What's Up, Doc?

[November 23rd, 2005] Portland doctors are unhappy that their counterparts in an OHSU-affiliated clinic going up in South Waterfront will get to operate tax-free.

Two weeks ago, WW reported that the new 16-story, $145 million Oregon Health & Science University Center for Health and Healing just south of the Ross Island Bridge will be owned not by the university but by 700 doctors who serve on OHSU's staff (see "On the Waterfront," WW, Nov. 9, 2005).

At least initially, the center will provide many of the same services as private medical offices such as the Portland Clinic. But because the OHSU docs formed the OHSU Medical Group, a 501(c)(3) nonprofit that the Oregon Medical Association says is unique in the state, they pay no property tax or corporate income tax.

Michael Schwab, CEO of the 55-doctor Portland Clinic, says the new South Waterfront center creates unfair competition. "It's hugely unequal for doctors' groups that have to pay taxes," Schwab says.

Last year, for instance, the Portland Clinic paid property taxes of nearly $100,000 on its main location at 800 SW 13th Ave. Its owners must also pay taxes on any money not distributed during the year, local income taxes and TriMet tax for all employees. The OHSU docs, in contrast are socking away about $10 million annually after all expenses and do not pay TriMet tax.

Then there's the handout of public funds. The Portland Clinic and other private physician groups rarely get the benefit of working closely with the Portland Development Commission, as the OHSU Medical Group does.

As City Hall's economic-development arm, one of the PDC's jobs is to make the massive $2 billion South Waterfront project happen. Originally, OHSU and the City sold the project as a biotech extravaganza, with the growth and commercialization of OHSU research creating 10,000 new jobs along Portland's last undeveloped stretch of the Willamette.

It's far too soon to know whether that dream will come true. The Health and Healing Center will not include much biotech at the outset, but thanks to nearly $5 million in grants from the PDC (which gets its money from property taxes), the docs are constructing their building with the plumbing and electrical flexibility to convert administrative space and doctors' offices into biotech labs, if necessary.

"When biotech firms begin to develop, we want to make sure they can stay in the district," explains Larry Brown, the PDC official overseeing South Waterfront. "Putting the money in now can save a lot of costs down the road."

In the meantime, the property tax-paying doctors who will be competing with the Health and Healing Center will also be subsidizing them. "I wasn't aware they got all these advantages," says Schwab.

OHSU spokeswoman Marlys Pierson says the tax and financial benefits OHSU doctors receive are nothing compared with the time they "donate" to teaching, research and serving the uninsured. "The community docs are correct, it is not a level playing field," Pierson says. "The OHSU medical clinicians are at a significant disadvantage."