Provena case could lead to more tax exempt challenges of area hospitals

State revenue department officials are vowing to review other hospitals' property tax exemption applications in the wake of a precedent-setting state Supreme Court decision that now has suburban hospital executives hunkering down.

Area hospitals continued to review the court decision concerning Provena Covenant Medical Center in downstate Urbana that could affect millions of dollars related to their tax exempt status. But how much each hospital must do to support charitable care remains unclear, since the court decision and legislators still haven't provided any guidance.

But that won't stop more investigations and court cases, according to the Illinois Department of Revenue.

"There are a number of hospital applications that have been on hold waiting for the (Supreme) Court's decision. We will now be reviewing those applications," said revenue spokeswoman Susan Hofer. The Revenue Department and the Illinois Attorney General's Office prosecuted the case.

Provena Covenant officials maintained they provided sufficient and clear evidence that it is a charitable group. After a five-year court battle, the state Supreme Court Thursday issued a decision that said the hospital group, which also operates in Elgin, Aurora and elsewhere, wasn't providing enough care for the uninsured to qualify for the exemption.

"There is, however, no blanket exemption under the law for hospitals or health care providers," the court said in its decision. "Whether a particular institution qualifies as a charitable institution and is exempt from property tax is a question which must be determined on a case-by-case basis."

During a tough economic time when the state is searching for new revenue streams, this wasn't welcome news to suburban hospitals and medical centers. Eighteen area hospitals all declined to comment or did not return calls and e-mails regarding the Provena case.

A review of 2008 financial records, provided by the state, showed area hospitals had cost ranges for uninsured patients from 0.7 percent to 3.9 percent of total revenues. Provena Covenant for the same year was 3.3 percent, but for 2002 at issue in the court case was 0.7 percent.

Naperville-based Illinois Hospital Association issued a statement describing the court decision as disturbing. The association also said that hospitals statewide have increased their charity care by 68 percent and the overall community benefits they provide by 27 percent since 2005. It said it has worked with state officials to establish laws in this area.

"While this court case focused on a single year, 2002, it's important to note that Provena and other charitable hospitals across the state have become even more generous over the years despite mounting financial pressures and challenges," Association president MaryJane A. Wurth said. "Even as many of Illinois' hospitals are struggling to survive and serve their communities during these difficult economic times, they are continuing their outreach efforts to make people aware of their charity care and financial assistance policies and to increase the benefits they provide their communities."

The Provena decision made clear that the law in Illinois requires nonprofit hospitals to provide charity care in exchange for lucrative property tax exemptions, said Heather O'Donnell, policy director for health care and human services with the Center for Tax and Budget Accountability in Chicago.

"The value of the tax breaks are essentially public dollars in the hands of nonprofit hospitals for the use of providing affordable care to poor and low-income patients," said O'Donnell. "It is imperative that given strained budgets at every level of government and a broken health care system, that every entity receiving public funds live up to their legal obligations. While hospitals do many things that benefit their communities such as medical education and research, these activities are competitive business practices to draw paying patients into the hospital, but they are not 'charitable' activities."

• Daily Herald Business Writer Kim Mikus contributed to this report.