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Atrium, Novant get millions in property tax breaks

Erin Keever
/
WFAE
Atrium Health.

$23 million — that’s how much Charlotte’s two largest hospital systems, Atrium Health and Novant Health, avoid paying in taxes on their Mecklenburg County properties that are valued at more than $2.4 billion. NC Health News and the Charlotte Ledger Business Newsletter analyzed local records to figure that out. As Atrium and Novant bring in billions in revenue and profits each year, there are some who say it’s time to change their tax-exempt status and for the hospitals to start paying up.

Michelle Crouch, the reporter who wrote the story, joined WFAE's Marshall Terry to discuss.

Special report: Mecklenburg's big hospitals don't pay taxes on hundreds of acres worth billions of dollars. Should they?

Marshall Terry: First, Michelle, we've all seen the huge new state-of-the-art facilities that these hospital systems are building, not to mention medical bills. So just why are Atrium and Novant and other hospitals exempt from paying property taxes?

Michelle Crouch: Well, Marshall, hospitals have had tax exemptions for more than 100 years, and these exemptions were put in place because they wanted to make sure that the hospitals would stay open and continue to serve the poor, rather than just patients that have the ability to pay. And this isn't just happening here, but it's happening across the country. Seventy-seven percent of all hospitals nationwide are either public or nonprofit, meaning they aren't being asked to pay taxes.

Terry: So Atrium doesn't have to pay taxes on property it owns, even if that property is not being used for medical purposes. For example, you found one property it owns in Cornelius is home to a chicken restaurant. So why is that sort of thing allowed?

Crouch: So Atrium is kind of a unique case. It is what's called a hospital authority. It was created by the county government here in Mecklenburg, many years ago as a government agency. And under North Carolina state law, government agencies can buy property and as soon as they own the property, it comes off the tax rolls. Now, that is different than a nonprofit hospital like Novant, for example. Under the state law for nonprofit hospitals, if they buy a piece of property, they have to continue to pay taxes until they can show that they are using it actually and exclusively for a charitable hospital purpose.

Should hospitals pay property taxes?
Listen to reporter Michelle Crouch talk with WFAE's Marshall Terry about her investigation into how much property tax Atrium Health and Novant Health get out of paying.
Carolinas Medical Center in Charlotte, North Carolina, seen on Oct. 24, 2022, is owned by Atrium Health. Atrium Health, North Carolina's largest hospital system, has declared publicly that in 2019 it provided $640 million in services to Medicare patients that were never paid for.

Terry: Do you know why Atrium owns this land in Cornelius? That's home to the Tenders restaurant.

Crouch: Yes. That piece of property is actually a very large piece of property, and the Tenders is just on a small part of it. And Atrium is planning to build a new hospital there — their Lake Norman facility.

Terry: And so as I understand it, Atrium actually does pay, voluntarily, taxes on some of its properties, right?

Crouch: Yes. It turns out that Atrium does willingly pay taxes on some properties that they aren't required to. And our analysis shows that these are mostly properties that have nonmedical commercial uses on them. For example, they own the parcel on East Boulevard that has the Penguin Drive-In, and they pay taxes on that. They also own a few parcels that have Harris Teeters and CVS stores on them, that they pay taxes on. However, our analysis shows that they are exempt from taxes on the vast majority of the property that they own.

Terry: Now, this isn't just confined to Mecklenburg County. You report state law allows Atrium specifically to avoid paying millions in taxes in Cabarrus, Union, Gaston and Lincoln counties as well, right?

Crouch: That's true. The state law allows hospital authorities to expand their reach within 10 miles of the county radius. And so acting as The Charlotte-Mecklenburg Hospital Authority, Atrium has purchased property in all of the counties surrounding Mecklenburg — except for South Carolina, of course. But, you know, it's not just Atrium that is affecting these counties around us. In Iredell County, for example, Novant recently purchased two for-profit hospitals. Those hospitals were contributing $883,000 to the Iredell County budget. And now the county is looking at losing that revenue and trying to find ways to fill those gaps.

Tony Mecia
/
Charlotte Ledger Business Newsletter
Novant Health.

Terry: Now, when questioned about their tax-exempt status, Atrium and Novant say in exchange they invest millions back into the community. But some critics question how accurate that is. What kinds of investments do the hospitals say they're making, and why do critics question it?

Crouch: There's no doubt that the hospitals make contributions to our community. Atrium and Novant both run free medical clinics here in Charlotte. They offer charity care and financial assistance to patients, and they make contributions to local nonprofits. But when Atrium and Novant talk about what they're contributing back to the community, they include a lot of other things, such as medical training, research. And probably by far the biggest thing that they include is what they call Medicaid and Medicare shortfall. And critics say that those types of things shouldn't be counted.

Terry: Why not?

Crouch: Medicaid and Medicare shortfall is the difference between what the hospitals receive from those government programs and the costs of the care that they provide. But what critics say is that nobody is going behind them to scrutinize what the cost of that care actually is and that it's possible for the hospitals to use inflated numbers, and there's really no scrutiny of whether or not those numbers are accurate.

Terry: You report that in response to your findings. Mecklenburg County Commissioner Susan Rodriguez-McDowell has asked county staff for a review of hospital exemptions. Is it possible those exemptions could change? Who has the authority to do that?

Crouch: Well, any change in the law would have to happen at the state level, and it has happened at other states around the country — Illinois, Oregon, Utah, Nevada. A bunch of other states have passed legislation asking hospitals to do more in exchange for their tax exemption. There have also been court cases around the country where the nonprofit status of hospitals have been questioned. Now, at the local level, the county could certainly always ask the hospitals to make more voluntary payments. Durham gets a $400,000 voluntary payment from Duke University every year. Marshall, it's worth noting that not everyone at the local level is thinking that hospitals need to do more. For example, I talked to County Commissioners' Chairman George Dunlap. He points out that he thinks the hospitals do more than enough to contribute back to the community and that many counties don't even have a hospital. And he is grateful for all that the hospitals do for Mecklenburg.

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Marshall came to WFAE after graduating from Appalachian State University, where he worked at the campus radio station and earned a degree in communication. Outside of radio, he loves listening to music and going to see bands - preferably in small, dingy clubs.