Wisconsin Supreme Court Ruling Against Wauwatosa Could Cost Millions

High court's decision in longstanding tax dispute will likely cost the city nearly $8.5 million, lawyer says

In a decision that could cost the city of Wauwatosa millions of dollars, the state Supreme Court ruled Tuesday that the Wheaton Franciscan Healthcare-Wauwatosa outpatient clinic is a tax-exempt hospital.

Don Millis, the lawyer representing the clinic, said he will seek $4 million in taxes and interest from the city for 2003 through 2006, the dates covered by the lawsuit. He said the clinic owners, Wheaton Franciscan Healthcare, would also seek refunds for taxes paid under protest between 2007 and 2010. That accounts for another $4.5 million, he said.

The five-story building located at 201 N. Mayfair Road is assessed at about $58 million, said Millis. He said Wheaton Franciscan did not dispute that about one-third of the property, two floors used by doctors for offices for other non-hospital care, should be subject to property taxes.

But Wheaton – or Covenant, as it was called when the lawsuit started – has that the larger portion of the facility offered services that could be found in a full-service hospital and that in fact many patients were referred there from hospitals.

Wauwatosa City Attorney Alan Kesner said he and the lawyers representing the city are still evaluating the decision and its implications. He said he had no further comment.

The facility was built in 2003, an adjunct of St. Joseph's Hospital, 5000 W. Chambers St. in Milwaukee. It replaced an outpatient facility on Bluemound Road in Wauwatosa that was tax-exempt. The Bluemound facility is now the Heart Hospital of Wisconsin.

State law allows tax exemption for not-for-profit facilities "used exclusively for the purposes of a hospital," Justice Michael Gableman noted in the majority decision.

The difficulty is that many procedures once performed exclusively in hospitals can now be performed in doctor's offices, he wrote.

While the clinic does not provide for in-patient care, it does have a 24-hour urgent care facility and a 24-hour lab, as well as other services common to hospitals.

Chief Justice Shirley Abrahamson was the lone dissenter on the seven-member court.

Wheaton "has not met its burden to prove that the facility in issue is not used as a doctor's office," Abrahamson wrote.

She noted that the most common treatments patients sought were the same as those traditionally seen in a doctor's office rather than a hospital.

Milwaukee County Circuit Judge Elsa Lamelas agreed with Wheaton's position but was reversed by the 1st District Court of Appeals. Tuesday's decision overturns the appellate ruling.

The case has generated significant attention in the medical community.

David Edquist, a lawyer representing the Wisconsin Hospital Association, wrote in a friend-of-the-court brief that the appellate decision threatened the the tax-exempt status of outpatient facilities around the state.

Millis said the decision provides the parameters for both hospitals and assessors around the state. 


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