Living large: On property, UPMC spends big and is taxed little

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People around Pittsburgh know that UPMC is big. They just didn't know it was this big.

The region's leading health care provider, which has $9.6 billion in annual revenue, 56,000 employees and 20 hospitals, also owns 656 acres of property in Allegheny County worth $1.6 billion. It is the county's largest property owner by value and, because of UPMC's nonprofit status, 86 percent of those holdings are tax-exempt.

The hospital network's real estate portfolio got close examination in a series of stories by the Post-Gazette's Sean D. Hamill and Jonathan D. Silver which appeared last Sunday through Wednesday. The series, "UPMC: Forging a Giant Footprint," revealed that the corporation's charitable status saves it from paying $42 million in property taxes to municipalities, school districts and the county.

More troubling is the revelation that, because Allegheny County has failed to review its tax-exempt properties as required by law, it's unclear whether all 196 UPMC parcels should even be tax free. If some don't deserve tax-exempt status, that only increases the tax burden for modest property owners -- people and businesses.

The series also highlighted that the health system often buys properties at high prices and sells unneeded parcels at a loss. That hardly seems like sensible real estate strategy, particularly for an enterprise dependent on the public's health insurance dollars. But a reality faced by UPMC and other corporate or institutional property owners is that, when it needs adjacent land for expansion, for instance, it can't buy that property elsewhere. Thus, potential sellers are only too eager to force a captive buyer to pay top dollar.

Less understandable might be UPMC's track record on regularly selling at a loss. The series reported that in 20 of 27 cases in which it sold land it had previously purchased, the health system lost money or broke even. In 11 of the 20 cases, UPMC sold the property for $1 to Allegheny County, Pittsburgh, community groups or senior homes. (Maybe the health network wants the public to regard these property transfers as charitable donations to the community?)

But other examples abound of the nonprofit's willingness to pay just about any price for a desired piece of land. It bought the tract in Monroeville on which its newest hospital sits for $18.75 million -- more than double what its previous owner paid 18 months prior. It spent $573,847 on a 2,489-square-foot lot near Mercy Hospital. It bought the former Ford Motor Co. building in Bloomfield for $10 million in 2006, which the county assessed at less than half that in 2002; today it still stands empty.

The biggest questions swirling around these practices, in which a state-recognized charitable organization spends without limit on properties it wants, are the same questions that perplex Pennsylvanians about many large nonprofits.

Why can such deep-pocketed institutions operate with such financial swagger?

Why are they allowed to behave like big-money corporations while paying no property taxes?

Why do the governor and members of the Pennsylvania Legislature, who know the high cost of health care and health insurance, not address the gaping holes in state law on nonprofits and tax exemption?

These questions loom even larger for the Pittsburgh region, now that the West Penn Allegheny Health System, the closest thing to a competing hospital network, announced Friday that it has canceled its $475 million affiliation deal with Highmark Inc., the giant insurer that wanted to save WPAHS.

The Post-Gazette series is further evidence of a major disconnect between what the state demands of regular taxpayers -- the businesses, large and small, that pay their fair share and the individuals, many of them struggling families or retirees, who are just trying to keep a roof overhead -- and what it lets rich nonprofits get away with.

Spending big and freely on land, without being taxed, may be business as usual for UPMC, but it's the kind of giant footprint that can crush the little guy.



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