Hospital Tax Status Ruling May Affect Charity Care Statewide

The Illinois Department of Revenue recently affirmed a Champaign County Board of Review decision to deny Provena Covenant Medical Center’s application for tax-exempt status in 2002. At the crux of the final administrative decision (available at www.taxx.illinois.gov), however, was the admission that the hospital’s 2002 revenues exceeded $113,000,000 while its charity care program cost it only $831,724 or 0.7 percent of revenue, which was less than the value of the property tax exemption it was seeking.

The Provena Covenant charity care program in existence in 2002 was similar to many hospital programs under scrutiny as advocates consider the value of the tax breaks in light of the amount of charity care they provide in return. Echoing this concern, the Center for Tax and Budget Accountability just released a report entitled “An Analysis of the Tax Exemptions Grant to Cook County Non-Profit Hospitals and the Charity Care Provided in Return”(www.ctbaonline.org).

Ironically, since 2002, Provena administrators have been regularly meeting with health care consumer advocates to improve their charity care programs. Improvements include the following: income eligibility ceilings have increased substantially resulting in a 100 percent discount for households with income below 200 percent of the federal poverty level, publicity for community care discounts, improved applications, removing time limits for applying for the discount, and giving 100 percent discounts on past-due debt to all households currently receiving Medicaid.

The roots of the case include a convergence of a number of factors that led to scrutiny of a property tax exemption that had been taken for granted. Champaign County was part of an Access Project study of the consequences of medical debt. That same study included an analysis of bankruptcy petitions to determine the impact of bankruptcy filings on medical debt. The Wall Street Journal ran a series of articles about Champaign County hospitals’ “aggressive” debt collection practices, including using collection agencies and body attachments. In its application for tax-exempt status, Provena Covenant did a poor job of distinguishing the for-profit businesses from the nonprofit operations located in the facility. 

There is a big difference to consumers between “bad debt charges” and charity care or community care discounts.  Hospitals might have been somewhat cavalier about the distinction.  There may be very little difference to a hospital’s bottom line (hospitals don’t get paid in either case), and now hospitals may jeopardize their tax-exempt status if they do not do a better job of attending to the needs of the medically indigent in their communities.

For more information, contact guest writer Valerie Williams.