Grassley: Illinois Court Case Raises Profile of Charitable Care Concerns at Tax-Exempt Hospitals
M E M O R A N D U M
To: Reporters and Editors
Fr: Jill Gerber for Sen. Grassley, 202/224-6522
Re: Illinois Supreme Court ruling on hospital’s state tax exemption
Da: Thursday, March 18, 2010
Sen. Chuck Grassley, ranking member of the Committee on Finance, today made the following comment on the Illinois Supreme Court’s ruling ruled that Provena Covenant Medical Center in Urbana did not provide enough charity care to qualify for a state property tax exemption. The case has been closely watched by tax-exempt policy and hospital experts.
“This ruling underscores what the Government Accountability Office and others, including the former IRS commissioner, have said for a long time. There is often no discernible difference between the operations of taxable and tax-exempt hospitals. Taxexempt hospitals should give more attention to their charitable activities. That includes not only providing charitable patient care, but also publicizing it to patients, not charging indigent uninsured patients more than insured patients, and cutting aggressive collection practices. On the federal level, I’ll continue working to hold tax-exempt hospitals accountable for the federal tax benefits they receive.”
A Chicago Tribune article from today follows for reference.
Illinois Supreme Court rules Provena must pay tax
By Bruce Japsen| The Illinois Supreme Court ruled this morning
that Provena Covenant Medical Center in Urbana did not provide
enough charity care to qualify for a property tax exemption.
The widely watched ruling, which rejected the Catholic hospital's
appeal of a tax review board decision to take away its tax exempt
status in 2003, could set the stage for charity care expectations at
hospitals around the country.
The ruling -- supported by three judges, supported in part by two
and not voted on by two others -- means the hospital will have to
begin paying property taxes. It has been considered a nonprofit
hospital like most hospitals in the U.S. that are exempt from state
The Illinois Supreme Court upheld a lower court's decision in the landmark case that
pitted Provena Covenant Medical Center against the Illinois Department of Revenue. The
revenue department argued Provena should not be exempt from paying property taxes in
2002 when the state said the medical center's charity care was less than 1 percent of
revenue. The court also upheld the revenue department's denial of Provena's religious tax
exemption, which analysts say is unusual.
The state had no clear definition of how much charity care should be provided or whether
unpaid medical bills and services that are offered for free, among other practices, should
be included to determine whether a nonprofit hospital receives a property-tax exemption.
State lawmakers have debated a level in the past but have not followed through on
passing such legislation.
But the ruling clearly puts nonprofit hospitals on notice that aggressive business practices
put tax exemptions at risk and the hospital industry worried about a precedent.
"The record showed that during the period in question here, Provena did not advertise the
availability of charity care," Justice Lloyd Karmeier wrote for the majority. "Patients
were billed as a matter of course and unpaid bills were automatically referred to
The ruling against Provena adds momentum to legislative initiatives at the state and
federal level for establishing laws on charity care. The case of the Urbana hospital is
being watched closely by hospitals statewide as the high court tries clarify what medical
facilities in Illinois need to do to qualify for tax breaks.
The Illinois Hospital Association, which represents 200 hospitals in the state and most of
them are tax-exempt nonprofits, described the ruling as "disturbing."
"The court's decision ignores legal precedents and public policy in Illinois that confirms
non-profit hospitals are tax-exempt, charitable organizations," said Illinois Hospital
Association President Maryjane Wurth.
"For more than a century, the Illinois Supreme Court has recognized a simple, but
critical reality: a hospital that treats patients regardless of their ability to pay and that
does not provide profits to private individuals is charitable and merits an exemption from
property taxes, without regard to the specific amount of free care it provides," she added.
"This sudden, about-face by the Court also ignores the findings of an administrative law
judge in the Department of Revenue who originally ruled in favor of Provena after
hearing considerable testimony and the actual facts of the case."
But Illinois Atty. Gen. Lisa Madigan, whose office argued the case before the court last
September, said the ruling is critical for patients. Madigan's office would not comment
when asked whether it would introduce legislation calling for hospitals to provide a
certain level of charity care.
"Today, the Illinois Supreme Court upheld over a century of Illinois law that requires tax
exempt hospitals to provide free health care in exchange for the enormous tax breaks they
choose to receive from the people of the state of Illinois," Madigan said in a statement.
"This decision is good news for the nearly two million uninsured Illinoisans who lack
access to affordable health care."
Justices agreed with Illinois Asst. Atty. Gen. Evan Siegel's argument that 0.7 percent of
revenue and only 302 people receiving free care "is not substantial," Siegel told justices
when the case was argued before the court last September.
In 2002, Siegel said, 302 patients were given free or discounted care out of more than
100,000 admissions at a cost to the hospital of $831,724, or about 0.7 percent of its $113
million in 2002 revenue. Siegel did not specify where the charity care bar should be set.
Justices last fall pressed Siegel and Provena Covenant's attorneys on their definition of
adequate charity care.
For its part, Provena Covenant Medical Center said it is indeed charitable, saying it
provided "more than $38 million in free care and other community benefits."
Provena executives also encouraged state lawmakers to examine how charity care is
defined but did not advocate a specific level.
"We can only hope this 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," Provena Covenant President
and Chief Executive David Bertauski said. "We will work to lead the way."
Provena faced tougher odds in part because two justices declared conflicts and could not
be a part of the decision.
Provena Covenant is one of six Catholic hospitals owned by Mokena-based Provena
Health, which also has facilities in Aurora, Danville, Elgin, Joliet and Kankakee. It is
sponsored by three religious orders.
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