PeaceHealth St. John Medical Center in Longview, Washington in 2014.
Courtesy of M.O. Stevens
Officials with the city of Longview and PeaceHealth St. John Medical Center met Monday to negotiate over how much the hospital will have to pay the city in back taxes after failing to do so for more than a decade. They also discussed whether the not-for-profit will lose a significant business tax exemption as a penalty.
Last month, city officials discovered a 14-year gap in payments of business and occupation tax, or B&O, by the hospital for services like outpatient therapy, behavioral health and pharmacy services.
Now, the city could seek as much as a decade of those unpaid taxes.
Longview’s B&O tax applies to all businesses in the city with gross incomes of more than $100,000 per year. As a not-for-profit hospital, PeaceHealth services are largely exempt from the B&O tax. The hospital should be taxed on roughly 10% of its outpatient operations that are not exempt.
Confusion about paying the B&O tax stemmed from an administrative error in 2010 when the hospital relocated its headquarters from Bellevue to Vancouver and transitioned to using centralized accounting records across the hospital system, according to a spokesperson.
The city of Longview also missed the tax implications of the move.
“We’re not really sure at this point how the city didn’t catch it,” said Chris Collins, Longview assistant city manager, during Monday’s meeting.
In addition to the one-time back tax repayment, Longview officials are expected to decide whether to end any future exemptions for PeaceHealth St. John during an Aug. 26 city council meeting. That could cost the hospital around $400,000 per year, according to PeaceHealth Chief Financial Officer Tracey Fernandez.
“Your proposal is to take away a long-standing exemption from the hospital. That is the thing that would 10x what we would have to pay,” Fernandez told the revenue committee Monday.
PeaceHealth St. John Medical Center is one of Longview’s largest employers. It’s one of nine hospitals within the PeaceHealth system that serve parts of Oregon, Washington and Alaska.
The back tax payments could be a boon for Longview, which is forecasting a $4 million budget gap in both 2027 and 2028.
The revelation of the unpaid taxes comes at a challenging time in health care. PeaceHealth is just one local hospital system navigating future cuts to Medicaid from the federal government that are expected to drastically reduce the number of people who receive low-income health insurance. Many hospitals rely on those federal payments to provide services.
“I think what makes us nervous is the headwinds for health care just don’t look great right now,” said St. John Chief Hospital Executive Kendall Sawa. “There are just a lot of unknowns.”
St. John Medical Center made $337,015 in profits, according to 2024 tax filings. The overall PeaceHealth nonprofit reported $3.6 billion in revenue last year, though its expenses exceeded that amount by about $22.5 million.
