Inglewood Tax Puts Hospitals, Doctors on Both Sides of Fence

Imposition of a business tax on out-of-town doctors practicing at hospitals in this city has drawn a mixed reaction from the two large, nonprofit hospitals that will feel the greatest impact.

Daniel Freeman Memorial Hospital says it can live with the tax and does not expect to lose any doctors because of it. “This tax will not drive doctors out of the city,” said administrator Que S. Hansen.

But Centinela Hospital, calling the tax an attack on nonprofit hospitals and retaliation against Centinela because of stands it has taken on controversial city issues, filed suit in Los Angeles Superior Court last week in an attempt to overturn the tax and collect $1 million in damages from the city.

Nonprofit Hospitals

“They would like us to leave Inglewood and have something for profit in our place,” said Russell S. Stromberg, president of Centinela. He asserts that City Manager Paul Eckles told him in a recent telephone conversation that the city does not want nonprofit hospitals because “they do nothing but use city services and don’t pay any taxes.” He also contends that the city is getting back at Centinela for its past opposition to a payroll tax and establishment of poker parlors in Inglewood, which city officials wanted to legalize despite earlier rejections by voters, Stromberg said.

Terming the lawsuit “garbage” and “totally irrational,” Eckles said the assertion that he does not want nonprofit hospitals in the city is a fabrication. Recounting the telephone call, Eckles said, “He (Stromberg) told me he would have me fired if I didn’t get the tax repealed. I said the hospital is tax-exempt and a big draw on city services and it is not unreasonable for doctors who practice there to pay a business license tax.” Eckles said the unsuccessful proposals for a payroll tax and poker parlors were opposed by many community groups, including Centinela, and that those issues have no bearing on the tax.

Eckles called the two hospitals “assets to the community” that the city has worked to strengthen. Five years ago, he said, the city used its eminent domain powers to acquire residential property for Centinela so it could expand parking. Last December, the city issued $6 million in hospital revenue bonds for a laboratory and computer system at Daniel Freeman.

The hospitals are each licensed for 403 beds and are direct competitors.

No Collection

Although the tax was enacted more than a decade ago and has been paid since then by Inglewood’s 147 doctors and medical corporations, the city did not attempt to collect it from out-of-town doctors using local hospitals until now.

Norman Cravens, deputy city manager, said the decision to start collecting the tax was made during a staff review of the new city budget. He said it is part of the city’s overall business license enforcement program. “We want everybody to pay the tax who is supposed to,” he said.

Two weeks ago, letters were sent to more than 400 doctors demanding payment of the tax for the last three years--the statute of limitations for back taxes--within 10 days.

The tax, which is part of the city’s business license tax structure that city officials say brings in $2 million a year, requires physicians to pay a minimum tax of $30 a year on billings of up to $20,000, and $1.50 for every additional $1,000 in billings.

Cravens said Inglewood doctors last year paid $140,000 on billings of $85 million--an average of about $949 each.

Officials term the tax modest, in comparison to the higher Los Angeles city tax it is modeled after, and said there is no estimate as to how much more will be collected by the addition of out-of-town doctors.

The letter to physicians prompted about 100 calls to City Hall from doctors or their accountants, Cravens said. Many complained, and others asked for time extensions, he said, but so far 31 doctors have paid $3,500 in taxes.

Redondo Beach this year started collecting a similar tax from out-of-town physicians practicing at South Bay Hospital, although it is a flat rate of $73.50 a year. After doctors complained, the tax was suspended for three months but was resumed in April.

Officials at Daniel Freeman said they initially objected to the Inglewood tax--the letter to physicians was “not nice,” said hospital spokesman Jeff Merkow--but changed their position after a meeting attended by officials from the city and both hospitals in which the city agreed to modify the tax.

No Audits

The city dropped the demand for taxes on billings before 1985, Cravens said, and it agreed to trust physicians to declare the amount of their Inglewood hospital billings, eliminating the need for separate accounting or audits. Deadline for paying the tax also was extended indefinitely, he said.

Merkow called these negotiations “friendly” and said Centinela’s lawsuit is an “extreme and unnecessary act” that Daniel Freeman does not support.

Dr. Arthur Shapiro, chief of staff at Daniel Freeman, said he does not believe doctors will leave the hospital. “They yell and scream for a day or two and then they come back to work,” he said.

Shapiro said he has offices in Inglewood and Los Angeles and pays business taxes in both. “It is not unfair to ask people to pay a business tax where they do business,” he said. “If doctors generate income in Inglewood, where they use the streets, the water and the power, let them pay their Inglewood share.”

He said Centinela is “dumb” to fight the city: “They won’t find much sympathy with the community who will say: ‘Those cheapskate doctors don’t want to pay their taxes.’ ”

Daniel Freeman officials say the tax will not threaten the quality of medical care, but Centinela President Stromberg disagrees. He said doctors will be discouraged from practicing at the two hospitals. “The hospital is interested in making sure there are doctors available in all specialties,” he said.

No Effect on Admissions

He said, however, that no doctors have stopped using the hospital and the tax has had no effect on admissions.

The 320-member Centinela Valley District of the Los Angeles County Medical Assn. is also concerned, according to Dr. William Engeberg, an Inglewood physician who heads the group. Engeberg said the district is unhappy about the way the tax was implemented, bookkeeping problems it causes, and the adverse effect it could have on medical quality. He said the county group will make a policy statement on the tax next week.

The Centinela Hospital suit claims that the tax is arbitrary because doctors, and no other professionals, are singled out. “They’re not going after attorneys, who see people in jail or try cases in Inglewood courts--only doctors,” Stromberg said.

Paid by Gardeners, Barbers

Eckles, however, said it is a tax that is paid by many people doing business in Inglewood--”all entities, from gardeners and the ice cream man to barbers and people at the Forum.”

Officials in the city and at Daniel Freeman contend that the suit is motivated by Stromberg’s quarrels with city officials. He strongly denies that.

Said Daniel Freeman administrator Hansen: “His action is based on an attitude of conflict toward the city, not the real substance of an issue.”

Eckles said Stromberg views himself as a power in the city, and added: “Centinela Hospital is not running the city of Inglewood.”

For his part, Stromberg said Daniel Freeman is not fighting the tax because the city helped it with the bond issue. “The doctors are mad at Freeman for not fighting it,” he said.

Hansen denies the allegation, saying the bonds were sold on the open market and “the city put up no money, has no liability and no expense.”

Stromberg said he believes Inglewood citizens will support the hospital’s fight with the city. “We have 400 volunteers and employees who live here as a nucleus,” he said.