Monday, September 28, 2009

Court To Decide How Much Hospital Charity Is Enough

By Bethany Jaeger
The Illinois Supreme Court has to decide which standard to use when considering a highly anticipated case about what not-for-profit hospitals have to do to qualify for local property tax exemptions.

While the case specifically deals with Provena Covenant Medical Center in Champaign County, the court decision has potential to affect about 160 Illinois nonprofits including all the hospitals serving McHenry County.

Both sides presented oral arguments before the Illinois Supreme Court last week with drastically different beliefs about what should count when considering charitable exemptions and what evidence the court should consider when determining whether Provena qualifies for that property tax exemption.

On one hand, Provena argued that the justices should undertake a brand new review of whether the denial of the hospital’s charitable exemption violates the state Constitution.  On the other hand, the Illinois Department of Revenue argued that the justices should defer to its administrative findings because the department knows all about property tax.

The department ruled in 2002 that Provena didn’t qualify for a tax exemption because it dedicated only 0.7 percent of its revenue that year to providing so-called charity care to 302 patients out of 110,000 patients admitted.

Provena lawyer Patrick Coffey said the determination should have counted the hospital’s total contribution to the community. “It’s not out of bounds to consider how much free care was given, but they have also gone beyond.” For instance, Provena operates Crisis Nursery, a 24/7 child abuse prevention and support service and provided more than $13.5 million on such “community benefits” in 2002, according to the hospital’s Supreme Court filing.

Assistant Attorney General Evan Siegel argued,"The primary use of the property is treatment of patients with insurance. By arguing that 0.7 percent is sufficient, Provena is trying to alter the constitutional standard. And it is for this court, not the legislature, to determine what constitutes a constitutional charitable use.”

Coffey said a proposal to set a minimum percentage of charitable care should go through the legislative process, not the court system.

Business analysts say a decision against Provena might raise Illinois hospital rates.

Read Bethany's entire report at:

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