Group Health Co-op. of Puget Sound, Inc. v. State Through Dept. of Revenue
| Decision Date | 17 July 1986 |
| Docket Number | No. 51941-2,51941-2 |
| Citation | 106 Wn.2d 391,722 P.2d 787 |
| Court | Washington Supreme Court |
| Parties | GROUP HEALTH COOPERATIVE OF PUGET SOUND, INC., Respondent. v. STATE of Washington, Acting Through the DEPARTMENT OF REVENUE, Appellant. |
Kenneth Eikenberry, Atty. Gen., Linda Krese, Asst., Olympia, for appellant.
Skellenger, Ginsberg & Bender, Phillip Ginsberg, Linda Eide, Seattle, for respondent.
Group Health Cooperative (Group Health), a nonprofit health maintenance organization, provides comprehensive health care services on a prepaid basis to its members through its medical staff and facilities. Group Health was audited and deductions disallowed. It seeks a refund of business and occupation taxes based on a deduction allowed public entities for health or social welfare services rendered, pursuant to RCW 82.04.4297.
The first challenge to Group Health is that its executives are not paid salaries comparable to salaries paid like positions in the public service. The second claim by the State is that business and occupation taxes should be assessed on carpentry and print activities performed at Group Health and the third claim involves the appropriate date upon which a Department of Revenue (Department) change of position regarding a deduction should be deemed effective.
RCW 82.04.431(1)(b) and RCW 82.04.4297
RCW 82.04.431 defines a health or social welfare organization for the purposes of RCW 82.04.4297. 1 Prior to trial the parties agreed that Group Health met all of the criteria enumerated in RCW 82.04.431, except for section (1)(b). RCW 82.04.431(1)(b) requires the "[s]alary or compensation paid to its officers and executives must be ... at levels comparable to the salary or compensation of like positions within the public service of the state". (Italics ours.) The titles of President, Vice President, Secretary and Treasurer are given to persons who apparently serve only in an honorary, ceremonial or voluntary capacity. These persons, so titled, are not compensated for holding their positions. They do not perform daily management activity for Group Health. They are not the officers and executives of Group Health who actually render services, and the amount of their salaries is immaterial to the issue and this appeal.
EVIDENCE SUPPORTING DEDUCTION
During the trial Group Health produced the testimony of Mr. Ralph Bremer and Dr. David Goldsmith. Mr. Bremer, a past president of the Board of Trustees (Board), testified in general about the services Group Health provides and about the organization itself. Mr. Bremer stated that Group Health is governed by an 11-person Board elected by the membership. Board members are not compensated. The bylaws of the organization provide for four officers: President Mr. Bremer testified as to salary-setting procedures. The Executive Vice President has overall responsibility for establishing salary and compensation policy. Mr. Bremer stated that the employees and executives of Group Health are not paid anything above actual services rendered.
Vice President, Secretary and Treasurer. The Board may also approve additional vice presidents for purposes of executive management. Mr. Bremer identified the following as "senior or top management": Executive Vice President (also called the Chief Executive); Vice President of Finance and Administration; Vice President for Health Care; Central and Eastside Regional Administrators; General Counsel; Director of Policy and Planning; and Director of Public and Employee Relations. The latter three executives report directly to the Executive Vice President. All of these positions have significant contacts with the Board. In addition, the top level medical staff position, Chief of Staff, has extensive contacts with the Board. Some middle-level staff on occasion report to the Board; lesser management has little contact
Dr. Goldsmith testified as an expert in the area of wage and salary studies. Dr. Goldsmith had conducted a study of the salaries received by the executives of Group Health as compared with the salaries received by public sector employees in like positions. Dr. Goldsmith identified the following Group Health positions as executive: Executive Vice President, Vice President for Finance and Administration, Vice President for Health Care, Chief of Medical Staff, Regional Administrator, General Counsel, Director of Policy and Planning, and Director of Public and Employee Relations.
The data for Dr. Goldsmith's analysis included organizational charts, job descriptions and salary records. This same type of data had been utilized in wage and salary studies by his firm since 1974. Professional colleagues in the same field rely on this type of data for their work.
Dr. Goldsmith outlined the procedures used to analyze the data that had been collected. First, he identified the Based on his analysis and the results of the validation technique, Dr. Goldsmith testified that in his opinion the public service positions selected for comparison to Group Health positions were comparable both in terms of the content of positions and in terms of salary ranges for such positions.
criteria employed for the selection of "executive" positions at Group Health, and for the selection of comparable organizations from which possible comparisons might be drawn. A "probable comparable set" was identified. Second, Dr. Goldsmith sought to validate the collected data through interviews with at least one person within each identified comparable organization. Over 20 such interviews were conducted by his assistants. Third, the salaries of Group Health's executives were compared with the salaries of those in positions identified as comparable. To validate the information gained to this point, Dr. Goldsmith used the Willis System, a method utilized by the State of Washington since 1973
Group Health offered into evidence, a Group Health Cooperative Retrospective Compensation Study. This study comprised a series of charts prepared by Dr. Goldsmith comparing, among other things, the monthly salary range of Group Health's executives with those in like positions. The trial court admitted this exhibit solely as a basis for Dr. Goldsmith's expert opinion and not as proof of the matter asserted. Group Health also offered a Retrospective Compensation Study compiled by Dr. Goldsmith for the 11 "nonexecutive" positions at Group Health immediately below the positions he deemed executive. This also was admitted into evidence.
This court's role as to questions of fact is to determine whether substantial evidence supports the trial court's findings and whether those findings support the conclusions of law and the judgment. The trial court's findings will not be disturbed on appeal if supported by substantial evidence. State v. Black, 100 Wash.2d 793, 802, 676 P.2d 963 (1984); Ridgeview Properties v. Starbuck, 96 Wash.2d 716, 719, 638 P.2d 1231 (1982). Substantial evidence is evidence in sufficient quantum to persuade a fair-minded person of the truth of the declared premise. Ridgeview, at 719, 638 P.2d 1231; accord Nichols Hills Bank v. McCool, 104 Wash.2d 78, 82, 701 P.2d 1114 (1985). We conclude that Group Health presented evidence in sufficient quantum to persuade a fair-minded person that its executives are paid salaries comparable to those holding "like positions within the public service of the state" and that Group Health is entitled to the deduction provided by RCW 82.04.4297.
The Department contends that the issue is whether the opinion of the expert witness is sufficient to establish the facts in issue. ER 702 reads:
If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise.
There is no dispute about Dr. Goldsmith's qualifications as The data Dr. Goldsmith relied upon in forming his opinion is of the type reasonably relied upon by experts in his field. ER 703 reads:
an expert. To be ascertained is whether his testimony "will assist the trier of fact to understand the evidence or to determine a fact in issue." The trial court has discretion as to the admissibility of expert testimony. State v. Fagundes, 26 Wash.App. 477, 483, 614 P.2d 198, 625 P.2d 179 (1980). "If the reasons for admitting or excluding the opinion...To continue reading
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