Catholic Med. Ctr. v. N.H. Dep't of Revenue Admin., 216-2011-CV-00955

• Decision Date: 08 April 2014
• Docket Number: 218-2011-CV-01394 (ROCKINGHAM, SS),216-2011-CV-00955,216-2011-CV-0085G
• Parties: CATHOLIC MEDICAL CENTER v. N.H. DEPARTMENT OF REVENUE ADMINISTRATION ST. JOSEPH HOSPITAL v. N.H. DEPARTMENT OF REVENUE ADMINISTRATION EXETER HOSPITAL v. N.H. DEPARTMENT OF REVENUE ADMINISTRATION
• Court: New Hampshire Superior Court

CATHOLIC MEDICAL CENTER
v.
N.H. DEPARTMENT OF REVENUE ADMINISTRATION
ST. JOSEPH HOSPITAL
v.
N.H. DEPARTMENT OF REVENUE ADMINISTRATION
EXETER HOSPITAL
v.
N.H. DEPARTMENT OF REVENUE ADMINISTRATION

216-2011-CV-00955
216-2011-CV-0085G
218-2011-CV-01394 (ROCKINGHAM, SS)

STATE OF NEW HAMPSHIRE SUPERIOR COURT HILLSBOROUGH, SS. NORTHERN DISTRICT

Date: April 8, 2014

ORDER

The petitioners, Catholic Medical Center, St. Joseph Hospital and Exeter Hospital, have brought these consolidated actions seeking review of an order of the Hearings Bureau of the respondent New Hampshire Department of Revenue Administration ("NHDRA") denying their request for a refund of the Medicaid Enhancement Tax ("MET"). The petitioners assert that the MET is unconstitutional on its face. The parties have filed cross-motions for summary judgment. The Court held a hearing on February 10, 2014.

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The parties have submitted an Agreed Statement of Facts ("ASF"), which the Court hereby incorporates by reference. The respondent, NHDRA, has also filed a motion to strike, challenging facts asserted by the petitioners in their motion for summary judgment but not included in the ASF. Because the Court did not rely on the challenged facts in drafting this order, that issue is moot.

Generally, in determining summary judgment matters, the Court considers the parties' pleadings, affidavits, and other evidence, as well as all inferences properly drawn from them, in the light most favorable to the non-moving party. Purdie v. Att'y Gen., 143 N.H. 661, 663 (1999). "[S]ummary judgment may be granted only where no genuine issue of material fact is present, and the moving party is entitled to judgment as a matter of law." Id. (quoting Goss v. City of Manchester, 140 N.H. 449, 450-51 (1995)); see also RSA 491:8-a, III (1997). Here, however, the parties have submitted an agreed statement of fact concerning the underlying factual issues. Accordingly, the issue before the Court for determination is a legal one, that is to say whether, based on the facts set forth in the agreed statement of fact, the petitioners or the respondent are entitled to judgment as a matter of law.

The petitioners raise two primary facial challenges to the constitutionality of the MET. First, they assert that the MET violates the equal protection clause of the State and Federal Constitutions. Second, they assert that the MET impermissibly classifies taxpayers. The Court will address the petitioners' equal protection argument first.

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"The equal protection provisions of the State Constitution are designed to ensure that State law treats groups of similarly situated citizens in the same manner." McGraw v. Exeter Rea'l Coop. School Dist., 145 N.H. 709, 711 (2001). In reviewing whether a particular law violates the equal protection provisions of the State Constitution, the Court must determine whether persons similarly situated are being treated differently under that statutory law. State v. Callaqhan, 125 N.H. 449, 451 (1984) (quoting Gazzola v. Clements, 120 N.H. 25, 29 (1980)). "Holding that persons who are not similarly situated need not be treated the same under the law is a shorthand way of explaining the equal protection guarantee." In re Sandra H., 150 N.H. 634, 638 (2004). If persons are not similarly situated, then no equal protection problem is presented. McGraw, 145 N.H. at 712 (quoting LeClair v. LeClair, 137 N.H. 213, 222 (1993)).

This analysis is consistent with equal protection analysis under the Federal constitution. In Re Sandra H., 150 N.H. at 638; see also Keevan v. Smith, 100 F.3d 644, 648 (8th Cir. 1996) (finding that "the initial inquiry in any equal protection claim is whether the plaintiff has established that she was treated differently than others who are similarly situated to her"). "To be sure, the constitutional demand is not a demand that a statute necessarily apply equally to all persons. The Constitution does not require things which are different in fact to be treated in law as though they were the same." Rinaldi v. Yeager, 384 U.S. 305, 309 (1966) (internal quotation omitted).

Within the tax law context, "Part II, Article 5 [of the New Hampshire Constitution] requires that all taxes be proportionate and reasonable, equal in

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valuation and uniform in rate, and just." Appeal of Town of Bethlehem, 154 N.H. 314, 322 (2006). "The equal protection clause protects [an entity] from state action which selects [it] out for discriminatory treatment by subjecting [it] to taxes not imposed on others of the same class." Verizon New England, Inc. v. City of Rochester, 156 N.H. 624, 630 (2007). In evaluating an equal protection challenge to a tax classification, the Court applies the rational basis test. See id. at 628.

The petitioners argue that the MET is unconstitutional because it taxes hospitals but not non-hospitals, despite the two providing oftentimes identical medical or health services. Respondent NHDRA objects, arguing that inpatient and outpatient hospital services constitute distinct classes of health care services, and are thus not similarly situated with non-hospital providers. NHDRA places significant weight on federal definitions and regulations in placing inpatient and outpatient hospital services in their own class. For example, the respondent cites to regulations where the terms are defined and placed in two separate classes among nineteen others. See 42 C.F.R. § 433:56(a); 42 C.F.R. § 440.10; 42 C.F.R. § 440.20; see also New Hampshire Admin. Rule Rev. 2301.06, .08. In addition, the respondent argues that hospitals require special certifications and follow separate regulations in order to operate as hospitals. A functional analysis of the petitioner entities' practices, however, outweighs reliance on Federal and State administrative nomenclature.

As indicated by the uncontested facts of this case, both hospitals and non-hospitals perform a wide range of identical health services, including, but not

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limited to, physical therapy, diagnostic radiology, urgent care, emergency care, speech therapy, and occupational health care. In essence, the MET imposes a tax on hospitals simply because they are hospitals, not based on the nature of the services they provide. Looking to the practical reality of the circumstances, the Court finds that hospitals and non-hospitals are similarly situated with respect to the services they perform. Therefore, because the MET...