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WV Supreme Court Rejects Hospital's Health Care Provider Tax Refund Request



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On March 28, 2013, the West Virginia Supreme Court of Appeals issued an opinion in which it rejected a health care provider tax (“HCPT”) refund claim submitted by Wheeling Hospital.  Wheeling Hospital’s refund claim was based on its attempted reclassification from inpatient or outpatient services to physicians’ services of gross receipts attributable to its provision of overhead to physicians not employed by the hospital.   The overhead provided by the hospital includes its physical facilities, staff, medical equipment, drugs and other incidental supplies.

Wheeling Hospital originally, and correctly according to the Court, reported the receipts associated with its provision of overhead as inpatient or outpatient services for purposes of West Virginia’s HCPT.  Wheeling Hospital’s primary argument for reclassifying the inpatient and outpatient receipts was that its use of certain current procedural terminology (“CPT”) codes in its billing practices conclusively identified its provision of overhead as physicians’ services. Physicians’ services were taxed at a lower rate than were inpatient and outpatient services during the period for which the HCPT refund was claimed.  Physicians’ services are no longer subject to the HCPT in West Virginia, while inpatient and outpatient services are taxed at 2.5% of gross receipts.  

Justice Allen H. Loughry II, writing for a unanimous Court, stated that, “[t]he controlling federal definitions [of physicians’ services] make it clear that the issue before us must be resolved in terms of who furnished the services and not by reference to billing codes.  In this case, it was the Hospital and not the physicians who provided the items of overhead that are in dispute.”  The Court further stressed that the controlling factor for HCPT reporting is who furnishes the service, writing that, “[t]he fact that the CPT codes are part of the Medicaid billing structure does not alter the AMA origins of those codes and, more importantly, it does not codify the CPT codes into federal law.  And, while it may suit the Hospital’s purposes to characterize the CPT codes as being encapsulated within the federal definitions of ‘physicians’ services,’ this contention is nothing more than sophistry.”

Medical facilities that are still subject to the HCPT in West Virginia, including hospitals, nursing homes, ambulatory surgical centers, independent labs and x-ray facilities, and intermediate care facilities for the mentally handicapped, need to diligently identify who furnishes a particular service at the facility.  If these facilities provide particular services that are no longer subject to the HCPT, including therapy services, physicians’ services, chiropractic services, dental services, emergency ambulance services, nursing services, opticians’ or optometrists’ services, podiatry services, or psychological services, care should be taken to ensure that these services are not included in the facility’s HCPT return.