Edward Hospital to appeal tax exemption denial

Edward Hospital officials pledged Tuesday to mount a “vigorous defense” against an Illinois Department of Revenue decision to deny the Naperville facility’s property tax exemption. The department#146;s decision follows last year#146;s Illinois Supreme Court ruling that a downstate hospital wasn#146;t providing enough free or discounted treatment of the poor to qualify for an exemption. The ruling cost that facility $1.2 million in annual local property tax payments.

The revenue department now has decided Edward, Northwestern Memorial#146;s Prentice Women#146;s Hospital and Decatur Memorial Hospital don#146;t qualify for property tax exemptions, either.

#147;We are very disappointed about today#146;s preliminary ruling by the Illinois Department of Revenue and plan to mount a vigorous defense,#148; Edward officials said in a written statement. #147;Edward Hospital has one of the most generous charity care policies in Illinois and contributed $77 million in charity care and community benefit programs last year.#148;

The tax-exempt status, Edward officials said, allows them to invest in the community through critically needed services, access to care, improved quality, lifesaving technology and upgraded facilities.

Edward spokesman Keith Hartenberger declined to speculate what the tax decision may cost the hospital.

Whatever those tax dollars amount to would contribute to numerous government agencies, including the city, schools and park district.

#147;Should this go through, it would be similar to adding a giant development smack-dab in the middle of downtown,#148; City Manager Doug Krieger said. #147;That would ultimately increase the overall EAV (equalized assessed valuation), which would then provide downward pressure on property tax rates. So, no, we certainly would not be disappointed.#148;

Park district Executive Director Ray McGury called Edward a #147;great partner#148; and said the district would be monitoring the situation.

#147;We set our budgets based upon what we know and appreciate all the support our taxpayers provide to us,#148; McGury said. #147;Since this a very recent decision we will monitor future developments and act accordingly.#148;

Officials at Naperville Unit District 203, which would likely be the biggest benefactor, could not immediately be reached.

The hospitals have 60 days to ask an administrative law judge to review the decisions. Edward officials said they will seek such a review.

In Illinois, property taxes are collected by county governments and the Department of Revenue decides which institutions are eligible for tax exemptions.

There is no state money involved in the property tax decisions, but local governments could benefit if the hospitals end up paying.

Roughly 15 other health care systems, including Advocate Medical Center in Libertyville and Adventist GlenOaks Hospital in Glendale Heights, are awaiting decisions, said Mike Klemens, manager of policy and communication for the Department of Revenue.

The department used guidance from the Illinois Supreme Court#146;s decision, previous court cases and the state constitution to determine whether the hospitals qualified as charitable institutions, officials said. There was no dollar amount or percentage of revenue used as a threshold.

#147;The question for us is: Is it a charity or a business? Is it Motorola or is it a soup kitchen?#148; Klemens said.

It#146;s not clear how much the three hospitals in Tuesday#146;s action would have to pay in taxes because the properties haven#146;t been assessed.

Hospital executives, in justifying their tax-exempt status, say they do much more for the community good than the charity care they provide. They also note that Medicare and Medicaid rates are so low they don#146;t cover a hospital#146;s costs.

In the case of the three hospitals, all have for-profit entities in their ownership chains, Klemens said. They all charge fees for the health care they provide. They documented no charity care on their financial statements, Klemens said, although they reported charity care figures in other records.

#147;We treat patients 24 hours a day, seven days a week, regardless of their ability to pay,#148; Edward officials said in their statement. #147;We are a mission-driven organization committed to supporting health and strengthening communities by providing outstanding health care services.#148;

The Northwestern Memorial decision was based on its 2007 application for its newly constructed $450 million women#146;s hospital. The Northwestern system had $1.17 billion in net patient revenue in 2007, according to Klemens. Northwestern reported charity care totaling 1.85 percent of its revenues.

Edward Hospital#146;s application for tax exemption in 2007 was submitted after its property was subdivided. The hospital in Naperville had $448 million in net patient revenue that year and reported charity care equal to 1.04 percent of net patient revenues.

Decatur Memorial Hospital#146;s 2006 application for tax exemption came because of an ownership change. The hospital had $252 million in net patient revenue that year and its charity care amounted to 0.96 percent.

The Illinois Supreme Court ruled last year that Provena Covenant Medical Center in Urbana didn#146;t do enough to deserve a property tax exemption. Backing a state decision to repeal Provena#146;s exemption status, the court said the hospital provided minimal free or discounted care, did little to advertise its charity care and used tough tactics to go after unpaid bills.

In 2002, the year in question in the Supreme Court case, the Urbana hospital#146;s charity care was valued at 0.7 percent of the hospital#146;s revenue. That was about $270,000 less than the $1.1 million in tax exemptions the hospital would have received. The hospital has been paying about $1.2 million in local property taxes since the decision.

The Supreme Court also said Provena didn#146;t lessen the burdens of affected taxing districts in performing their functions.

Ÿ Daily Herald news services contributed to this report.