State high court removes hospital's property tax exemption

Nonprofit hospitals, take notice: your tax exemption is only as good as the charity care you actually provide. The Illinois Supreme Court ruled on Thursday to remove the tax exemption status of Provena Covenant Medical Center in Urbana, Ill., citing that the Catholic facility's records show it to be a hospital devoted to caring for patients "in exchange for compensation through private insurance" more often than not, Reuters reports.

The ruling means that Provena Covenant's Urbana facility will have to pay property taxes. That tax-exempt status first was elimintated in 2003, when the Champaign (Ill.) County Board of Review determined the facility did not meet the requirements to receive such a status. Three years later, the state's Department of Revenue agreed, saying that the amount Provena Covenant spent on charity care was less than the property tax exemption. After the Sangamon (Ill.) County Circuit Court ruled that the Department of Revenue was in the wrong in 2007, a state appeals court overturned that ruling, ultimately paving the way for yesterday's decision.

"[U]ndermining Provena Hospitals' claims of charity is that even where it did offer discounted charges, the charity was often illusory," the ruling stated. "[U]ninsured patients were charged PCMC's 'established' rates, which were more than double the actual costs of care. When patients were granted discounts at the 25 percent and 50 percent levels, the hospital was therefore still able to generate a surplus. In at least one instance, the discount was not applied until after the patient had died, producing no benefit to that patient at all."

Jon "Cody" Sokolski, Chair of the Board of Provena Covenant, took issue with the ruling, saying that it impairs the facility's ability to reach its charity care goals. Sokolski specifically pointed out that Provena "provided more than $38 million in free care and other community benefits" in 2008.

Provena Covenant CEO David Bertauski added that he hopes the "troubling ruling prompts a dialogue among hospitals and elected officials to dialogue about not only how we define charity care but also how we better ensure that the people who need financial assistance get it."

To learn more:
- read this Reuters report
- read the actual Illinois Supreme Court ruling
- here's Provena Covenant's response

Related Articles:
Provena Covenant takes tax exemption fight to Ill., Supreme Court
Provena Covenant's tax exemption in jeopardy again
Ill., hospital loses high-profile tax case