Tower Health’s trio of Chester County hospitals — Phoenixville, Brandywine, and Jennersville — lost their tax-exempt status due to the excessive salaries of the company’s executives, writes Judith Garber for the Lown Institute.

The Pennsylvania appellate court recently denied property tax exemptions for these hospitals. Jennersville Hospital has already been sold to another system, while Brandywine Hospital closed in January 2022.

Meanwhile, the superintendent of the Phoenixville Area School District noted that the district would get close to $1 million more every year if the local hospital paid property taxes.

In Pennsylvania, there are specific requirements for “purely public charities” that are set by the state constitution for them to be considered tax-exempt. One of these is that the institution operates “entirely free from private profit motive.”

The court decided that the demand for management fees by Tower Health from its hospitals, along with the use of interest on bonds to acquire other properties, proved a profit motive. The court also determined that the executive compensation at the health system was excessively high, as well as substantially tied to financial performance.

Read more about Tower Health from the Lown Institute.

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