Doctors’ Tax Fight Settled in Inglewood

City officials have dropped their demand for back taxes from out-of-town doctors who work at local hospitals and will not require them to pay 1986 business taxes until January.

The action, which settles a four-month dispute with hospital administrators and doctors, will cost the city as much as $300,000, Deputy City Manager Norman Cravens said.

Between now and January, city officials will meet with hospital representatives and draw up new guidelines for the business tax, according to a joint statement issued this week by Inglewood city officials and administrators at Centinela Hospital Medical Center and Daniel Freeman Memorial Hospital.

Exemption Under Study

Among other things, city and hospital officials plan to review the roster of about 400 out-of-town physicians and discuss a plan that might allow doctors who rarely use Inglewood’s two hospitals to be exempt from the tax, or to pay a reduced, flat fee for services performed in the city.

Under the current guidelines, doctors are required to pay a minimum fee of $30 on billings up to $20,000 and $1.50 for each additional $1,000 in billings for work done at medical facilities in Inglewood.

Inglewood doctors have been paying the tax since it was imposed more than 10 years ago, but city officials had never attempted to collect the fee from out-of-town doctors until a budget study earlier this year revealed that the city was losing about $150,000 in revenue each year by overlooking that group.

City officials mailed letters to about 400 doctors in May demanding payment of the tax for 1986 plus two years’ worth of back taxes within 10 days. That action brought protests from Centinela administrators, who said the tax would drive physicians away and hinder the hospital’s ability to serve the community.

The hospital filed a lawsuit in Los Angeles Superior Court on June 20 seeking to overturn the tax and collect $1 million in damages from the city.

Centinela President Russell S. Stromberg also waged a media campaign against Inglewood officials--including full-page newspaper ads--warning that the loss of physicians might force the hospital to close its emergency room. More than 30,000 letters were mailed urging residents, hospital employees and former patients to pressure city officials to repeal the tax. In response to Stromberg’s mailings, more than than 600 people denounced the tax in letters sent to City Hall, city officials said.

Freeman administrators did not resist the tax, although several doctors there told city officials they were opposed to it and did not intend to pay. As of Monday, only 84 of the 400 or so out-of-town doctors who were subject to the tax had paid the fee.

Their payments will be refunded while officials work on new tax guidelines, Eckles said.

Stromberg, who has called the tax “ridiculous” and a “nuisance,” has agreed to drop Centinela’s lawsuit and halt the media blitz as part of the settlement with Inglewood officials.

“Our doctors are still a little concerned about the tax, and to be quite frank I am still opposed to a tax on out-of-town doctors,” Stromberg said. “But it is in the best interest of the community to sit down and talk this out. . . .

“It’s not a case where either side won the battle. Both sides had to compromise,” Stromberg said.

Two weeks ago it looked as if neither side planned to give in. On Aug. 5 the City Council unanimously approved a staff report criticizing Stromberg’s actions and vowed to continue with its efforts to collect the tax. Stromberg was busy preparing a petition calling for a ballot measure to limit the city manager’s contract and recall city council members.

“I guess everyone realized that this was really hurting the city,” said Deputy City Manager Cravens. “The attorneys for both sides made several phone calls and sort of set the stage for an agreement where we could sit down and talk this out, although this still doesn’t guarantee that the doctors are going to pay the tax. They still may be opposed to it in January but I think that they will be less likely to protest if they have more input.”

Doctors at both hospitals seemed optimistic about the agreement.

“I think doctors see the tax as an imposition and a nuisance,” said Dr. Samuel Wayne, Centinela’s chief of staff. “But I think some of their concerns might be resolved if they knew the city had fully explored their position before imposing the tax rather than just collecting the tax without any input from those of us who will be paying it.”

Freeman’s chief of staff, Dr. Arthur Schapiro, could not be reached for comment. In an earlier interview, he said Freeman physicians would have felt better about the tax if the city had initially asked for their input.

“I think doctors immediately went on the defensive because it took them by surprise,” Schapiro said.

City officials plan to meet with Wayne and Schapiro in September to review the tax.