the party payors patients, but there is not for pose providing services those record, a shred much of evidence this race, need, creed, color regard without Commission, finding by less a the Tax ability hospi- pay, the facts any one the revenues cent of is used charges pay who are able to tal purpose furthering charita- other than surplus its and that a has services purposes providing hospital ble services (no part created in fund been contrary, infirm. to the sick and On the to a private which has diverted been findings Tax affirmative- Commission’s change essentially chari- profit) do its profited ly person that no has establish nature. v. table Goldman Friars Club produced Utah from the revenues at either 185, 518; (1952), 107 158 Ohio St. N.E.2d Valley Hospitals American Fork Hospital v. Ass’n Taylor Protestant legal patients. than Under time-honored 1089, N.E. 85 Ohio St. hospitals qualify as charita- principles, both N.S., L.R.A., paragraph The fifth 427. ble institutions. O’Brien, Treas., syllabus v. (1917) 96 Physicians’ Hospital Ass’n 1917F, Ohio St. 116 N.E. L.R.A. AND UTAH IV. VALLEY HOSPITAL’S applicable in this states the law GIFTS FORK HOSPITAL’S AMERICAN case, as follows: THE COMMUNITY TO hospital may “A re- charitable states Utah law4 be pay patients who are ceive able follows: accommodations granted entity may An receive, money received property under from such source becomes fund, if it meets

trust must be devoted to Constitution “charity” cannot di- same trust or if its definition of Admr., private profit. (Taylor, pur- verted exclusively for “charitable” is used Assn., v. The Protestant poses. Essential to definition 1089], approved Ohio St. N.E. [96 community. to the element of followed.)” or dedica- “Charity is the contribution N.E.2d at 4. something of value ... tion of prop- By exempting good_ common permissible non- is also It purposes, erty for charitable rates cover hospitals to fix their profit gifts respect. requires that major there It justification, the also in one Without Court stated quan- specific be shown and donations imports into a test formulated Utah law patients. The charged rates Supreme tifiable effect on law Minnesota Court under Minnesota explain why that re- it adds Hennepin does Star Institute in North County, Research reason quirement. constitutional There N.W.2d 754 306 Minn. requirement. for that standards enunciated This Court modifies the sought constitutional convention en- $3,174,024. sation amount courage group corresponding individual sacrifice for The figures for American community. $39,906 the welfare of the es- Fork An in indigent care $421,306 charity sential element of is an Medicare, act subsidization of Medicaid, giving.” County compensation Lake v. Salt Tax Com- worker’s bene- fits. mission ex rel. Greater Salt Lake Facilities, Utah, Recreational 596 P.2d However, charity the value ex- 641, (1979) added). (emphasis A indigents tended to greater is in fact than the community can be identified either the amounts stated. cost The chari- aby substantial ex- imbalance ty extended to who are first identi- change charity between the and the re- charity patients fied admission after cipient of lessening its services or in the rather than charged at admission is to the government aof through burden account, along “bad debts” with traditional charity’s operation. Laborers Local No. debts, uncollectible accounts or bad instead

295, (Oaks, J., P.2d concur- being charged charity. reason ring). accounting procedure for this is that some not, (as patients do or cannot in the case of The Court contends that neither of the emergency admissions), report their indi- hospitals here at issue has demonstrated gency status when are first admitted “any substantial imbalance between the hospital. to the After services have been provides value services it rendered, hospitals stop ef- collection payments it receives” because “the vast forts once it is patient determined that a majority of the provided services ... qualifies cases, charity. In such paid by government programs, private hospital accounting system pa- shows the companies, insurance or the individuals re- tient as a noncharity account. ac- This ceiving care.” The majority cites au- counting procedure unique is not IHC thority in support of the assertion See, hospitals. e.g., Jackson v. nonprofit hospital loses its sta- Mo., Commission, Tax State 521 S.W.2d patient tus if its receipts cover current (1975); Allegheny Hospital West operating law, above, costs. The as stated Assessment, Property Board 63 Pa. importantly, is otherwise. More there is in Commw. 439 A.2d n. 4 very fact a substantial imbalance between (1981),reversed, 500 Pa. 455 A.2d 1170 hospital cost given total case, hospital the revenues of the in this apparent so from the record as to sum, patient In charity cost direct be undeniable. given away Utah Valley Hospital

period question $3,374,- is in excess of A. Direct $4,942,779 (which Patient Subsidies but less than in- debts). cludes bad The direct cost of the basic disputed. facts are not Both charity given away by American Hos- Fork wholly patient render free servic- pital $461,212, is in excess of but than less addition, es in substantial amounts. $639,024 (which debts). includes bad hospital subsidize the cost of services poor, elderly, argues for-profit hospi- and workers whose is, paid bills are also work- tals have bad debts. That course, compensation. years true, During er’s it completely 1978- evades the Valley Hospital wholly for-profit Utah central point.. hospitals, Unlike rendered indigents free services to in the Valley amount Fork American have $200,000, each years policy against turning away indigent pa- and in of those Therefore, amount substantially portion increased over the tients. hos- preceding year. During period, pitals’ the same bad debts which is attributable indigency subsidized services rendered is bona fide since Medicare, Medicaid, compen- charges initially worker’s been made every patient from the fact patient’s indi- benefits charity account had nonprofit corporation is a that IHC whose at admission. discovered gency been hospitals profit make no on the value of the just ordinary busi- charges are not Those hospital assets dedicated to care. The ma- experienced by all commer- debts ness bad jority’s portray hospitals effort to IHC as if majority would have enterprises, as the cial operated for-profit as entities it. has no substance the record whatsoever. opinion importantly, More for-profit hospital, A unlike a amount of ignores the total dollar hospital, necessarily price must its services hospital by dismissing the provided by each profit if to make a on its investment it is to Medicare, Medic- subsidization of hospitals’ stay surplus that business. Utah aid, patients compensation and worker’s budget Valley and American Fork for is hospitals for-profit with the assertion by any equivalent profit, means the not true, if it does the same. Even that be do majority wrongly suggests.6 as the of a dimmish the value of the benefits short, patients In all at American Fork (in to them tertiary hospital available Valley Hospitals, whether indi- Utah Hospital) which Valley case of Utah subsidized, gent, partially or those who for-profit hospital. at not have charged, by amount are the full benefited gift capital of the assets and the initial Capital B. Subsidies Gifts subsequent capital. In ad- all donations glaring lapse The most dition, they directly by nonprof- benefit view, my is its flat-out refusal opinion, hospitals, means it structure of the which would be no Utah Val- recognize that there hospital charged rates include not been ley Hospital all—if had —at nothing profit capital or a return of lock, stock, by the given and barrel to IHC Moreover, the di- invested investors. Latter-Day of Jesus Christ Church patient care referred rect contributions Saints, hospital. initially built the by the amortized to above are understated ini- Hospital apparently was American Fork capital value of the assets donated At by taxpayers’ money. tially erected charged profit amount of that would be operation request, took over the City’s IHC for-profit had those been of American of the lessee hospitals. govern- City relieve the of a City Fork $4,000,- majority’s dismissal It follows that all mental burden. Valley 000 donated Utah indigent, part- hospitals, whether at both facil- physical of additional the construction fully paying patients, are direct paying, or scope of the in 1978 demonstrates the ities large monetary invest- beneficiaries majori- the facts. The disregard of Court’s land, buildings, equip- and medical ments naught with the simply sets that ty Valley Hospital, In the case of Utah ment. “was no demonstration comment that there plant equipment the total value of the on the impact of that donation cur- $24,769,220. In the case of approximates maintenance, opera- support, rent ap- Hospital, the amount American Fork year in the tax tion of $1,963,515.5 proximates added.) Apparently (Emphasis question.” $4,000,000 majority holds that “gift to the communi- In addition facilities, ignored it was should because each ty” physical the actual Hospitals are Valley Fork computed and American figures from the assess- 5. These profit. for-profit hospital’s appearing equivalent tax notices of a ments significant majori- probably support that Utah Again, low. It is record does not $21,000,000 Valley to its build- community added a addition hos- ty’s over claim. IHC has taken government ing Utah, funds were used Delta, in 1978. No because pitals as one at such so, for that addition. to do municipal asked IHC authorities growth. one means of majority argues "rapid growth" of 6. The earnings indicates that IHC expended, shown to have been at least in non-profit institutions. part, expenses. fact, on current It is clear that tertiary there is hospi- care go tal, operating that sum did not into current for-profit, whether or in the expenses, physical rather immense, but into assets.7 sparsely populated area served events, In all the amount was substantial by Valley Hospital, the Utah which extends by any twenty percent measure: some County Utah to the Nevada-Arizona project. the whole Indeed, border. strongly the facts suggest that a for-profit tertiary hospital care could I epistomology requires know of no that survive the geographical market perfectly that a obvious fact must be mea- by area Valley. served Utah sured before its existence can be admitted. flyer ignores A plain who a mountain in summary, In Valley Hospital made view it has because not been measured gifts substantial patients to all who use its A courts disaster. court law ig- that even greater gifts facilities and needy obvious, nores hardly relevant facts can indigent patients and period for the 1978- avoid substantial error. 80 to following extent: Furthermore, the majority inaccurately (1) Needy indigent patients received charges asserts Utah Valley that rates $3,374,224 patient excess of direct for comparable to other similar entities. The care; the contrary. evidence is to Utah Valley (2) patients All had to a tertiary access Hospital, expensive, with its 385 beds and hospital $24,769,- care valued in excess of sophisticated equipment, acute care persons dedicated to all serving re- charges comparable to rates the rates gardless race, ability pay, religion, charged by Payson Hospital, small for- or origin hospital national and a that profit hospital that inexpensive renders gift would not exist but for the of that types comparison of services. That indi- facility community the Church Valley’s cates that Utah rates are low. Saints; Latter-Day Jesus Christ of Certainly 80-bed, of operating the cost (3) patients All received the value of hav- primary Payson hospital ought care to be ing hospital performed services free of lower Valley’s than Utah costs. Further- any charge profit of capital; or cost more, majority flatly ignores the uncon- testimony tradicted of the chairman of IHC (4) $4,000,000 given by Some was charge that “we significantly less for the capital community improvements. charge same admission” lower “[w]e American Fork conferred the fol- prices to our for the same level of lowing gifts period: financial for the same complexity for-profit hospi- than would a (1) $461,212 In pa- tal.” excess for direct care; tient vein, In a majority similar asserts (2) primary Access to a local care com- gifts that there is no evidence that munity hospital to serving dedicated all hospital patient donations to the resulted persons race, regardless ability pay, charges rates,” “prevailing below market religion, origin hospi- national is, by for-profit rates established hos- —and tal that would not exist for the but tax- pitals. The above facts show otherwise. payers City, having of American Fork addition, In “prevailing there are no mar- plant equipment value in in excess of tertiary hospitals, ket rates” care if $1,963,515; and majority term prevailing means (3) competitive for-profit hospitals. rates of having The value of services for-profit performed charge profit There is no care tertiary any free of Utah; tertiary capital. entire state of all cost of gift 7. Even if the whether the amount were translated into its standards that determine charges patient effect on the rates, qualify gift. overhead was sufficient as a majority gives no indication of Moreover, short, expenses. at both dize current the ma- all jority governmental from tens of substantial benefits concludes because receive programs, private companies, of dollars that have been invested millions insurance the health of citizens Utah promote and individuals vast in the entire central south- provided, such services “collection of Common sense parts ern state. giving, remuneration does not constitute recog- realities be above reciprocal dictates is a exchange mere of servic- nized, recognize yet refuses money.” wrong es for That conclusion is whatsoever in any value ignores hospi- because it that the fact having or of those capital assets the value costs, charges tals’ do not cover the full any charge of a on free for return assets direct, operating a both overhead of interest. hospital. private In the of the econ- sector omy, rarely given are at cost or services In Lake v. Tax Commis- Salt cost, If less than let alone for free. Lake ex rel. Greater Salt Recreation- sion occur, usually rare does occasions that it is Facilities, Utah, P.2d al only promotion as a stimulate fur- sales “charity we declared that is the contrast, profits. in exchange ther In the something or dedication of of contribution reciprocal this case is not because rates good_” my the In value ... common charged by hospitals these do not cover all view, the above and the Commission’s facts costs. findings speak loudly eloquently so the as to determine outcome.8 themselves made; hospital charges of Of course are ignores or majority wholly The dismisses pay, course can do whether those who on the assertion these facts focuses companies, through it be their insurance expenses for both operating that “current through programs, person- government or entirely by hospitals are covered almost ally; expenses generally cov- course patient charges” (emphasis from revenue know, by every far ered As as I revenues. added) hospitals the and that “neither of single has these court that considered im- any substantial this case demonstrated factors that do not make a has held of the services it balance between the value tax hospital noncharitable for provides apart it receives payments VII, cited in in- purposes. See cases Part donations, any gifts, or endowments.” from suggestion that a non- majority’s The fra. in its profit hospital must have a deficit hospitals Presumably, if the ran def- charitable qualify current accounts icits, i.e., patient expenses if the direct prescrip- is anachronistic and a status both income, patient would a hos- care exceeded care, if not quality hospital tion lesser view a pital qualify majority’s the quite explicit. bankruptcy. majority The course, the defi- charitable institution. Of case made defendants in this “None of the up by made dona- cits would to be they would that any effort to demonstrate shortly lapse tions, would dis- or have to any operating suffer losses cited bankruptcy. the cases above into As ineligible if any continue services hardly can be recognize, modern from taxes.”9 must basis donations subsi- run on the and future question any cation a likelihood current this case that 8. There is no generated jeopardized.” ma- by be The funds are used levels care would fantasy. flight than that no The jority for other charitable with that into errs being sponsor tertiary hospital benefits as a result individual of IHC testified that chairman incorporation hospitals. of a jeopardized the loss care be would Furthermore, exemption. addition, majority states: "Justice Stew- In Valley either Utah record not indicate that does county taxes levied art’s assertion Hospital has con- Fork or American passed on to in the would have to financially growth IHC tributed higher charges without founda- form Indeed, growth system. least of IHC's logical more as- the evidence. The far tion in operation taking over from its has occurred system IHC sumption growth is that the community as in municipal hospitals, such slowed, possibly be but there no indi- V. TAX EXEMPT OF hospital. STATUS NON- lated in one area of An indi-

PROFIT HOSPITALS UNDER THE gent, expectant mother must be treated

MAJORITY OPINION mothers, like expectant all other and an effect, indigent patient heart precludes must be treated in opinion, nonprofit primary all IHC care the same equip- facilities and with the same qualifying exemption. ment patients. particu- as other heart tertiary hospitals may, however, IHC patient’s lar nature of a problems medical qualify charity if tertiary as a care services has little do with the financial resources given away shown to relieve a patient. Nor is there a valid basis to government burden. footnote say may CAT exempt scanner opinion sets forth the test that a because manner which its use is hospital must meet: priced. Obviously, price use unique Because of the character [terti- could be set either at cost or cost. If below care, ary] may possible medical well be latter, the hospital recoup could identify substantial imbalance by charging higher prices loss for obstet- exchange Valley Hospital between care, rical for example. point is that it care, recipients tertiary the of its and or hospital is the as a unit that either a lessening government a a burden not; charity or it cannot validly be divided through offering the of such care. In into majority’s areas services. The light of our Loyal statement in Order of slight opening tertiary of the door for care Moose, “any at sepa- P.2d hospitals qualify part opera- a of their part occupied building rate and impractical tions as charitable is so exclusively for purposes used really opening unrealistic as to no be at all qualifies exemption,” it may ... for in my view. possible provision the of tertiary The record also demonstrates that qualify care services could a charity if primary hospital tertiary care care requisite gift community were hospital sig- involved in this case a relieve case, be demonstrated. this burden, governmental nificant one effort was made demonstrate for the two determining alternative tests for certain types record whether of care nonprofit hospital qualifies whether a to be actually being “given away” by ei- treated as If the they ther institution institution. or whether could not hospitals two provided in fact be this case do not relieve offsetting without the exemption, burdens, of a governmental majority factor at least to the as holds, extent of the value the facilities need- I more do know what needs to be provide ed to such care. do not We rule prove point. wide-open shown to In the availability exemptions on the of tax un- West, spaces where small communi- der such circumstances in the context of widely separated, profit ties are motive undeveloped record. provide has not been sufficient the need- impetus building ed community majority’s suggestion The that certain instances). hospitals (except in rare Nor “separate part[s] building occupied has it resulted the construction terti- tertiary hospital and used” care can ary qualify impracticable. populous for an care more Charity patients realistically parts cannot be iso- of the state. Delta, If, however, pa- Fork it American Utah. The short of it were demonstrated hospitals paid hospital patients tients of these fees is that at American Fork and Utah operate to build or Hospitals

Valley pay will indeed states, might question I effect of that on the taxes, nonprofit as will the in all other hospitals’ I charitable status. doubt that Utah, patient revenues are because taxpayers required to should be subsi- source which such funds could be building hospitals in dize IHC’s Idaho obtained. Wyoming. argument that no majority’s provision by suggesting nonprofit hos- government by providing burden is relieved serve pitals, which the sick and infirm for a to those who can hospital purpose, service purely altruistic are not essential- for-profit argument basis. misses on a legal ly different for from for- First, for two the alter- the mark reasons. hospitals. profit for-profit nonprofit hos- natives are not Furthermore, there are indeed numerous pitals. hos- nonprofit The alternatives are charities that have commercial com- some all, pital or no at least care care YWCA, Cross, petition, such as the the Red geographical markets. within the relevant many Certainly majority’s others. Second, the charitable status of a wholly unsupported entirely novel as- provides turn on whether it does not that tax exemptions nonprofit sertion policy can pay. who basic hospitals raise a constitutional serious irrespective is not to tax the sick and infirm is, submit, I question utterly meritless. ability pay. county provides many A poor to rich and alike without services charging rich for services. Parks those VI. FOR- DIFFERENCES BETWEEN examples. Pro- playgrounds AND PROFIT NONPROFIT viding may medical services not be manda- HOSPITALS do, cities, tory counties or but if per- A proposition fundamental certainly promote most there is opinion vades is that morals, health, safety, welfare for-profit no essential difference between way. Surely cities and most fundamental nonprofit hospital corporations. The would, matter, practical counties significant declares dif- that “the if the compelled provide hospital services for-profit ference between nonprofit hospitals state did not effect, corporations is, the meth- a majority exist. Nor does offer valid upon od of distribution of dissolution assets tertiary distinguishing reason between corporation, a rare which is itself primary care re- care and asserts, The majority occurrence.” further relieving governmental a spect to burden. large record “a support, without majority’s central concern seems profits for-profit portion of of most competitive equality be to establish be- improvement capital entities is used for-profit nonprofit primary tween new, equipment, the defendant updated hospitals. competitive The essence en- similarly spend their reve- here

terprise profit. It is ironic indeed that operational expenses.” nues in excess of XIII, construes Article Section Two fundamental differences between protect for-profit from the entities nonprofit for-profit corporations nonprofit competition of entities. The con- First, it is axio- ignored by majority. de- provision simply was not stitutional for-profit hospital a must con- matic that signed competitive equality. deal with profit if it is to its business make a duct corporations, such as Nonprofit Second, for-profit in business. remain Valley Hospital American Fork as to what hospital’s investment decisions purpose created the sole Hospital, are enter and what markets or communities to benefit, providing conferring equipment in are made kinds of to invest possible at the rate. hospital care lowest than a basically motive indeed, from a different If, nonprofit hospital has a com- hospital’s. The decisions hospi- petitive advantage for-profit over a be hospital corporation must for-profit tal, application no concern in that is of to the XIII, upon careful calculations Section 2. The based of Article expected on that may of that of return premises the basic rate misconstrues hospitals to be nonchari- nonprofit hospital organized held those courts have 10. If a has been Georgia Hospital, E.g., Osteopathic Inc. gain sponsors hospital, private table. (1962). reasons, Alford, may variety 217 Ga. 124 S.E.2d for a occur capital. invested If the rate of return is care which you are not able to not— sufficient, the investment is not made. really enough receive to cover them surplus Whether the trauma, reinvested in burns, would be open-heart, that paid out to investors in dividends in high kind of level care. in part, whole or per- investor receives Moreover, there is credible evidence that monetary sonal benefit either in the in- nonprofit hospitals general are more ef- creased value of his stock inor dividends. charge ficient and less than for-profit hos- for-profit The record indicates that hospi- pitals. study One for-profit indicates that tals in Utah have invested to a limited hospitals charge percent per more ad- high-volume, extent low-cost services mission with health insurance pediatric, psychiatric, such as and obstet- and that general administrative and service services, rical-gynecological high- but not in percent costs were 13 higher nonprof- than er-cost, lower-volume kinds of hospitals. services. It Starr, Paul The Social Trans- may competition well be that from a for- Medicine, American formations profit hospital is beneficial to the “National that, data also indicate industry generally, but there is no every indica- bed-size category, for-profit hos- tion in this for-profit hospitals record that pitals higher costs than the overall have acted in any fashion other than a coverage for community hospitals.” Id. for-profit corporation normally act. Mr. Jones also testified that IHC’s Board of Trustees considers itself a trustee of the Nonprofit hospitals must, course, health care public. facilities for the “[W]e concerned with generating sufficient reve- see ourselves as by owned the community themselves, nue to maintain corporation since the owns itself and in earning concerned with a return on gave effect the church their investment for the benefit of stock- communities, and we’re entrusted with the holders. Their are altruistic. running hospitals. We see them as Any surplus must be used in a manner that in effect owned the communities. We aggrandizes one, such as for the lower- raising have fund drives and strive to have ing rates, acquisition equip- of new the communities feel that [they in- are] ment, improvement or the of facilities. volved.” This explained fundamental difference was Jones, Mr. William short, N. a trustee and majority’s argument chairman of the Board of Trustees of Inter- only significant difference between for- mountain Health Care. He profit testified: nonprofit hospitals and is the distri- bution of assets on nonprofit simply ig-

A dissolution hospital system hospital or reality. nores majority’s wholly has a un- approach hospital different to supported assertion care, will, or that “the historical you health if dis- than someone tinction for-profit between might business, nonprofit who be involved in it as a hospitals has any eroded” is without a business factu- where desire have a to al foundation in this record. product, fine The Court talking do. I’m states: profit-oriented now about' sys- business

tems or hospitals, [they] must do well as majority Because the vast of their servic- a for, business. We must as sys- paid a es are nonprofit hospitals in tem do well in our mission which is to this case capital, accumulate as do their provide health consequently] care. So profit-seeking counterparts. The record care, try provide when we to health we capital indicates that this accumulated is do not try provide just to the health care used for the construction of additional easy that’s and remunerative hospitals such as throughout other facilities pediatrics obstetrics and which are system provision rela- the IHC tively complex, not too you expanded receive a services. The record before us fairly high level of undeveloped income from them. is point, on this but there is hand, On the other examples nothing of health capi- therein to indicate that the any defend- ment not found in in tal accumulated either area, in for-profit is even earmarked market whether nonprof- ant in way technology in their facilities or even it. That includes a use 22-bed neo- unit, County. Utah a linear to natal accelerator treat can- cer, and a laboratory. heart catheterization contrary is Again, position Court’s also has number well-recognized It Valley Hospital budgets the facts. Utah staff specialists recently on its and has plus an projected for the cost of services open surgery applied do heart because percent additional five to seven reserve acquire. of the facilities it has been able to contingencies replacement and for of build- acquired Whether facilities were those expan- ing equipment and for future surplus revenues or is from donations Nothing budgeted expan- is sion. IHC consequence my judgment. no percent if the five to seven sion. Even equivalent reserve were considered VII. OTHER COURTS HAVE RECOG- not, begin it is would not profit, which NIZED THE REALITIES OF compare amount MODERN HOSPITAL CONDITIONS required by most commercial institutions make a reasonable return on investment. declares that the “economic Valley Hospital, in which The administrator of environment modern Davis, budget analysis is that the at that function critical to our in this Mr. testified analysis case because it is an which is present any of the generally not cases plus con- those actual costs consists of upon by dissenting opinions.” relied includes, reserve, and that tingency or single tenders one item of course, for either future monies funds proof support sweeping expansion, replacement equipment, re- plainly statement. For ma- inaccurate so placement buildings on. You that all other courts have jority assert see, many ways, are in we are at we perceive patently changes failed to obvious mercy of doctors and and econo- operations in the over business example, you budget my. how do For just wrong. past years plainly going that are number perspicacity The Court assumes lack of year your hospital come of sister courts that unwar- many we advance? We find times that ranted. regionally, some- miss that sometimes nationally.

times Wherein we would example, Community For Harvard patients or budget given for a number of Plan, Health Inc. Board Assessors falls out for three income and bottom Mass. 427 N.E.2d Cambridge, 384 case, is no or four months. In that there the Massachusetts Su- originality. There We reserve. stated: preme Judicial Court fight make meet and scramble to ends However, recognize major too that we things and those are the year, for the care, espe- changes in area of health it to.... I think that we are vulnerable operation and financ- cially in modes viable, in say in remain is safe to order to in changes have well ing, necessitated I keep order from—what’s the word The term “chari- predicates. definitional ourselves, we self-liquidating facilities, want— table,” applied health range something must times, earlier has been since broadened percent in order probability five or seven mainly limited to almshous- when was Now, stay shoot alive. that’s what we result, pro- As poor. es always get. for. we That’s what health, through the motion of whether that, see, you self- we would be Without through medi- health care or provision of liquidating. research, gen- today education and cal purpose. A. a charitable erally seen as Valley recently has ac- Hospital 368, 372; Scott, Bogert, G.T. supra at equip- high technology quired expensive, §§ 292 (rev. poor.” Trustees 2d

Trusts & 374 ed. recognized prívate The court § 1977). purpose separate philanthropy part displaced Such had been in Medicare, poverty, Medicaid, distinct from relief of nonemergen- and local cy organization engage poor. care for health need The court concluded: appears “almsgiving” qualify upon order to the rationale ex- “[I]t emption. See limited definition of Hosp., Barrett v. Brooks ‘charitable’ was predicated Inc., 754, largely 759, disappeared. has 338 Mass. 157 N.E.2d To 638 Scott, continue to base the (1959); ‘charitable’ status of a supra A. at 2895-2896. hospital strictly provides on the relief it Ky. See Eastern Rights also Welfare poor to account major fails for these Simon, 1278, Organization v. 506 F.2d changes in the area of health care.” Id. at (D.C.Cir.1974),vacated on 1287-1289 oth- 1288-89. 26, 46, grounds, er 426 U.S. 96 S.Ct. 1928, 1917, (1976); 48 L.Ed.2d 450 Sound opinions Numerous have discussed the Commissioner, v. 71 Health Ass’n T.C. manner in nonprofit which modern hospi 158, (1978). 177-179 operated, [Footnote omitted.] tals are including particular prac tices which the majority asserts have In Evangelical Lutheran Good Samari changed hospitals garden-variety com Society Gage 831, tan v. 181 County, Neb. mercial example, ventures. For it has long (1967) 151 446 (quoting N.W.2d recognized been Young Men’s Christian v. Ass’n Lancas are financially who able to pay 105, ter 106 Neb. County, 182 N.W. 593 expected pay. Eg., Harvard Com (1921)), Supreme the Nebraska Court stat Plan, munity Health Inc. v. Board of ed: Assessors, 536, 1159, 384 Mass. 427 N.E.2d Formerly all furnishing institutions [care (1981); 1163 Mayo n.10 Foundation v. convalescing patients], to sick or includ- Commissioner, 25, 306 Minn. 236 N.W.2d ing homes, nursing both 767, (1975); 773 Jackson v. State providing many care for Commission, Mo., Tax 521 S.W.2d 378 compensation without and extended char- (1975); Community Hospital Memorial v. ity alms-giving sense of or free Mo., 290, 422 Moberly, (1967); 295 S.W.2d poor. services to the the advent With v. Vick Cleveland Memorial Medical present day security social and welfare Foundation, 30, 2, 2 Ohio St.2d 206 N.E.2d programs, type is not of- (1965); 4 Allegheny Hospital West v. ten found because assistance available Assessment, Property Board 500 Pa. poor programs. Yet, under these 236, (1982); 455 1170 City A.2d Rich “ * * * the courts have defined ‘charity’ mond Hospital, v. Richmond Memorial something to be more than mere alms- 86, 79, 202 Va. 116 S.E.2d 83 giving poverty or the relief of and dis- importance third-party payors tress, given significance and have it a government programs welfare assistance enough broad practical include enter- in financing patient most care has been prises good humanity operated recognized. Intercity Hospital Squire, v. at a moderate cost to who those receive (W.D.Wash.1944); 56 F.Supp. People 472 v. the benefits.” Hospital Corp., Southern 404 Illinois Ill. Kentucky Rights Eastern Or- 20, (1949); 88 23 N.E.2d Coun Jackson Welfare Simon, ganization v. 506 F.2d Commission, Mo., ty v. State Tax (D.C.Cir.1974), grounds, vacated on other (1975); Community S.W.2d Me Kentucky Simon v. Eastern Mo., morial Moberly, Welfare Rights Organization, 426 (1967); U.S. S.Ct. Evangelical S.W.2d Lu 1917, 48 L.Ed.2d 450 discussed the Society Gage theran v. Good Samaritan development hospitals 831, 151 446, from “almshouses County, 181 448 Neb. N.W.2d supported by philanthropy serving (1967); Allegheny Hospital al- v. West Board 236, exclusively poor” Assessment, most the sick to “primary Property Pa. 455 500 (1982). 1170, payment community facility health for both rich and A.2d 1172

293 hospital. personnel immunity nonprofit for a If a salaries reasonable operated provide surplus monetary of a realization maintaining surplus in sponsors, benefits to its it is not charitable. reinvestment equipment or other plant and replacing Georgia Osteopathic Hospital, Inc. v. See expressly been 663, (1962); charitable activities have 217 124 402 Alford, Ga. S.E.2d Hospital, Memorial approved. Scripps Hospital, v. Aransas Aransas Inc. Pass Employment Commis Inc. v. District, Independent School Tex.Civ. California 109, 669, P.2d 115 sion, 24 151 Cal.2d (1975). App., 521 S.W.2d 685 Utah law is (1944); Community Health Harvard to the same effect. v. Salt Lake Assessors, 384 Plan, v. Board Inc. Commission, Utah, P.2d 641 Tax 596 (1981); 536, Mayo 427 N.E.2d 1159 Mass. (1979)(“where profit motive underlies Commissioner, Minn. 306 v. Foundation activity,” there is no even 769, (1975); 25, 767, 774 Jack 236 N.W.2d though nonprofit corporation “is inter Commission, County v. State Tax son posed entrepreneur between an and his (1975); Mo., Community 378 521 S.W.2d however, customers”). case, In the instant Mo., 422 Hospital Moberly, v. Memorial sponsors hospitals question 290, (1967); Evangelical Lu S.W.2d 293 persons private, pecuniary whose Society Gage v. theran Good Samaritan interests are furthered their control of 446, 831, N.W.2d 448 County, 181 Neb. 151 hospitals. (1967); Hospital v. Board Allegheny West Assessment, 236, Pa. 455 500 Property of A.2d VIII. BURDEN OF PROOF 1170, (1982); City Richmond 1172 Hospital, 202 Va. v. Richmond Memorial major- Finally, it should be noted that the (1960). 86, 116 S.E.2d hospi- ity dispute does not the fact that the tals meet the standards established hospitals nonprofit Numerous majority dis- 59-2-30.11 Nor does the § agen- collection credit counselors debt there set pute the fact that the standards patients who are able to cies to collect from by general principles of supported out are pay. Mayo Foundation v. Commis- E.g., accepted in states. widely law sioner, Minn. 236 N.W.2d Nevertheless, provi- holds (1975); Hospital v. Board Allegheny West unconstitutional, applied, at least as Assessment, 500 Pa. 455 sion Property saying specifically why. The courts have without A.2d be- emphasized the critical difference also treats that stat- Procedurally, the Court corporate profit tween the holding that not exist in ute as if it does and sustained the structure proving have the burden nonprofit hospitals be- charitable status of exemption. In the tax their entitlement to merely an nature is cause their “business” they com- fact, prove that did provid- primary to the mission incident set out section plied with the standards population. general ing health care County, not point, At that 59-2-30. Mo., 589 Leggett, Barnes Cf. prove hospitals, had the burden (en banc). (1979) S.W.2d prin- the statute was unconstitutional. majority’s assertion that “traditional the constitution- one who attacks ciple that relationship to the little assumptions bear the burden must assume ality of a statute com- the medical-industrial economics of require as to established proof is so well majori- the 1980’s” is based on plex placing the bur- constantly citation. In develop- acknowledge the ty’s refusal view, Court, my hospitals, the on the den over case law that has occurred ment of rule. apply proper fails to years. past least the event, to sustain record is sufficient irrespec- hospitals, exemptions of both tax course, nonprofit corporate struc Of proof. of burden of tive enough provide ture is not itself opinion. note 1 of the provision set out in foot- 11. The text of that IX. majority CONCLUSION violates at least well- two recognized appellate rules of It review: sum, majority misap- In I submit that the asserts fact as matters not contained in the XIII, plies Article Section of Constitu- record, e.g., that there is no difference be- departure tion makes a radical from for-profit tween the rates of hospitals and legal principles universally sound that are nonprofit hospitals for-profit and that hos- recognized. part, In the majority comes to pitals charge treat without those patients result it does because it to refuses pay. who The majority ignores cannot un- evident, recognize patently facts that are disregards contradicted evidence find- part propositions because assumes ings by of fact made the Tax Commission unproved, fact about this case that are supported by that are competent evidence part because it believes that its own findings contrary, makes to hospitals footing should on stand the same e.g., that the rates services of the two for-profit hospitals competitive to assure question change would not if equality changes because of in the nature they required to pay property taxes hospital. and that Utah Valley refuses fundamentally disagree Because I to treat they pay. unless can In a majority, I I dissent. also concur in attempt reckless to find support for what Justice to Howe’s dissent the extent that it appears personal ideas, to be its novel but- addresses the substantive issues. by tressed by references to “literature”

writers whose credentials are not estab- lished, majority indulges in totally irrel- HOWE, (dissenting): Justice arguments, evant e.g., hospi- that the two I dissent. The majority views tals have they not demonstrated that precedent charitable are without any operating “suffer losses have to jurisprudence in the of this country. The discontinue if ineligi- services majority introduces confusion and mischief exemption property ble taxes.” an into area the law that has been well settled in years this state for at least I. strips nonprofit hospitals from all U.C.A., 1953, 59-2-31, In the legisla- § exemption they span have had over that property ture has declared that used exclu- time. The result will be that each sively purposes, which use seeking must demonstrate complies requirements with the of section ultimately to this Court the extent its (nonprofit status), 59-2-30 be shall deemed almsgiving. required We then will used for charitable within weigh almsgiving and measure that against exemption granted by XIII, article sec- sufficiency standards which 2 of tion the Constitution Utah. That declines now articulate. Courts ado exempts buildings section lots with thereon people they disservice to the by serve leav- exclusively purposes. for charitable ing the state the law in such uncertain- Neither XIII nor any article ty- the Constitution contains a definition (1) fails accord to purpose.” what constitutes a “charitable legislature rightful defining role in assessors, equali- county boards of give constitutional term and to pre- zation, and the Utah State Tax Commission sumption constitutionality to its defini- frequently requests confronted with (2) tion, recognize le- overwhelming exemptions by property owners who gal authority property hospitals, that the being claim that their used ex- case, such the two in this involved clusively purposes. This is (3) used for purposes, many attested to cases that recognize made these final come to this Court as the arbiter question. legislature en- communities serve. in an acted sections 59-2-30 and 59-2-31

295 has scope” of the reli- When the Constitution a doubtful attempt “clarify the to meaning capable obscure or is of various purpose gious and charitable placed XIII. The interpretations, 2 of article the construction found in section did Legislature very careful to state that it is of legislature was thereon thereby expand to or limit the persuasive significance. not intend exemptions or to defeat ex- scope of such Again, the same court said in In Pacific specifically enumerated which emptions not demnity Co. v. Industrial Accident Com purview of the may found within be 461, 464, 1, mission, 11 2 215 Cal. P.2d exemption. Foulger See constitutional (1932): purpose determining “For the Commission, v. Tax Equipment Co. State constitutionality, we cannot construe a sec 165, (1964), and 2d 397 P.2d 298 16 Utah if tion of the Constitution as it were a 242, 48 P. 1097 Judge Spencer, v. 15 Utah statute, adopt interpretation our own (1897)(statutes exempted down that struck legislative regard without to the construc not included in the property taxation tion. Where more than one reasonable exemption). constitutional exists, duty accept meaning it is our to that attempt clarify the legislative to This Legislature.” chosen proper. purpose” was term “charitable principle In this of ac- accordance with determined purpose cannot be Charitable legislature defining a in cording the role the sole adcademically alone. Nor is it constitution, legislative at- terms used in a in in the first prerogative of Court tempts statutorily define what consti- every charitable identify each and stance use of have tutes a charitable recognized that purpose. We Manor, Jasper Mease upheld v. been to the “common involves a contribution Fla., (1968), Inc., 208 821 So.2d Samar- subject precise defini good” that Barbara, County Inc. v. kand Santa light “subject judgment in tion but is 341, Barbara, 31 Cal.App.2d 216 Santa mores,” Lake changing community Salt (1963), Cal.Rptr. Lundberg 151 v. v. ex rel. Great Tax Commission 644, Alameda, 298 46 Cal.2d County of Facilities, Recreational er Salt Lake case, (1956). a stat- 1 In the Florida P.2d 641, (1979), Utah, and that 596 P.2d 643 provided operation of a home ute charity may assume multifarious acts of conditions, con- aged, under certain for the Institute, Inc. v. Eyring forms. Research In Lund- purpose.” stituted a “charitable Utah, Commission, P.2d 598 Tax Alameda, challenged berg County v. entirely appro It is therefore certain exempted property, under statute peo representatives of the priate that the conditions, schools of exclusively for they subject and that ple heard on this collegiate grade that were owned less than Supreme expression to it. The Court give char- religious, hospital, or operated by in Methodist Sac of California foundations, funds, corporations. itable 685, 97 Cal. Saylor, 5 Cal.3d ramento constitutionality upholding In (1971), recognized a Rptr. 488 P.2d 161 cases statutes, recognized both it was legis “strong presumption” favor presumption carry a that such enactments con interpretation of a California lature’s constitutionality, in favor of their ap provision. quoted It stitutional except by the courts not be invalidated will case, Delaney v. proval from an earlier showing unquestionable upon a clear 154 P.2d Lowery, Cal.2d unconstitutional. presump that court referred where recognized rule of heretofore constitutionality and the This Court has tion of defining limita terms legislature construction of constitutional role of the strict un- legislature and concluded in the constitution but appear on the tions Boy Gold Highland 154 P.2d 674: there. page defined P. Strickley, 28 Utah Mining Co. v. the latitude principles Those indicate to a stat- (1904), challenge was made legislative construc- given effect right of the use that authorized ute interpretation of the Constitution. tion or by mining company any recognition eminent domain to without legisla- ture, acquire right-of-way operate statutes, enacting aerial resolved tramway transport ore and other materi- those granting issues favor of the ex- private property. als The conten- emption. approach across if taken tion was made that the statute conflicted legislature spoken. had never The collec- 22, I the section article of Constitution judgment tive of the legislators 104 is sub- Utah, the which authorized condemna- verted to views majority, the which if private property only tion of it was taken are not supported the citation a sin- for use. public This Court noted that gle case. among there was an irreconcilable conflict 59-2-31, Sections 59-2-30 and being ex- the authorities as to what constituted a pressions what legislature in this public public use and that what would be a state be purposes, finds to are use in jurisdiction one necessar- presumption therefore entitled to a of con- ily jurisdiction. be one in another We stat- Hall, stitutionality. Utah, Murray City v. public ed should that what be considered 663 P.2d 1314 depended locality,

use often on the people, wants necessities of the II. conditions with which were surround- In case ever before this Court ed, nature and character of the hospital sought where a a charitable ex locality. natural resources of the We ob- emption taxation, from ad valorem Wil legislature determine, served that could liam Budge Memorial v. Mau instance, given the first whether a use 516, (1931), ghan, 79 Utah 3 258 P.2d we public was a use. We further held that held test that the which determined wheth legislature when the had made such a dec- hospital er a was charitable was whether it laration, respected and it would be followed gain, was profit, maintained or advan by the courts unless was clearly the act tage. declared, question, That we was to palpably However, unconstitutional. powers from determined as defined recognized legislative we that the declara- in its charter and the manner in which tion was not final was and that it ultimate- 523, hospital was conducted. Id. at ly for the courts to determine whether a pointed P.2d 258. We out that mere particular public use was a use. fact property hospital that the was commenting legislative In on the con- purposes to exempt was sufficient Constitution, struction of Utah since not all were charitable insti Lewis, Court in ex rel. State Breeden v. “They may tutions. be and often are main 120, 123, 72 P. said: pecuniary profit.” tained and conducted So, Legislature an enactment of the em- Id. at P.2d 258. We denied the itself, by implication, braces within a con- in that ease because by a struction co-ordinate branch of the organized corporation pecuni was as a government, provi- of the constitutional ary profit, though no dividends even relating subject legis- sions to the paid ever declared to the stockholders. court, construing lation. Therefore a We remarked we were unable to find a enactment, question where the of its single distinctive charitable feature of the constitutionality in difficulty is involved hospital. implication decision doubt, will strongly inclined to nonprofit hospitals was resolve such doubt favor of its validi- open without restriction ty, .... years, charitable. For over 50 counties majority pays only lip exempted hospitals. have accordingly service to such away attempt Today, sweeps Budge these rules and no to em- makes ploy analysis. contrary, century practice recogni them its and a To half determination, every question the burden raised tion on the of its own basis record, there is is shifted to the two made dehors profit and a treatment difference between and care to who neither should be and therefore to pay anything. many unable In cases granted exemption. paying patients vastly outnumber payment and their con- states, hospital of other decisions stitutes the main hospital’s source of the often been found be used has income, such exclusively receipt has been within meaning statutory destroy or constitutional held not to the institution’s chari- exemptions. See the annotations and cases consequent table character collected at 144 A.L.R. therein exemption.... A.L.R. 62 A.L.R. and 34 A.L.R. (Footnote omitted.) majority1 of cases hold that vast principle exemplified by That People hospital property pur is charitable ex rel. Cannon v. Southern Illinois Hos organized poses hospital if not Corp., pital supra, where the re court profit private gain and is in derived fact ferred to earlier its decision Sisters dissolution; of earnings upon its or all from Third Order St. v. Francis Board earnings hospital of are used maintain the 317, Review Peoria 231 Ill. 83 County, facility; hospital open 272 N.E. and reaffirmed a state race, color, creed; restriction to or without great ment made that disparity there predicated upon ability is not admission paid between the number of who pay. County v. Tax Jackson State immaterial, pay those who did not was Commission, Mo., (1975); 521 S.W.2d 378 Community Hospital City Memorial v. long charity dispensed so as was to all Mo., (1967); Moberly, 422 S.W.2d 290 Vick it applied who needed and those who Medical Founda v. Cleveland Memorial therefor, long private gain and so as no 30, tion, (1965); 2 206 N.E.2d 2 Ohio St.2d profit person to any came connected v. Egleston Hospital Elder Henrietta institution, long with and so as it Children, 489, 53 S.E.2d 751 205 Ga. obstacle, appear any does not that (1949); rel. v. People ex Cannon Southern character, by corporation placed was 66, Hospital Corp., Illinois 404 Ill. 88 might way in the who’ need those (1949); 20 Scripps N.E.2d Memorial Hos kind dispensed by this pital Employment v. Commis California institution, prevent calculated to such 109, sion, 24 151 P.2d 155 Cal.2d persons making application obtaining (1944); Physicians’ A.L.R. 360 O’Brien v. hospital. admission to the Association, 116 Hospital 96 Ohio St. Id., 231 Ill. 83 at 274. also N.E. See (1917). consistently N.E. The cases Allegheny Hospital v. Board West hospital disqualified hold Assessment, Property Pa. receiving exemption merely be a charitable (1982). However, hospital that A.2d 1170 pay cause who are able consistently paying patients in such admits required long do so as the funds so as numbers to exhaust its accommodations to the derived this manner are devoted prevent charity pa- the admission of charitable of the institution. See exemption may its as a tients lose subject A.L. the annotation on this at 37 Physi- v. charitable institution. O’Brien states: R.3d 1223-27. annotator there Association, Hospital supra; Com- cians’ practice It is a usual munity City v. Memorial charge pay for patients who are able to held case also Moberly, supra. latter rendered in order to main- services fatal a charitable tax it was not institution, pay

tain the off the indebted- was in some facilities, exemption the institution its buildings, expand on ness its improve services, denying competition private with business. its while not Society County Gage, 181 hospitals operated Good Samaritan 1. One court has declared that universally classed institutions are N.W.2d 446 Neb. Evangelical Lutheran institutions. charitable concerned, III. almshouses filled with poor, persons, sick receiving little or no Thus, legislature in non- exempting attention, medical receiving humane profit hospitals sections 59-2-BOand 59- custodial until light support they passed 2-31 did so in on. overwhelming precedent. The annotation at 37 A.L.R.3d con law, rejects great body claiming tains spanning cases from the century last practices long is based on present time where the issue of They commencing abandoned. assert that raised, paying patients was but in which it century running up late the 19th disqualifying was held not charity. as a 1920s, nonprofit until long ago fully Courts firmly considered and transformed from provid- institutions that rejected the notion now advanced poor-sick ed custodial care for the to insti- majority that the charitable of a character patients sought tutions where most hospital is quantity determined were able to for medical treatment. almsgiving. They single do not cite a courts, continues, American case where an was denied have been oblivious to this transformation insufficiency quantity of free care. strength of “unexamined as- will now stand alone with that anti sumptions” past have continued to quated concept as its A law. grant exemptions, realizing quantity does rest on the of by. until noticed the majority today that only free care—but on its availability. modern quite are different frequent The cases contain reference past. the almshouses of the This condem- fact that long keep nation is could its Nothing unwarranted. could be open everyone doors cursory pa further from fact. Even a unless exami- most nation of the cases tients to pay reveals that well were able Pay their care. years, 100 country ing patients help over courts in this charity have make possible for patients well been aware that most in chari- nonpaying patients. Joseph Hospital St. 's hospitals pay table for all of their County, Association v. Ashland 96 Wis. care, but held that this fact does 636, (1897); 72 N.W. 43 State ex rel. Alexi rob institution of its charitable charac- Hospital Powers, an Brothers supra. v. (109 example, For in years ago) ter. 1876 for-profit hospi asserts that Supreme Judicial Court of Massachu- tals also regard admit without setts in McDonald v. Massachusetts Gen- ability pay, but the record before 432, Hospital, eral 120 Mass. held that the entirely us is any devoid of such evidence. fact that pay most are in able to County Not even Utah makes such a claim. full for the care receive does not ren- oblivious, Courts have not been the hospital charity. der less a Sim- insurance, majority charges, govern- ilarly, 1881, in in State ex rel. Alexian programs Medicare, ment such as Powers, Mo.App. Brothers v. 10 third-party payors now for the of care 263, 476, 74 affirmed in Mo. and in 1907 many persons formerly who were called Sisters the Third Order St. Francis of of poor. Again, this criticism is ill-founded. v. Board Review 231 County, Peoria following cases, In the the courts made Ill. specifically 83 N.E. the courts specific changes mention of the that have many patients paid noted most occurred in health I care field. While case, their care. In the latter five advocating go am not that we as far as percent charity patients. early were These them, some of dealing since we in the cases refute the theme nonprofit instant case two traditional opinion people that in when everyone that admit without re- Territory approved constitution gard to ability pay, cases containing exemp- for their these illustrate new state use, perceive property put charity tion how courts to a charitable health mind, they had in simply so far as care as much pro- broader than

299 needy concept with the viding of free services inconsistent usual charity. “charity” destitute. But to the law has a much meaning broader than Plan, Community Health In Harvard (15 speech Am. accorded in common Cambridge, Assessors Inc. v. Board 8). Jur.2d, p. scope charity (1981), N.E.2d Mass. 1159 the standards under it is admin- provided pre- health clinic that past, istered are not frozen care paid comprehensive health services keep pace with the times the new exemp- sought a subscribers its (Zoll- society. conditions and wants of building. The court remarked: tion on man, Charities, pp. American Law of However, recognize major we too that 123). care, espe- health changes the area of Id., 149, 151 Mont. at P.2d at 918 cially operation and financ- modes of added). commenting changes (emphasis ing, have as well necessitated changes predicates. years “chari- that have occurred recent definitional term facilities, field, table,” applied Supreme health in the health care Court times, Evangelical since earlier of Nebraska in Lutheran has been broadened mainly Society it was limited to almshous- when Good Samaritan result, poor. pro- 831, 151 es for the As Gage, Neb. N.W.2d health, through whether motion said: through care or medi- provision health Formerly furnishing all institutions ser- research, today gen- education and cal nature, hospi- including vices of this both erally purpose. seen A. as a homes, providing nursing tals and 368, 372]; Bogert, G.T. Scott [Trusts §§ compen- many patients care for without (rev. & 2d ed. Trusts Trustees § in the sense sation extended 1977). purpose separate Such a almsgiving or free services to the poverty, from relief of and no distinct day poor. present With advent of in organization engage need health security programs, and welfare social ex- “almsgiving” qualify in order to for type charity of is not found this often emption. is available to the because assistance * * “ * 542-43,

Id., Yet, Mass. N.E.2d at programs. 384 at 427 poor under these omitted). (citations ‘charity’ 1163 to be the courts have defined something alms-giving more than mere vein, Supreme of In a similar Court distress, poverty relief or the of Montana Bozeman Deaconess Founda enough significance given have it a broad Ford, Mont. P.2d tion v. 151 439 practical enterprises for the include to (1968), addressing a A.L.R.3rd 558 37 operated moderate good humanity of at a exemption on a for the claim for home receive the benefits.” cost to those who aged, noted that the “modern view” charity is that is not confined to the relief it 449 Id., 151 Neb. at N.W.2d 181 destitute, includes and at but care (citations omitted). The Colum District of aged apart finan people for from similarly tention expressed Circuit Court bia assistance, supplying and that Orga cial Rights Kentucky Eastern Welfare as a charita (D.C.Cir. this care and attention is much Simon, F.2d 506 1278 v. nization purpose as relief of and benevolent 1974), ble 426 U.S. grounds, other vacated on Further, (1976), financial the court wants. L.Ed.2d 450 S.Ct. said, in the as used the term “charitable” that Congress by not intended the stan- I.R.S. Code was may appellants

It be feel that providing free care, always limited remain excellence of accommo- dard indigents, was for but dations, of life or below-cost and the mode accorded changing “recognize enough facility, reflected the size flexible all economic, precepts fees, technological social and occupancy and maintenance Id. society.” contemporary available and values physical plant and facilities Supreme at 1288. Missouri Court in open with an policy admission County Jackson v. Tax State Commis they comport institutions in that sion, supra, noted modern-day that social with one of of “charity” by the definitions legislation providing has resulted in more making “gift” “by a to the sick relieving paying hospi citizens with disease, assistance for their bodies from suffering, con tal care. court there found it unneces straint.” sary percentages pa consider previous This Court’s cases in way

tients who or only part none of mandate the denial of long their care. So as might granted We, in other states. like open alike, poor to the rich and said the courts, recognized have that since court, they qualify for a charitable tax purpose” static, definite, “charitable has no exemption. meaning, and fixed or exclusive the identi- trusts, In the recognized law of it is well fication may institutions a may charitable trust change created from time to time. Justice Wilkins promotion health, although recognized bene- of this Court this when he poor. fits not limited to the Restate- wrote the Court in Salt Lake (Second) 372; ment of Trusts Scott on Tax § Commission ex rel. Greater Salt ed.); (3rd Bogert, Trusts Facilities, Trusts supra, § Lake Recreational (2d rev.). charity Trustees ed. the latter subject definition, precise § treatise, the author states: subject to judgment light changing community mores. sickness, In order We found trust relieve disease, in Youth Tennis prevent Foundation v. promote Commission, Utah, Tax regarded health be P.2d 220 as charitable it is exempted where we necessary that it sales tax be limited to assistance nonprofit corporation organized poor. spon- to the It is advantage soring, promoting, encouraging agencies state to ama- many possi- teur tennis. We held the Foundation to be operating bring ble about health for charity, giving that word broad mean- community. Society entire is inter- ing. We said: having members, ested in all its rich and condition, poor, good physical capable Charity in the broad giving sense is the being productive of caring something benefit to others without enjoying themselves and life. expectation gain. Considering init statute, more direct focus under this (Citations omitted.) providing something means pub- for the opinion The majority maintains that Utah welfare, lic which includes not mate- may unique cases in mandating substan rial, cultural, educational and but also almsgiving tial before can be found. physical extends to and recreational Our cases such thing. do no Our cases are needs. discord with those American (footnotes omitted). Id. at No substan- state courts. For example, majority the almsgiving tial required by as now the ma- rejects Community Hospital Memorial v. jority opinion ever was identified. City Moberly, supra, because the Mis souri court did not recognizes seemingly discuss whether the The majority and made a to the approves its or that some courts use rationale Thus, community. majority that by states that charitable entities “their activities harmony that decision out community with Utah enhance beneficial values or law. While is true goals.” They recognize “charity it that such discus also that appears, sion to have included it would is the contribution dedication of some- or “reinventing good.” have been wheel.” thing It has of value Fur- to common ther, been established law in Missouri since at that concedes the “care (State least 1881 traditionally regarded ex rel. Alexian sick” has been Brothers Powers, Hospital v. supra) nonprofit majority, clinging that But the to charitable. by party specific that vanished made either to make a concept of almshouses comparison of its for-profit rates with a was years before Utah Constitution tertiary hospital However, in Utah. charity of myopic see the adopted, is too president of IHC testified that its rates question. hospitals in the two for-profit hospitals. were lower than The ignores this testimony and would IV. comparison like to make the lack fatal to record made After careful review of the exemption, a case but it cites no case or Commission, parties before Tax by authority that a must hospitals in that two I am satisfied patients. offer rates to paying lower with operation complied their structure writer, cases, in examining This scores of necessary classified as everything to be requirement. has found no such are entitled institutions and thus primary American Fork offers taxation on exemption from ad valorem living persons care to communi- six small true even buildings. This is their land County. ties northern Utah It is the by charity taken under the narrow view of only public open service that is 24 hours i.e., must be a majority, that there switchboard, day. From its each ambu- the value of imbalance between substantial are dis- firefighting equipment lances provided remuneration services night patched several of the communi- corporation is a nonprofit IHC received. ties. who serve governed a board of trustees open The two to all mem- pay as do members of without the board race, public irrespective of the col- bers hospital. No dividends or each individual or, specifi- creed. The Tax Commission either direct type, distributions cally found admission and treatment indirect, to them or to paid can be on ability pay. not conditioned Utah dissolution, incorporators. all re- On seriously does not contend other- maining distribut- required assets to be majority, derogation wise.2 nonprofit corporation ed to a foundation or appellate most fundamental of rules of re- exclusively organized operated that is view, finding disregard has chosen to charitable, educational, religious, or sci- Commission, supported although the ma- purposes. attempt entific evidence, competent make their own equate profit jority corporations finding contrary. The fact corporations its face so le- is on hospitals do not advertise these gally repugnant unsound to William inconsequential. free service is render Budge Hospital Maughan, Memorial Mercy v. Corporation court Sisters (1931), nothing 3 P.2d 258 261 P. 694 County, Or. Lane subject. said more need be here on that hospi- disqualify did not a charitable Valley is locat- Hospital, The Utah so as not giving patient a bill each tal for Utah, Provo, ed at furnishes might upon imposed by those who to be tertiary specialized care that is more overstay. care is cus- Emergency want sophisticated primary than services non- tomarily rendered and much hospitals. community in smaller available way is before emergency care well under Hospital and Valley serves central arrangements made between are financial institu- hospitals Utah and the such southern patient hospital. the Provo, Vegas, Utah, Las from tion between to collect for their services endeavor according Nevada, miles. patient, part, a distance of about 400 in whole or in each large majori- tertiary care A privately no his financial resources. There are owned to pay in full to Utah, attempt ty patients was the are able hospitals in of thus County where majority concurrence of Utah with the 2. In the two instances cited in drug admis- could opinion, the not refused addiction their intoxication Indeed, Valley they the Utah sion. were in better treated. facility Hospital and later moved to another or through from their own means their Valley taxes the Utah Hospital amount- eligible $377,000 are and, insurance. Others ed to more than in 1980 ac- cording participation government programs president’s such to testimony, would be a cost as Medicare or Medicaid are under in- that would have to be covered in insurance, setting the annual of dustrial accident which does not rates. It is of no consequence pay cost, operates full that IHC always hospital’s causing outside of Utah. Our partial exemption ap- loss. constitutional to absorb plies to property real in this state used for buildings compris- Most of the land and purposes, charitable irrespective of wheth- ing Valley the Utah were donated er the owner property has also devoted to to the Church Jesus IHC Christ in another state. The Latter-Day charge oper- Saints with American example. Red Cross is such an ate it the benefit residents legislature proper acted within highly significant area it serves. It also bounds in exempting hospitals organized promotes fund-raising that IHC drives in operated in the manner two hospitals. the communities its served It hospitals involved this case. Their exist- hospitals recipi- and the individual are operation ence and contribute immeasur- donations, bequests, ents of charitable ably they inhabitants of the area endowments. Those donors would sur- serve. Because these are non- prised know that their was not to profit and open persons regard- are to all charity. Valley Hospital When the Utah less their ability pay, quite are they recently was enlarged its services ex- different from the private “countless enter- panded, over four million dollars were prises” they compared are majori- to in the raised toward that construction from the opinion. ty The fact that most residents of the communities it serves. through private resource their sought. Government was assistance eligible insurance or other means or are patients, including pay Thus all those who Medicare or and can Medicaid whole full, care in their beneficiaries of or in preparedness is a to their tribute gifts. these See Missouri United Method- and to the programs wisdom federal that ist Retirement Homes State Tax Com- elderly make readily insurance for the Mo., mission, (where gifts, 522 S.W.2d 745 available. It does not detract from fact bequests, and donations from two confer- that these stand as bulwarks ences of the Methodist Church were used always communities their doors defray part cost of operating open to rich poor assist the alike. In house, retirement the home was entitled to catastrophic disaster, the case of illness or exemption). seemingly even the well-prepared may need reviews annually IHC its rates and at- long care after their resources costs, tempts plus to make them cover event, depleted. such free care margin expansion re- services and provided by hospitals may these well ex- placement equipment and facilities. paid ceed for. In a Contrary the assertion in the argument, reckless asserts opinion “earmarking” that there is no two have not demonstrat- margin, chairman the board ed that would “have to discontinue trustees testified be- difference any if ineligible services for ex- expenditures tween its income and “to- was emption They taxes.” also tally capital and exclusively” devoted to decry exempt hospitals tax-sup- “use improvements. argue, To as does the ma- services, ported public including road con- jority, that it was not demonstrated that maintenance, police protec- struction and IHC suffer operating loss if tion, protection, fire water and sewer main- subjected to property tenance, removal, taxation is both irrel- name a and waste evant and In place, few,” nonexempt unrealistic. the first “expense at the health exemption is providers taxpayers, not based on a other com- and showing of Secondly, absolute need. the mercial and It is obvious that individual.” I wholly uphold constitutionality irrelevant. such statements understanding, and demonstrating sections 59-2-30 59-2-31. The over- their lack of whelming argument a state- case both from this comparable Court law jurisdictions supports in memo- and other judge ment the trial his made legislature’s Certainly, determination. exemption a tax denying randum presumption constitutionality of the stat- v. Tax Jackson State Commis- utes has I not been overcome. would af- sion, supra. That statement was that the firm the Tax decision Commission “as as one paid had never much granting exemption the two hospitals. fine, expensive and cent of tax on their I also concur in Justice Stewart’s dissent- beautifully equipped hospital properties ing opinion. schools, roads, support streets, departments, and police the fire ” ZIMMERMAN, J., participate does not governmental functions.... herein; SAM, Judge, District sat. Missouri, Supreme in de- Court irrelevant, nouncing statement as ob- authorizing exemption a tax

served that constitution,

in their the citizens of very com- expressed

state result place.

plained of take So it is here. As knows, neither the lack of well ability taxes nor non-use Jones, Pamela Ronald D. JONES and governmental services has ever been the Respondents, Plaintiffs and exemption. basis a charitable v. INC., PORTFOLIOS, AMERICAN COIN CONCLUSION corporation; a California Robert G. agreement I am in Trustee, Holt, as L.H. Investment Com- exemptions strictly from taxation should be partnership, pany, a and In- Utah L.H. jurisdictions All so hold. How- construed. Group, corp., Defend- vestment Utah ever, in so pointed we have also out that Appellant. ants and meaning doing give we should a reasonable ex- language of the constitutional INC., PORTFOLIOS, AMERICAN COIN narrowly emption it so and construe corporation, a California Oakwood qualify, thereby that no institution can Co., partnership, Manor a California choking enterprises off Plain Counterclaim Crossclaim encourage. Be- was meant to Appellants, tiffs and No. nevolent Elks and Protective Order of v. Utah, Commission, P.2d Tax JONES, Jones, E. D. Pamela Carl Ronald Mis- Supreme Court of Barnes, Barnes, Mary L.H. Investment point: recently souri wrote on this partnership, Company, In L.H. a Utah Exemption there- “Taxation is the rule. Group, corporation, G. vestment exception. exemp- from the Claims for Eastman, Donald J. Boshard Lee How- tion in the law.” favored Calder, A. Richard Counterclaim ever, public has Missouri declared as Respon Defendants Crossclaim actually regular- policy dents. pur- ly exclusively for charitable No. 19003. taxation, poses exempt from shall be per- taxing are not to be authorities Utah. Supreme Court of announced mitted to defeat that Aug. ap- policy or unrealistic by unreasonable 21, 1985. As Modified Oct. construction” rule. plication of the “strict Missouri United Methodist Retirement Mo., Commission, Tax

Homes v. State omitted). (1975) (citation 745, 751 S.W.2d

Case Details

Case Name: Utah County Ex Rel. County Board of Equalization v. Intermountain Health Care, Inc.

Court Name: Utah Supreme Court

Date Published: Jun 26, 1985

Citation: 709 P.2d 265

Docket Number: 17699

Court Abbreviation: Utah