The Rhode Island Radiology Society gets the state’s outpatient revenue tax overturned.
In June 2007, radiologists in Rhode Island were caught off guard.
At the eleventh hour on the final day of the legislative session, the Rhode Island General Assembly approved a budget amendment that levied an unexpected 2 percent “surcharge” on the gross patient revenue that outpatient imaging facilities and ambulatory surgical centers generate in the state. Suddenly, Rhode Island’s radiologists were involved in an epic political battle to rescind the tax, which took effect Jan. 1, 2008.
The Rhode Island Radiology Society (RIRS), a state chapter of the ACR, and Rhode Island Medical Imaging (RIMI), the largest radiology practice in the state, led the charge. “We had no idea that the legislature was contemplating this 2 percent tax,” says John A. Pezzullo, MD, president of RIMI. “We were obviously taken by surprise, so we started to marshal our forces to figure out the best tactics for getting this thing repealed.”
With each of its seven outpatient centers subject to the tax, RIMI had significant incentive for getting the levy repealed. The tax was so financially debilitating that RIMI laid off 24 employees, the most in its history, and implemented a hiring freeze that left some positions unfilled. It also delayed new equipment purchases and capital investments.
“The tax had a huge impact on us,” Pezzullo says. “We wanted legislators to understand that this tax probably did more harm than good for the state, because it resulted in lost jobs.”
RIRS immediately reached out to lobbyists and leveraged other political connections in hopes of persuading legislators to reconsider the tax. Through these channels, the group submitted proposals, asking legislators to repeal or, at least, amend the tax. Nothing stuck.
In 2010, RIMI and other practices filed a lawsuit against the state for what it called the “grossly unfair” tax. But the case was dead on arrival. “The states have broad leeway to tax, and without a precedent for this repeal, the judge’s decision sided with the state,” Pezzullo explains.
While the legal defeat was discouraging, the state’s radiologists were undeterred. They continued to develop relationships with lobbyists and legislators and to submit repeal proposals. They also held fundraisers for General Assembly candidates who supported their cause.
“You’re not going to succeed in getting a tax repealed by just going up to the statehouse once,” says Peter Evangelista, MD, radiologist at RIMI and president of the RIRS political action committee. “You have to become a known commodity and be present multiple years in a row before the legislators really start to respect you.”
A turning point came in 2013, when Terrance Healey, MD, past president of the RIRS, had the fortuitous opportunity to arrange a lunch meeting with Evangelista and Gina Raimondo (D), then treasurer of Rhode Island. At the time, Raimondo was contemplating entering the gubernatorial race, and she listened intently as the radiologists explained the burdens and unintended consequences of the tax.
Following the luncheon, Raimondo accepted an invitation to tour RIMI’s corporate office. “We explained to her that we’re really a small business trying to protect jobs in Rhode Island,” Pezzullo says. “That was the message we carried throughout the session, and that’s what finally resonated with the legislature.”
Raimondo was elected governor of Rhode Island in November 2014 and immediately took up the issue.
As the 2015 budget process ramped up, the RIRS drafted yet another legislative proposal. This time it suggested phasing out the tax over three years and offering tax credits to radiologists who hired new employees.
Raimondo included the RIRS’s request in the proposed 2015 budget, something that no other governor had done before. She also encouraged legislators to eliminate what she called “nuisance taxes,” giving the gross patient revenue tax as an example.
As the General Assembly debated the proposed budget, the RIRS rallied radiologists, as well as other physicians, office staff, and health care professionals throughout the state, to write letters to their legislators, encouraging them to repeal the tax. “We sent between 200 and 300 handwritten letters explaining why we wanted the tax repealed,” says Don C. Yoo, MD, radiologist at RIMI and President of the RIRS.
Finally, legislators agreed to rescind the tax, effective July 1, 2015. “Not only did legislators approve our proposal, but they changed it from a phase out to a full repeal, which was amazing,” Yoo says. “This could not have happened without the full support of Governor Raimondo.”
The RIRS attributes its victory to three things: the relationships they built during the past seven years, their perseverance in the face of repeated defeat, and a little bit of luck. “You’re not always going to be successful, even if you do everything right,” Yoo says. “But if you keep at it year after year, eventually you’ll find success.”
Since the start of the 2015 state budget process, which included repeal of the 2 percent tax, RIMI has hired eight full-time radiologist and 29 administrative and clinical staff.
By Jenny Jones, project specialist for ACR Press