The Post-Gazette's March 27 editorial ("Profit Motive: The City's Suit Will Turn on One Key Factor") was refreshingly right that UPMC "may have an easy time" satisfying four of the five "HUP" criteria for tax exemption. It was disappointingly wrong, however, in misquoting and then misapplying the fifth HUP factor.
According to the editorial, that fifth leg asks whether UPMC operates "entirely free from profit motive." In fact, the test reads whether the organization "operates entirely free from private profit motive." By omitting the word "private," the editorial distorted its own "key factor."
A nonprofit organization must try to generate more revenue than it pays out in expenses ("profit motive"). If it doesn't, it goes out of business. The test is whether an organization tries to generate profits for the benefit of private individuals, what's known in legal parlance as "private inurement."
That's why UPMC's critics harp on what a few executives and physicians at UPMC are paid, as if just stating "more than $1 million" cinches their case. Last year, Highmark and the West Penn Allegheny Health System paid current and departing executives millions of dollars and Highmark paid its board members a total of $1.9 million. Meanwhile, the compensation paid to every UPMC employee, from top to bottom, is regularly and rigorously benchmarked against the market and its board is unpaid. There is no private inurement at UPMC.
When a lawyer misstates the key legal standard, the case is thrown out on something called "summary judgment." Is there a journalistic equivalent?
Senior Vice President
Chief Legal Officer