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Reporter chases down cost of new tax break for investor-owned hospitals Date: 11/27/12

By Carla K. Johnson

When Illinois Gov. Pat Quinn signed into law a tax break for investor-owned hospitals last spring, there was no official analysis of how much it would cost the state in lost revenue. I thought that was odd and that the tax break itself was unusual.

Supporters said it was an acknowledgment that investor-owned hospitals provide millions of dollars worth of free care to the uninsured. The law also defined how nonprofit hospitals could retain their local property tax exemptions following an Illinois Supreme Court ruling that put those tax exemptions in jeopardy.

But why did state legislators throw in a new tax break for investor-owned hospitals, especially during a time of fiscal crisis?

And why not tell Illinois taxpayers how much the tax break would cost? A spokesman for the Illinois Hospital Association met my questions about the cost of the tax break with answers like, "That's difficult to say." The Illinois Department of Revenue spokeswoman said that department was never asked for an official estimate.

So I decided to figure it out myself. Under the new law, each hospital will be able to claim a state income tax credit worth the lesser of what they paid in local property taxes and the amount of charity care they provided. So, I thought, I just need two numbers for each of 28 for-profit hospitals in Illinois.

An annual "hospital profile" on file with the state includes a line for charity care, so those numbers were fairly easy to find.

It was more difficult to determine the property taxes paid by each hospital. The hospitals and their parent companies ignored my calls. After repeated failures, I turned to county government. For some counties, it was simple to look up a property ID number on the assessor's website and then to use that number to look up taxes paid on the treasurer's website. When I couldn't find what I needed online, county employees often were able to help by phone.

In Cook County, where most of the hospitals are located, many of the facilities had 30 or more ID numbers. And the treasurer's website required that I enter a captcha – a string of random letters – for every ID number. I spent hours of tedious keyboarding to get the tax numbers I needed.

One big spreadsheet later, I calculated the annual tax break cost at $10 million.

Armed with my own estimate, I was able to finally get the hospital association to reveal their own back-of-the-envelope arithmetic: They agreed with my number and said they had estimated the high end at $15 million a year. They also said they had told the governor's office and other insiders their estimate during negotiations on the legislation. Interesting, I thought, and a great detail for my story.

I then talked to as many people as possible about how the deal got made. A retired Department of Revenue official told me how his department was cut out of talks at the end and was surprised to learn that the tax break survived. The Illinois Hospital Association's top lobbyist, a former state senator, explained that tax break helped gain support from investor-owned hospitals for a large, complex package of Medicaid legislation.

My story is a case study in how laws get made in Illinois, with horse trading and closed-door meetings and the public learning what happened after the fact.

The lesson for journalists here: Doing your own arithmetic can lead to more reporting questions and better answers from sources who are impressed you took the time to do the math.

Carla K. Johnson is a Chicago-based medical writer for The Associated Press and a member of AHCJ's board of directors.