(Some) Illinois Hospitals Losing Tax-exempt Status

From the Chicago Tribune and AP.

The decisions were announced to the hospitals Tuesday morning, Revenue Department officials told The Associated Press. They follow last year’s Illinois Supreme Court ruling that found a central Illinois hospital wasn’t doing enough free or discounted treatment of the poor to qualify for an exemption, costing it $1.2 million in local property tax payments per year.

In addition to Prentice Women’s Hospital [a Northwestern facility] in Chicago’s Gold Coast neighborhood, the revenue department now has decided that Edward Hospital in Naperville and Decatur Memorial Hospital in Decatur don’t quality for property tax exemptions. The hospitals have 60 days to ask an administrative law judge to review the decisions. In Illinois, property taxes are collected by county governments, and the Department of Revenue decides which institutions are eligible for tax exemptions.

In a written statement, Illinois Hospital Association President Maryjane A. Wurth said she was disappointed and “deeply concerned” by the Revenue Department’s preliminary rulings, and worries that the hospitals will be forced to reduce services and increase costs for patients and employers.

It’s neither surprising nor inappropriate that state policymakers are holding hospitals to account. A large research literature documents that while some nonprofit hospitals provide great community benefit, many provide very little. Many nonprofit hospitals implicitly or explicitly decline to treat poor people, determine everything from their location to their service mix to maximize economic gain, even if this gain is not, strictly speaking, distributed as profit. Many of these same hospitals perform little medical research or other valuable activities that might merit implicit or explicit state support.

As someone who cares about the future of the medical safety-net and urban teaching hospitals, I’d trade the loss of nonprofit prerogatives for fair and timely Medicaid reimbursement. Our hospital, and others that really carry the load, is being badly damaged by Medicaid’s low reimbursement rates and other program problems. Unfortunately this will not get any better in a state experiencing very serious budget deficits and governance difficulties.

I suspect that we are heading for the mother of local political fights. I can’t imagine that these hospitals–and others in the crosshairs–will take this lightly.

[Cross-posted at The Reality-Based Community]

Harold Pollack

Harold Pollack is the Helen Ross Professor at the School of Social Service Administration at the University of Chicago.