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Cook County Official to Offer Bill Ensuring Hospitals Meet Tax-Exempt Standards

Friday, June 03, 2005
Northwest Herald
by Elizabeth Carvlin

CHICAGO While a Cook County, Ill., board committee last week deferred resolutions that would have reviewed the tax-exempt status of nonprofit hospitals in the county, one board member said he would tailor new legislation to focus on the space that nonprofit hospitals lease to for-profit entities.

The new legislation would be more specific in order to avoid what one commissioner called terror among about 40 hospitals in the county that fear losing their tax-exempt status.

The Cook County Board of Commissioners’ finance, tax, and revenues subcommittee last week took testimony from experts as it attempted to devise legislation to ensure that hospitals that receive a tax exemption actually meet the standard set for that status. The problem, most speakers agreed, is that many of the laws have been vague on just how counties determine their status.

The question of how much space hospitals lease to for-profit entities is just one of several that are being reviewed, said commissioner Larry Suffredin, who planned to revise the resolutions and return to the board at a later date.

The committee heard testimony from those who have been involved in test cases and who have researched the issue of the tax-exempt status of nonprofit hospitals. The issue has become more widely visible since 2003 when billing collection became electronic. After that time, advocates challenged what they called aggressive billing practices that involved hospitals suing patients who had no insurance to pay, said James Unland, president of the Health Capital Group and editor of Journal of Health Care Finance.

Sen. Charles Grassley, R-Iowa, last month wrote to 10 hospitals asking for a detailed accounting of charitable activities. Two of those hospital systems are in Illinois Advocate Health Care Network in Oak Brook, and Resurrection Health Care in Chicago.

At the local level, a change in tax-exempt status could mean additional revenues for local communities. At the federal level, a potential shift in the tax-exemption could affect outstanding bonds. In addition, hospitals stand to gain by collecting more from patients who have no health insurance under a fee and collection system that is fair across the board, Unland said.

How the laws are written will be key, several speakers warned. Up to now, federal and local laws have been somewhat vague. While the Illinois constitution sets charitable care as a guideline for local assessors to use for determining exemptions, several court cases and some state legislation have only recently given a clearer definition of that test.

The Illinois attorney general filed friends of the court briefs in the suits filed by the Champaign County Board of Review when it challenged the tax-exempt status of two hospitals in central Illinois. The county won those challenges and now collects taxes from the hospitals. The hospitals have appealed the ruling to the Illinois Supreme Court in a case could set precedent for other hospitals in the country.

That challenge to the tax-exempt status for Provena Covenant Medical Center and Carle Foundation Hospital in Champaign County was not motivated by the need for additional tax dollars, Stan Jenkins, a Board of Review member, told the committee. The county was only trying to abide by the law, he said, and that became a major undertaking.

With the case law, the burden of proof has now become clearer. Hospitals must be exclusively charitable,” Jenkins said. And they must be primarily used as charitable institutions to qualify for tax exemption. That’s a burden that the Champaign hospitals did not meet, he said.

I think the test is clear, and it’s a very high standard, Jenkins said.

The way in which the county devises legislation must be considered with care, commissioners warned.

It’s important for us to know what the impact to the hospitals will be,” said commissioner Carl Hansen.

Most speakers urged a solution that can be applied to all hospitals that takes into account the differences in the populations that they serve.

This is not an issue that should be resolved by one Illinois county or [be] based on one test case,” said John Fallon, an attorney in the Cook County assessor’s office. “Clearly, fairness and equity demand that the issues be fully discussed by all parties involved and that clear guidelines be set which apply equally to all hospitals in the state of Illinois.”

A review of the assessed value of Cook County hospitals and the estimated exempt dollar amount for nonprofits would cost the county about $233,000, Fallon said. The review would take about six weeks, he said.

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