[Cite as Dayton Physicians, L.L.C. v. Testa, 2016-Ohio-5348.]
IN THE COURT OF APPEALS OF OHIO SECOND APPELLATE DISTRICT MONTGOMERY COUNTY
DAYTON PHYSICIANS, LLC : : Appellate Case No. 26881 Appellant : : BTA Case No. 2014-3986 v. : : (Administrative Appeal from JOSEPH W. TESTA, TAX : Board of Tax Appeals) COMMISSIONER OF OHIO : : Appellee : :
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OPINION
Rendered on the 12th day of August, 2016.
JAMES M. KELLY, Atty. Reg. No. 0016984, and JARROD M. MOHLER, Atty. Reg. No. 0072519, Robbins, Kelly, Patterson & Tucker, 7 West Seventh Street, Suite 1400, Cincinnati, Ohio 45202-2417 Attorneys for Appellant
MICHAEL DeWINE, Atty. Reg. No. 0009181, by BARTON A. HUBBARD, Atty. Reg. No. 0023141, Office of the Attorney General of Ohio, 30 East Broad Street 25th Floor, Columbus, Ohio 43215 Attorney for Appellee
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FAIN, J.
{¶ 1} Appellant Dayton Physicians, LLC, appeals from a determination of the -2-
Board of Tax Appeals affirming an order of the Tax Commissioner of Ohio imposing a tax
on the purchase of medical transcriptionist services under the statute that imposes a tax
on automatic data processing services. Dayton Physicians argues that medical
transcriptionist services are a personal or professional service that is not subject to Ohio
sales or use tax.
{¶ 2} We conclude that the final determination of the Board of Tax Appeals (BTA)
is not unreasonable or unlawful and that the record contains reliable and probative
evidence to support the BTA's findings. Therefore, the decision and order of the BTA is
Affirmed.
I. Course of Proceedings
{¶ 3} Dayton Physicians is a medical practice providing urology, radiation
oncology, pathology and hematology care. Dayton Physicians utilizes medical
transcription services for transcribing medical reports, tests, medical analysis,
summaries, histories, diagnoses, operative notes, lab reports and discharges. The Ohio
Department of Taxation conducted an audit of Dayton Physicians’ purchases from
January 1, 2010 to March 31, 2013. As a result of the audit, Dayton Physicians was
assessed a use tax for the purchase of medical transcription services. Dayton
Physicians petitioned for reassessment, reflecting that the disputed amount is
$97,202.87. Record at pg. 10. The Tax Commissioner denied the reassessment,
concluding:
In summary, the sole act of medical transcription is not an “act
performed by a person pursuant to a professional license, certificate or -3-
other legal authority.” Many transcriptionists just need to be accurate at
typing and the spelling of medical terms. Therefore, the lone act of medical
transcription is not exempt from tax as a professional service, rather it is
“processing of others’ data, including keypunching or similar data entry
services together with verification thereof…” The transcriptionist is taking
information (data) from notes, tests, tapes, medical reports, medical
analysis, summaries, histories, diagnoses, operative notes and other
sources and using a computer to place them into another medium. This is
a taxable service. However, in situations where the facts show that a
taxpayer is not purchasing just medical transcription service where data is
transcribed into a different form, but instead has contracted with a company
and received additional services of a personal nature, a finding that the true
object of the contract is a personal service may be correct.
In the present matter at issue in this Final Determination, the
petitioner has not submitted a contract or other probative substantive
evidence to demonstrate that the service the petitioner has purchased is
anything but taxable data processing service. The auditor’s review found
the transcription services to be taxable automatic data processing services,
and the petitioner has not shown this to be incorrect. The objection is
denied. Therefore, the assessment shall stand as issued.
{¶ 4} Dayton Physicians appealed to the Board of Tax Appeals. At the hearing
before the BTA, Dayton Physicians presented three witnesses, and the State presented
one witness. Holly Card, employed by Dayton Physicians as a Practice Administrator, -4-
testified that a medical transcriptionist “brings a well-written document that is well
interpreted by all collaborating physicians who are involved in the patient’s care.”
Transcript (“T.”) at 33. Card explained that a good transcriptionist interprets what the
physician is saying, must understand the specialty and flags discrepancies, which are
returned to the doctor for edits. T. at 35-36. Card verified that Dayton Physicians has no
written contract with its transcription service. T. at 55. Vicki Lynn DiMarco, an employee
of Columbus Oncology Associates, testified, based on her 29 years as a medical
transcriptionist, that her job is to provide a verbatim transcript of what the doctor dictates
on a microcassette. DiMarco testified that it is a collaborative process between her and
the doctor, which requires her to flag ambiguities and send them back to the physician for
completion or correction. T. at 75. DiMarco stated that the work is not automatic, and
could not be performed by someone without training and experience. T. at 77. Dayton
Physicians also provided testimony from Craig Froehle, a systems engineer for
healthcare delivery systems, who researches and teaches healthcare delivery options at
the University of Cincinnati. Dr. Froehle testified that his research included a comparison
of the process of medical transcription completed by humans with that completed by
automatic dictation software. T. at 112. Dr. Froehle’s research found a significant
reduction in physician satisfaction and perceived usability when the transcription is done
automatically with Dragon software. T. at 119. Dr. Froehle opined that a human
transcriptionist adds significant value to the process by cleaning up an audio recording
through formatting and the elimination of incidental statements such as “umm” and “ah,”
unnecessary repetitions of the same facts, or conversational statements occurring when
the physician is interrupted during dictation. T. at 160. It was Dr. Froehle’s expert -5-
opinion that human medical transcription services are a personal service that entails
listening, understanding, comprehending, interpreting, and the putting into written words
the physician’s intent. T. at 127.
{¶ 5} At the hearing, the State presented one witness. Tracy Ruegg, a former
director of the Ohio Board of Nursing, testified that medical transcriptionists are not
licensed medical professionals and have no authority to alter, adjust, or make any
substantive changes to the notes dictated by a physician. T. at 212. As a certified nurse
practitioner practicing at The Ohio State University James Cancer Hospital, Ruegg has
dictated medical notes for processing by an outsourced medical transcriptionist for many
years. T. at 170-172. Reugg testified that it was inappropriate for a transcriber to fill in
blanks based on prior reports, records, or common knowledge, because it is their duty to
transcribe dictation verbatim, and notify the physician of any discrepancies. T. at 209. In
Ruegg’s opinion, a medical transcriptionist would be engaged in the unauthorized practice
of medicine if the transcriptionist changed a conjunction in a sentence, or interpreted
medical records. T. at 209-211. Ruegg agreed that it is a simple collaborative process,
which requires certain skills, but testified that it is the physician’s responsibility to make
any corrections, fill in blanks, and verify accuracy. T. at 217-226.
{¶ 6} Accepted into evidence at the BTA hearing were Exhibits 4 and 5, which
document final determinations of the Tax Commissioner for two other medical practices,
in which the Commissioner concluded that medical transcriptionist services were personal
or professional services not subject to tax. Neither of these decisions provide any factual
findings of the medical transcription services at issue in those instances, so a comparison
with the transcription services provided to Dayton Physicians in the case before us is not -6-
possible. Both of these decisions were made before the Tax Commissioner’s final
determination in the case before us that Dayton Physicians’ purchase of medical
transcriptionist services was taxable as an automatic data processing service. The record
also contains documentation describing certificate or associate degree programs for
medical transcription training at the University of Akron, Columbus State Community
College, Owens Community College, Columbus State University, Hocking College,
Washington State Community College, Lakeland Community College, Zane State
College, University of Northwestern Ohio, Eastern Gateway Community College, and
Belmont College. Record at 41-90. The record also contains two job descriptions
provided by the Ohio Department of Administrative Services for state employees holding
the positions of a medical transcriptionist and a data entry clerk. Record at 37-40.
{¶ 7} The BTA affirmed the decision and order of the Tax Commissioner after
finding, based on the evidence presented, that the “transcriptionist does not study, alter,
analyze, interpret or adjust the material,” and does not fit any definition of personal or
professional service defined under R.C. 5739.01(Y)(2)(a)-(j). The BTA found that the
transcriptionist reduces the physician’s spoken word to written form, and that, while
undoubtedly transcriptionists who perform their duties accurately and in a timely fashion
are preferred by their customers, there is no specialized training required to perform their
jobs, no licensing or certification process that must be completed in order to work as a
transcriptionist, and no regulatory authority that oversees the profession. Based on
these findings, the BTA concluded that the medical transcription services purchased by
Dayton Physicians during the audit period did not constitute a personal or professional
service. From the final order of the BTA, Dayton Physicians appeal. -7-
II. Standard of Review
{¶ 8} An appeal from a decision of the board of tax appeals involving a tax
assessment made by the tax commissioner is provided by R.C. 5717.04. In Global
Knowledge Training, L.L.C. v. Levin, 127 Ohio St.3d 34, 2010-Ohio-4411, 936 N.E.2d
463, ¶ 12, the Supreme Court of Ohio explained the proper standard of reviewing an
administrative appeal from the BTA:
Our standard of review from a decision of the BTA is whether it is
“reasonable and lawful.” While we “will not hesitate to reverse a BTA
decision that is based on an incorrect legal conclusion,” we will affirm the
BTA's resolution of factual issues if the record contains reliable and
probative evidence that supports the BTA's findings. [T]the tax
commissioner's findings “are presumptively valid, absent a demonstration
that those findings are clearly unreasonable or unlawful.” Consequently, the
taxpayer carries the burden “to show the manner and extent of the error in
the Tax Commissioner's final determination.” Specifically, “when an
assessment is contested, the taxpayer has the burden ‘ “to show in what
manner and to what extent” ’ the commissioner's investigation and audit,
and the findings and assessments based thereon, were faulty and
incorrect.”
(Internal citations omitted.) Id. at ¶ 12.
III. The Record Supports the BTA’s Conclusion that Medical Transcription -8-
Services Performed for Dayton Physicians Were Not a Personal Service
{¶ 9} For its first assignment of error, Dayton Physicians asserts as follows:
WHETHER THE BOARD OF TAX APPEALS ERRED IN APPLYING
THE CONSUMER USE TAX STATUTE TO THE FACTS OF THE CASE.
{¶ 10} “Automatic data processing services”, as defined by R.C. 5739.01(Y)(1)(a),
are subject to a use tax, while personal and professional services, defined by R.C.
5739.01(Y)(2) and R.C. 5739.01(B)(3)(e), are not subject to a use tax. “ ‘Automatic data
processing’ means processing of others' data, including keypunching or similar data entry
services together with verification thereof, or providing access to computer equipment for
the purpose of processing data,” as defined by R.C. 5739.01(Y)(1)(a). “ ‘Personal and
Professional Services’ means all services other than automatic data processing,
computer services or electronic information services, including but not limited to:
(a) Accounting and legal services such as advice on tax matters, asset
management, budgetary matters, quality control, information security, and
auditing and any other situation where the service provider receives data or
information and studies, alters, analyzes, interprets, or adjusts such
material;
(b) Analyzing business policies and procedures;
(c) Identifying management information needs;
(d) Feasibility studies, including economic and technical analysis of existing
or potential computer hardware or software needs and alternatives;
(e) Designing policies, procedures, and custom software for collecting
business information, and determining how data should be summarized, -9-
sequenced, formatted, processed, controlled, and reported so that it will be
meaningful to management;
(f) Developing policies and procedures that document how business events
and transactions are to be authorized, executed, and controlled;
(g) Testing of business procedures;
(h) Training personnel in business procedure applications;
(i) Providing credit information to users of such information by a consumer
reporting agency, as defined in the "Fair Credit Reporting Act," 84 Stat.
1114, 1129 (1970), 15 U.S.C. 1681a(f), or as hereafter amended, including
but not limited to gathering, organizing, analyzing, recording, and furnishing
such information by any oral, written, graphic, or electronic medium;
(j) Providing debt collection services by any oral, written, graphic, or
electronic means.”
R.C. 5739.01(Y)(2).
{¶ 11} We agree that medical transcriptionist services do not fit any subsection of
R.C. 5739.01(Y)(2), which provides a non-exhaustive list of personal or professional
services. Applying the statutory definition, the BTA was required to find that medical
transcriptionist services were not personal or professional services if the services fit under
the definition of automatic data processing, computer services or electronic information
services. The BTA did find that the medical transcriptionist services provided to Dayton
Physicians was simply the processing of others’ data by transferring dictated words into
a typed written form, which required no professional skills. While it is undisputed that Ohio
does not license or regulate the field of medical transcription, several colleges in Ohio -10-
offer certificate programs in medical transcription in order to train future transcriptionists
with the skills necessary to accomplish their tasks. Graduates of these college certificate
programs learn skills enabling them to succeed in their profession. There is also evidence
in the record that these skills can be learned on the job, through experience in the field.
{¶ 12} In Emery Indus., Inc. v. Limbach, 43 Ohio St. 3d 134, 539 N.E.2d 608
(1989), the Supreme Court of Ohio addressed the definitions of a “personal service” and
a “professional service,” as used in the tax code. The Court declared that a “professional
service” is any act performed by a person pursuant to a professional license, certificate
or other legal authority. Id. at syllabus. In Ohio, the Chancellor of the Ohio Board of
Regents, University System of Ohio, is the legal authority for approval of degrees and
certificate programs, pursuant to R.C. 3333.04, and OAC 3333-1-04. Therefore, it is
possible to establish that a medical transcriptionist provides a professional service if the
transcriptionist is providing services pursuant to the skills obtained in an approved
certificate program. In the case before us, the record does not support a finding that the
transcriptionists used by Dayton Physicians held certificates in medical transcription from
an approved college program and utilized the professional skills acquired by that program.
Therefore, the BTA correctly concluded that the medical transcriptionist services provided
to Dayton Physicians during the audit period did not constitute professional services.
{¶ 13} In Emery Indus., Inc. v. Limbach, supra, the Supreme Court of Ohio
declared that a “personal service” as used in the tax code is “any intellectual or manual
act involving a recognized skill performed by a person who is specifically engaged by the
purchaser to perform the act.” Id. at syllabus. The court recognized that the purchase of
personal services is often a mixed transaction involving both services and property that -11-
requires a determination of the “overriding purpose” or “true object” of the transaction. Id.
at 139. Emery, a chemical manufacturer, hired a contractor to design equipment, which
included both design services and the preparation of bid documents. Id. at 135. The Court
found that the preparation of documents was incidental to the design services, because
the overriding purpose of the transaction was to provide professional design services. Id.
at 139. In the case before us, the BTA’s decision incorporated its reasoning from a
companion case, Columbus Oncology Associates v. Testa, BTA Case No. 2014-3984
(Sept. 28, 2015), in which it reviewed the holding of Emery and considered the physician’s
objectives in purchasing transcription services. To determine the physician’s objectives,
the BTA considered the expectations of the physicians as well as the job duties of the
transcriptionists. The BTA noted that none of the physicians who work for Dayton
Physicians testified, and none of the transcriptionists who transcribe for Dayton
Physicians testified, leaving the record incomplete. Nonetheless, the BTA considered
the expert testimony provided by both parties, and found that the Dayton Physicians’
purchase of medical transcriptionist services had the sole objective to create a verbatim
record of the physician’s dictation, and the transcriptionists did not apply cognitive skills
or analytical thought to study, alter, analyze, interpret, or adjust the data. A reasonable
finding was made that the true object or overriding purpose of the transaction was to
produce a written transcript, from which the physician could verify its accuracy and apply
his or her professional skills to adjust or alter to complete the medical record needed for
patient care. Based on the evidence presented, the BTA reasonably concluded that the
medical transcription services purchased by Dayton Physicians did not constitute a
personal or professional service, as those terms are defined in R.C. 5739.01(Y)(2) and -12-
R.C 5739.01(B)(3)(e). Accordingly, the BTA did not err in applying the statutory
definitions, and Dayton Physicians’ first assignment of error is Overruled.
IV. The Failure to Follow Prior Precedent Was Not Unreasonable or Unlawful
{¶ 14} For its second assignment of error, Dayton Physicians asserts as follows:
THE TAX COMMISSIONER AND BOARD OF TAX APPEALS
ACTED UNREASONABLY WHEN THEY DISREGARDED TWO
PREVIOUS FINAL DETERMINATION LETTERS OF THE OHIO TAX
COMMISSIONER ON THE IDENTICAL LEGAL ISSUE.
{¶ 15} Dayton Physicians argues that the BTA decision and order was
unreasonable and unlawful based on its failure to follow established precedent. The
record regarding the final determination that two other medical practices were not subject
to a tax for their purchase of transcription services is insufficient to determine that the
facts established by the evidence in those cases are indistinguishable. In the case before
us, the tax commissioner reached his conclusion that the services were taxable based on
the specific facts presented by Dayton Physicians, noting that under different facts a
different conclusion could be reached. The tax commissioner stated, “in situations where
the facts show that a taxpayer is not purchasing just medical transcription service where
data is transcribed into a different form, but instead has contracted with a company and
received additional services of a personal nature, a finding that the true object of the
contract is a personal service may be correct.” This statement confirms that the decision
of the BTA was decided on the record of the evidence presented by Dayton Physicians.
The facts presented to the BTA for the other two assessment decisions involving medical -13-
transcriptionist services may have involved distinguishable facts. We agree with the Tax
Commissioner that under different facts a finding that the true object of the contract is a
personal or professional service might be correct. For example, a non-taxable
professional service may be found when a taxpayer enters into a written contract with a
transcriptionist service specifying that each transcriptionist must hold a certificate from an
approved college program and must utilize specific professional skills acquired from the
certificate program to complete the transcriptionist’s task. Based on the record before us,
we cannot conclude that the previous two BTA cases are indistinguishable on their facts.
Without a sufficient record, we cannot find, as a matter of law, that the BTA should have
applied and followed its prior decisions involving medical transcriptionist services.
{¶ 16} The second assignment of error is overruled.
V. Conclusion
{¶ 17} Both assignments of error having been overruled, the decision of the Board
of Tax Appeals is Affirmed.
HALL and WELBAUM, JJ., concur.
Copies mailed to:
James M. Kelly Jarrod M. Mohler Michael DeWine Barton A. Hubbard