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Crain's Article: IHA About to Take Charity Tax Exemptions Challenge to Illinois Legislature

Health & Medicine Policy Research Group (HMPRG)
February 28, 2012

Read the story in Crain's

By Kristen Schorsch February 28, 2012

(Crain's) — Barring a last-minute deal with the Quinn administration over the tax-exempt status of nonprofit hospitals, a powerful hospital lobbying group has lined up a prominent downstate Democrat to propose legislation to expand what counts as charity.

State Senate Majority Leader James Clayborne Jr., D- East St. Louis, has agreed to sponsor the Illinois Hospital Association's proposal, which would overrule a two-year-old Illinois Supreme Court decision that tightened the requirements for nonprofit institutions to be exempt from property taxes.

The proposal by the 200-member IHA would expand the definition of charity in the state's Property Tax Code to include not only free medical care to the indigent but also programs and losses that hospitals incur treating patients under Medicaid, whose reimbursement fees are well below market rates, according to a copy of the proposed legislation obtained by Crain's.

In 2010, the state Supreme Court ruled that discounts given to the state's Medicaid program could not be considered charity care. The ruling upheld the denial of tax-exempt status for a hospital that is part of what is now Presence Health, a hospital network formed by the merger of Mokena-based Provena Health and Chicago-based Resurrection Health Care Corp.

The latest firestorm was ignited in August, when the Illinois Revenue Department stripped charitable status from Northwestern Memorial Hospital's Prentice Women's Hospital in downtown Chicago, Edward Hospital in Naperville and Decatur Memorial downstate, in part because they each spent less than 2 percent of net patient revenue on free care.

A leader in the Chicago-based Fair Care Coalition, which calls for nonprofit hospitals to spend 6 percent of total revenue on charitable benefits, blasted the IHA's proposal.

“Not-for-profit hospitals are mandated by law to provide direct care to people who are underinsured and uninsured,” Curtis Smith said. “Providing a broader definition (of charity) clearly misses the mark.”

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