Hospitals are getting dinged for taxes
Northwestern Memorial Hospital's Prentice Women's Hospital was among four hospitals the Illinois Department of Revenue is saying didn’t provide enough charitable care to qualify for a tax exemption. (alex garcia, chicago tribune / March 28, 2005)
Three Illinois hospitals got some bad news last week: A big tax bill's coming. The Illinois Department of Revenue took away the property-tax exemption enjoyed by the three not-for-profit health centers: Northwestern Memorial Hospital's Prentice Women's Hospital, Edward Hospital in Naperville and Decatur Memorial Hospital in Decatur.
The revenue department says its decision was based on an Illinois Supreme Court ruling last year that Provena Covenant Medical Center in Urbana hadn't provided enough charitable care to qualify for a tax exemption.
Provena — like other not-for-profit hospitals in Illinois — was tax-exempt by law. Not-for-profit hospitals don't pay taxes and, in return, they're expected to provide some free or reduced-rate health care to people who can't pay for the care. But the law doesn't say exactly how much care the hospitals must provide.
The Revenue Department didn't establish a figure with its new ruling.
The state Supreme Court didn't establish a figure last year.
Attorney General Lisa Madigan has pressed the Legislature to set a standard, but lawmakers have not done so. When Madigan raised this idea in 2006, she said hospitals should have to devote at least 8 percent of their annual operating costs to charity care. Hospitals leaders said that would put a lot of them out of business.
Hospital execs say the decisions by the Revenue Department and Supreme Court have left them baffled. How much do they need to contribute to charity care to earn an exemption from property taxes? No one knows.
Four hospitals have been snared so far. It's hard for them to argue that they've been exerting themselves to help the poor.
At Provena, 302 of 110,000 patients got free or reduced-rate care through the hospital's charity program in 2002, when the hospital applied for its tax-exemption. That came to 0.7 percent of the hospital's net revenue that year.
Northwestern Memorial Hospital, which includes Prentice, reported charity care was 1.85 percent of its $1.18 billion in net patient revenue in 2007, when it applied for an exemption.
Edward Hospital charted charity care at 1.04 percent of its $448 million in net patient revenue in 2007.
The figure for Decatur Memorial: 0.96 percent of $252 million in revenue in 2006.
There's big money at stake here. The Supreme Court decision left Provena on the hook for $1.1 million in property taxes to local governments.
Hospitals need clear standards for how much charity care is expected in return for a tax break.
Lawmakers should follow the same credo as doctors: First, do no harm. The Illinois Hospital Association says one in three Illinois hospitals loses money. Lawmakers need to set a standard that's flexible so it doesn't push financially stressed hospitals over the brink with a tax bill. A shuttered hospital doesn't provide care for anyone.
A key question for lawmakers: What counts as charity care?
Hospitals should be able to count what they spend because the government fails to reimburse their full costs for treating Medicaid and Medicare patients. Forgiveness of debts for low-income patients should count, based on the actual cost of the care. So should some community benefits, such as direct grants to clinics and other facilities that primarily serve the poor.
The rules need to be clear so every hospital knows what is required. Let's set some reasonable standards and end the guessing games.
No comments:
Post a Comment