Wall Street Journal Looks at One Not-for-Profit Hospital’s Loss of Tax-Exempt Status
The Wall Street Journal on Tuesday examined Provena Covenant Medical Center's "fight to regain its local property-tax exemption amid questions about financial treatment of the uninsured, including aggressive debt-collection tactics." In February, the Illinois Department of Revenue revoked the property tax-exempt status of the not-for-profit hospital in Urbana, Ill., because local authorities determined it was not a charitable institution. The decision was made after the Champaign County Board of Review, a panel that oversees property-tax assessments, documented that the hospital had filed lawsuits and used other debt-collection tactics to pressure patients to pay their medical bills. Since February, Provena has begun to pay local property taxes, including $1.1 million for 2002 and $700,000 toward a total of $1.4 million for 2003. Provena's 2004 assessment is expected soon.
Provena has launched a series of changes to regain its reputation and demonstrate to officials that it is entitled to tax-exempt status, including increasing no-cost and discounted services by 40% since 2003, avoiding undertaking lawsuits and other bill-collection techniques and using newspaper ads and signs in the hospital to inform patients about available financial help. However, "[t]hose steps ... may not be enough to satisfy demands of authorities," the Journal reports. According to the Journal, Stan Jenkins, a member of the Champaign County Board of Review, said that despite the amount the hospital spends on charity care, it still will not meet Illinois Property Tax Code terms, which say that a not-for-profit entity must be used "exclusively" for charitable purposes. But Mark Weiner, Provena's president and CEO, said that making hospitals pay taxes affects their ability to provide patient care, including discounted and no-cost services. He added, "There is nothing in what we do at Covenant that is unusual. I submit to you that every hospital in the U.S. that is currently enjoying the benefits as a nonprofit organization has a lot to be concerned about."
Provena's case illustrates the "growing uncertainty about just what qualifies a hospital as a tax-exempt charitable institution," the Journal reports (Lagnado, Wall Street Journal, 6/29). The hospital is one of several named in lawsuits filed by plaintiffs' attorneys earlier this month alleging the facilities violated their charity care obligations by charging uninsured patients "premium" rates, even though insurers, HMOs and government programs like Medicare and Medicaid pay discounted rates. The suits, which seek class-action status, have small variations but all are essentially breach-of-contract suits focused on the idea that not-for-profit hospitals have an explicit or implicit contract with the federal government to serve uninsured patients to receive significant tax breaks. Some of the suits also cite particular hospitals' tactics to collect unpaid bills, including placing liens on homes and assessing interest, fines and legal fees. The lawsuits seek the creation of a trust fund that the hospitals would finance to provide affordable medical services to the uninsured (California Healthline, 6/23).
John Colombo, a law professor at the University of Illinois-Urbana who is monitoring the Provena situation, said that Internal Revenue Service rules regarding charitable care standards are not clear, noting they require hospitals to meet a "community benefit standard." Laws regarding charitable institutions also vary among states, according to the Journal. While Colombo said that Jenkins' interpretation of the charity care law might be "stark," he added, "It is not charity care to bill somebody and beat them over the head, and then, when you squeeze the last ounce of blood and can't collect, say, 'Oh, that is charity care.'" He said, "There needs to be a light shined on the business practices of nonprofit hospitals to see if they are consistent in being charitable or not" (Wall Street Journal, 6/29).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.