October 12, 2006 | Read Time: 2 minutes
The State of Illinois last week upheld a 2003 decision stripping the Provena Covenant Medical Center, in Urbana, of its exemption from property taxes, a ruling that comes as Congress is examining whether to redefine how hospitals must behave to avoid paying taxes.
Brian Hamer, the state’s director of revenue, said that Provena was spending less than 1 percent of its revenue on charity care, and called that “insufficient” to restore its exemption from property taxes.
The Champaign County Board of Review, which oversees property taxes in Urbana, had removed the hospital’s tax exemption in 2003, citing the aggressive collection policies the Catholic hospital was using with patients who could not afford to pay their bills, including suing patients and their relatives and even making civil arrests.
Provena says it has changed those policies. It also says it provides nearly $22-million annually in charitable benefits, such as free immunization programs. That is far more than the $831,724 it spent on patients who qualified for free hospital care in 2002.
“This decision is completely outrageous, unsupported by legal precedent or the facts,” William T. Foley, the hospital’s president, said in a press release. “The state’s ruling challenges every Illinois hospital’s ability to continue serving the poor and uninsured. We will quickly and aggressively appeal this ruling.”
Since the original county ruling in 2003, Provena says it has paid $4.8-million in property taxes.
Congressional Concerns
While the decision affects the hospital’s state tax status, it does not change its federal tax exemption. However, key members of Congress have been raising questions about what should be required of nonprofit hospitals in order for them to retain their federal tax status.
Last month, Charles E. Grassley, the Iowa Republican who chairs the Senate Finance Committee, called hospital officials and health-care experts to a hearing looking into whether Congress should require nonprofit hospitals to justify their tax-exempt status by providing a minimum level of free health care and other services.
“Nonprofit hospitals receive billions in tax breaks at the federal, state, and local level,” said Mr. Grassley. “The public has a right to expect significant, measurable benefits in return.”
Rep. Bill Thomas, Republican of California and chairman of the House Ways and Means Committee, has held hearings over the past few years raising similar questions. Mr. Thomas is retiring this year, however, and it is unknown who his successor will be or whether he or she will follow up on the issue.
