Regulators continue crackdown on hospitals' tax-exempt status

State and federal agencies continue to investigate the validity of hospitals' nonprofit, tax-exempt status. Yesterday, the Illinois Department of Revenue denied three hospitals from property tax exemptions, arguing that the institutions did not offer enough charitable care to qualify for the status. The denial could have repercussions for up to 15 other healthcare systems under state review, the Chicago Tribune reports.

And recently, the Atlanta Journal-Consititution exposed several hospitals that don't appear to qualify as "non-profit." 

While other nonprofits hospitals are turning for-profit and electing to partner with larger institutions to sustain financial blows, other nonprofits are hanging onto their not-for-profit status to avoid certain property taxes and continue to provide care for low-income patients. 

In Illinois, the decision to exclude Northwestern Memorial Hospital Prentice Women's Hospital in Chicago, Edward Hospital in Naperville and Decatur Memorial Hospital from tax exemption falls in line with the state's recent hard-nose stance on hospitals that classify themselves as not-for-profit.

Last year, the Illinois Supreme Court ruled that Provena Covenant Medical Center in Urbana didn't qualify as a nonprofit hospital because it provided charity care to fewer than one-half of a percent of its patients in 2002, the Tribune reported. Provena, on the other hand, argued it provided more than $38 million in free care and community benefits.

Similarly, Northwestern held that its community benefit contributions totaled $276.7 million, $44 million of which was for charity care. Edward Hospital said it contributed $77 million in charity care and community benefit programs last year, and Decatur reported that charity care made up 0.96 percent of its $252 million revenue, according to the Tribune article.

The Illinois Hospital Association said it's "disappointed" and "deeply concerned" about the Illinois actions.

"This is tantamount to taxing Illinois hospitals," the group said. "Hospitals will have to devote precious time and resources in responding to these challenges."

"There almost could not be a worse time for the administration to take this action, when hospitals are being pummeled by Medicare cuts, Medicaid slowdowns in payment and an economy that's struggling," the group's president, Mark Deaton, told a reporter.

The three hospitals have 60 days to ask a judge to review the decision, reports WBEZ.

For more information:
- read the Chicago Tribune article
- read the Illinois Hospital Association's statement
- check out Associated Press article
- here's the WBEZ article

Related Articles:
Little difference between for-profit, nonprofit hospitals
Tax-exempt hospitals under IRS's watchful eye
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