(Crain's) — Cook County Assessor Joseph Berrios is wading into the controversy over tax-exempt status for non-profit hospitals, taking administrative steps to put Prentice Women's Hospital in Streeterville on the property tax rolls, a move that could mean a $66-million bill for the hospital for the past four years.
Last month, Mr. Berrios' office served Northwestern Memorial HealthCare, which operates Prentice, with notices to place the 328-bed hospital on the tax rolls beginning in 2008 and issued a proposed assessment for 2011.
The move came just two months after the Illinois Department of Revenue denied the Chicago hospital system's application for tax-exempt status for Prentice, 250 E. Superior St., which opened in 2007. Northwestern spent just 1.85% of its net patient revenue on charity care in 2007.
The assessor is plowing ahead even though Prentice's tax status is far from settled.
Northwestern Memorial has appealed the Revenue Department's decision, and Gov. Pat Quinn has issued a moratorium on further tax-exemption rulings by the department. Mr. Quinn said the Illinois General Assembly should enact legislation better defining non-profit hospital's charity care requirements.
Meanwhile, the Illinois Hospital Assn. has strongly opposed any attempt to take away tax exemptions, saying focusing on charity care doesn't take into account non-profit hospitals' benefits to the community.
Mr. Berrios' action is a significant step in the controversy and likely will intensify the debate.
“The bottom line is that these hospitals have to provide enough charity care to justify that tax-exempt status,” said Diane Limas of the Chicago-based Fair Care Coalition, which supports increasing hospitals' charity care spending. “Once that decision was made by the Department of Revenue, that money will go back to the county.”
Mr. Berrios is seemingly an unlikely crusader to take on the city's major hospitals. A longtime Democratic insider, he served 22 years on the Cook County Board of (Property Tax) Review before being elected assessor in 2010.
A spokeswoman for Mr. Berrios downplays the move, saying the assessor's office is merely following the advice of Cook County State's Attorney Anita Alvarez.
“When the state made its decision, it was effective back to 2007,” the spokeswoman said. “We were advised by the (Cook County) state's attorney's office to put (Prentice) back on the rolls. We are following the law.”
A spokeswoman for Ms. Alvarez, said, “It wasn't so much a legal opinion so much as confirming the ruling by the Department of Revenue and the duty of the assessor.”
The assessor's office in October sent notices of intent to list omitted assessments for Prentice for 2008, 2009 and 2010, and has issued assessments for 2011, according to a quarterly report released by Northwestern.
Northwestern Memorial has filed administrative appeals to void the assessments.
If the assessment is not reversed, Prentice's tax bill will be $22 million for 2008, $14 million for 2009 and $15 million each for 2010 and 2011, the financial statement says.
Northwestern Memorial “will vigorously contest both the denial of its exemption application and the assessments for the Prentice pavilion,” a spokeswoman said. “We believe that those dollars need to stay in health care. It would be taking money from investment in doctors, new technology and research and innovation.”
The Department of Revenue on Aug. 16 denied long-pending requests for tax-exempt status from Northwestern for Prentice, as well as from Edward Hospital in Naperville and Decatur Memorial Hospital. The department's one-page rulings said the properties were not owned by charitable organizations and were not being used for charitable purposes; it did not elaborate on how those determinations were reached.
Edward spent 1.04% of its total net patient revenue on charity care in 2010, while Decatur Memorial spent 0.96%. State law does not specify a minimum level of charity care spending required for tax-exempt status.
Northwestern on Oct. 13 appealed the Department of Revenue's decision on the basis that the property on which Prentice sits previously was home to Northwestern's Wesley Hospital, which the hospital system operated for charitable purposes. That was the basis on which the assessor assessed Prentice as tax-exempt and the Department of Revenue's denial should be rendered moot, Northwestern argued.
“The final assessment of the property as exempt for 2007 would preclude any future attempt to impose back taxes on the property for that year,” the hospital system stated in its appeal.
Decatur Memorial and Edward also have appealed their denials, making similar arguments.
In 2010, the Illinois Supreme Court upheld the state's denial of Urbana-based Provena Covenant Medical Center's tax-exempt status in part because the hospital provided about 0.7% of its revenue for charity care in 2002. Provena now pays $1.2 million in annual property taxes.
(Editor's note: This report has been updated to accurately reflect how much of Northwestern's charity care expense.)