Hospitals reveal community benefits to discount tax-exemption critics

Amid increasing scrutiny of tax-exempt organizations, the Illinois Hospital Association yesterday revealed that nonprofit hospitals in the state contributed $4.6 billion in community benefits in the 2009-2010 fiscal year. Of that, $561 million went to free or discounted care at cost, an increase of 124 percent since 2005, according to a hospital association press release.

The report comes at a particularly tumultuous time, as Gov. Pat Quinn (D-Ill.) has asked for new legislation that would define criteria for hospitals to qualify for tax-exempt status, according to the Associated Press. Some nonprofit hospitals have been battling with the state Internal Revenue Service after being denied tax exemptions.

With skeptics arguing that not all hospitals provide enough charity care to fairly qualify for tax exemptions, hospitals essentially are showing their cards through the report. The Illinois Hospital Association said that over the past five years, community benefits have increased by 26 percent, compared to $3.7 billion in 2005. However, the total $4.6 billion in 2010 actually has dropped about 5 percent from $4.86 billion from the previous year, as Crain's Healthcare Daily pointed out.

The drop, in part, could be because the way hospitals report bad dabt; patients that don't pay aren't classified as charity care, according to a spokesman for the association, Crain's reported.

The state hospital association includes multiple factors in "community benefits," including $906 million in services for patients who were unable to pay; $445 million for healthcare professional training; $266 million to subsidize money-losing services, such as trauma, emergency, neonatal ICU, burn units; $130 million in donations and volunteer work; $85 million in research; and $18 million in language assistance services. Hospitals also absorbed $2.23 billion of costs because of underpayments from Medicare and Medicaid, the report continues.

For example, Passavant Area Hospital in Jacksonville, Ill., absorbed $19.9 million because of underpayments, according to the Journal Courier.

"Passavant Area Hospital, as a non-profit hospital, is a major partner in the communities we serve," President and CEO Chester A. Wynn said in the article. "As part of Passavant Hospital's mission, we are pleased to respond to the evolving health care needs of patients in our communities, lend a helping hand when needed and enhance our services as needed."

Under current state law, not all hospitals are required to report community benefits. If all community benefits were calculated, the hospital association estimates that the total value of community benefits in the state would be $1 billion higher.

The report included nonprofit, nonrural hospitals with more than 100 beds, according to Crain's.

For more information:
- read the Crain's Chicago Healthcare Daily article
- here's the AP article
- see the Journal Courier article
- check out the report (.pdf)
- here's the hospital press release

Related Articles:
Hospitals praise IRS reporting of charity care
Tax exemptions keep nonprofit hospitals under the spotlight
IRS continues probe into nonprofit hospitals' charity care
Tax-exempt children's hospitals profitable, provide little charity care
Illinois reviews 15 hospitals' tax-exempt status
IRS gives nonprofit hospitals some Form 990 reprieve

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