Cash-strapped Ill. goes after hospitals’ nonprofit status

Andrew Van Dam

About Andrew Van Dam

Andrew Van Dam of The Wall Street Journal previously worked at the AHCJ offices while earning his master’s degree at the Missouri School of Journalism.

A New York Times article written by Bruce Japsen, an independent journalist writing for the Chicago News Co-Op, digs into Illinois’ recent challenges to the tax exemptions granted to a trio of prominent hospitals by virtue of their nonprofit status. The challenge, inspired in part by the state supreme court’s willingness to uphold the revocation of the nonprofit status of an Catholic hospital in Urbana last year, could expand to more than a dozen other institutions as the state scrambles to cover a looming revenue shortfall.

In its case, the state alleges that the hospitals aren’t providing a high enough proportion of charity care to fulfill the mission of a nonprofit.

All three of the hospitals the state is focusing on provided free and discounted medical care that ranged from 0.96 percent to 1.85 percent of patient-care revenue, according to the revenue department. The state also said that each one had been operating as a “for profit” business when the state’s Constitution says that “only charities are entitled to a tax exemption.”

The hospitals, for their part, point to the other benefits they provide the community, such as neonatal intensive care and burn units, that don’t always bolster their bottom lines. Advocates answer that paying taxes provides a community benefit as well, one that can readily be measured in dollars and cents. And Japsen found that paying those taxes doesn’t even seem to preclude the provision of charity care, especially at the parsimonious levels provided by the hospitals currently targeted by the state.

“The relative amounts of charity care provided by not-for-profit tax-exempts are not materially different from the amount provided by for-profit hospitals,” said Jim Unland, a longtime analyst of Illinois’ health care industry and president of the Health Capital Group, a consulting firm in Chicago. “This raises the issue of whether the tax-exempts are getting prejudicially favorable treatment.”

The three hospitals whose tax exemptions have been stripped by the state department of revenue plan to challenge the action in court, and state hospital organizations are gearing up for a lobbying push they hope will put their tax status on firmer ground.

1 thought on “Cash-strapped Ill. goes after hospitals’ nonprofit status

  1. Carla K. Johnson

    An update: Illinois Gov. Pat Quinn has put a hold on new rulings for hospitals seeking property tax exemptions. The hold will give breathing room while stakeholders negotiate a possible legislative compromise.

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