Gov. Pat Quinn has put a hold on a decision to strip three Illinois hospitals -- including Edward Hospital in Naperville -- of their property tax exemptions.
Instead, Quinn directed his staff to work with the hospital industry and other parties to find a legislative compromise.
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Quinn wants recommendations on legislation by March 1.
"Meeting this deadline will assure that no decisions will be issued on the recent exemption denials while the parties are working together in good faith," Quinn wrote in a letter to the Illinois Hospital Association.
Last month, the Illinois Department of Revenue ruled that Edward, Northwestern Memorial's Prentice Women's Hospital and downstate Decatur Memorial Hospital don't provide enough free or discounted treatment of the poor to qualify for tax exemptions.
"We appreciate the governor's willingness to seek a legislative solution and to delay action on the initial denial of our tax exemption," Edward Hospital officials said Thursday in a prepared statement.
In the meantime, however, Edward will continue its appeal of the preliminary ruling, officials said.
Another 15 or so Illinois hospitals -- including Advocate Condell Medical Center in Libertyville and Adventist GlenOaks Hospital in Glendale Heights -- are awaiting decisions on their tax-exempt status.
The Department of Revenue reviews are triggered by such events as a new building or a change in ownership.
At stake are millions of dollars in tax revenues that the hospitals could contribute to cities, parks and schools by paying property taxes. No state tax revenue is at stake because the exemptions are for local property taxes.
Hospitals say losing their property tax exemption will force them to reduce services, lay off employees and cancel construction projections.
"Nothing good will come from taxing hospitals," Maryjane A. Wurth, IHA President, wrote in a letter to Quinn. "It will only kill jobs, further slow the Illinois economy and increase the costs of health care."
Coming up with a legislative solution that suits both hospitals and taxpayers won't be easy, however.
For years, the hospital association has resisted a rigid percentage of revenue as a definition for charity care, arguing instead for a more expansive consideration of what hospitals contribute to the community through the costs of training doctors and nurses, the costs of care not covered by the government health programs Medicare and Medicaid and the cost of patients' bad debt.
Wurth said the expansion of Medicaid coverage coming in 2014 under the Affordable Care Act will mean fewer Illinois residents will lack insurance. That will make setting a percentage of revenue for charity care unreasonable, she said.
"That's yesterday's answer to the problem," Wurth said.
The Chicago-based Fair Care Coalition has argued that tax-exempt hospitals should be required to spend 3.5 percent of their annual revenue on providing free and discounted care to the poor and uninsured.
"We want a standard that's going to be measurable," said Roshani Saraiya, a community leader with the Logan Square Neighborhood Association, a coalition member. "We want a hard number. We're not stuck on that number. We're more focused of finding solutions to the problem."
Daily Herald wire services contributed to this report.