Hospitals ready if talks break down on taxes

Finding a compromise on a legal standard that would allow Illinois’ nonprofit hospitals to keep their valuable property tax exemptions is proving difficult as a Thursday deadline set by Gov. Pat Quinn approaches.

An eleventh-hour meeting is scheduled Wednesday with advisers from Quinn’s office, representatives from hospitals and consumer advocates. If a compromise can’t be reached, the Illinois Hospital Association is ready with its own draft legislation, while a consumer coalition is arguing in favor of a standard that most hospitals aren’t meeting now.

Five months ago, Quinn set a March 1 deadline and halted the Illinois Department of Revenue from issuing rulings that would strip hospitals of the tax exemptions if they were deemed not to be providing sufficient charity care.

The governor’s office will determine its next step on Thursday, said Quinn spokeswoman Brie Callahan. Quinn could extend the negotiations if a compromise can’t be reached. It’s also possible he could order the Department of Revenue to resume issuing rulings that could mean more hospitals would have to start paying local property taxes.

“We’re prepared to follow the governor’s instructions on March 1 regarding the moratorium on dealing with hospital applications for charity exemptions,” said Department of Revenue spokeswoman Sue Hofer.

Illinois Hospital Association spokesman Danny Chun said the group wants the talks to continue, but that it has draft legislation ready and has lined up East St. Louis Democratic Sen. James Clayborne Jr. as the sponsor, Chun said.

“We’re assuming (Wednesday) is not the last meeting. We’re assuming these very important talks will continue,” Chun said. “We do need a legislative solution passed this spring.”

Chun said the hospital association supports a framework floated Monday by the Civic Federation. Under the proposal, a nonprofit hospital would be required to provide charitable care and other community benefits at least equal to the property taxes it would have paid.

On the other side, consumer group Fair Care Coalition wants each hospital to provide 6 percent of its revenue for charitable benefits to get a tax exemption. Eighty percent of that would have to be in the form of free or discounted care for the poor.

Few nonprofit hospitals meet that standard now, said Janna Stansell, who is a part of the coalition and a senior policy analyst for the Health and Medicine Policy Research Group in Chicago.

“We believe hospitals could do a better job of helping people access charity care,” she said.

Only four of 25 nonprofit hospitals in Cook County are now meeting the standard proposed by the coalition, according to new data analysis that the coalition shared with The Associated Press.

The Illinois Hospital Association argues that President Barack Obama’s health overhaul law will expand Medicaid coverage to 600,000 more Illinois residents within the decade, which will make it more difficult for hospitals to reach rigid charity care goals. More people with insurance means less need for free care.

“We’re not going to agree to their 6 percent proposal. ... A lot of hospitals are financially fragile and this could put them over the edge and they’ll close,” Chun said.

Stephen Weyl, a health care attorney in New Hampshire who has been following the issue, said he knows of only three states with specific requirements for the amount of charity care a hospital must provide in order to qualify for a property tax exemption.

The Utah model is similar to the Illinois Hospital Association’s plan. Defining what constitutes charity is difficult, Weyl said, and there are political challenges too.

“The tax-exempt hospitals don’t want to give up anything and the state taxing authorities want as much as they can get,” Weyl said.

The dispute stems from a 2010 Illinois Supreme Court decision that ruled Provena Covenant Medical Center in Urbana wasn’t doing enough free or discounted treatment of the poor to qualify for an exemption. It ruled that the hospital had to pay $1.2 million in local property tax payments per year.

Last year, the Illinois Department of Revenue cited the 2010 ruling when denying property tax exemptions to three hospitals: Northwestern Memorial’s Prentice Women’s Hospital in Chicago, Edward Hospital in Naperville and Decatur Memorial Hospital in Decatur.

Edward Hospital has annually paid about $1 million in property taxes since 2008, a decision made as the Provena case made its way to the state’s high court.

“This was a business decision made a few years ago in an era of great uncertainty and with an abundance of caution — and there’s still much uncertainty,” said hospital spokesman Brian Davis. Leadership thinks the hospital should be tax exempt, he said.