NAPERVILLE, Ill.-The Illinois Hospital and Health System Association said it will sue the state of Illinois if it renews a controversial Medicaid provider tax.
The threatened litigation comes despite a new state report that said Illinois hospitals earned more than $725 million in profits in 1993.
The association said the release of the report is politically motivated and, in fact, the report is meaningless because the state owes hospitals some $700 million in back Medicaid payments.
"It's hard to spend money that somebody owes you," said Kenneth Robbins, the association's president. "Under general accounting principles, all of our profits are paper profits."
Gov. Jim Edgar's proposed fiscal 1996 state budget would continue an approximately 1.9% tax on hospitals' gross revenues to help fund Illinois' Medicaid program. The 4-year-old tax was set to expire June 30, the end of the state's 1995 fiscal year.
The hospital tax is expected to generate more than $681 million in revenues for the Medicaid program in fiscal 1995, according to hospital association figures. That represents 13.7% of the state's total Medicaid budget of more than $4.9 billion in fiscal 1995.
In addition to the tax, the state in April 1994 froze reimbursement rates at 85% of hospitals' costs of caring for Medicaid recipients.
The combination of the tax, the rate limit and hundreds of millions of dollars in unpaid Medicaid bills has pushed hospitals to the brink of litigation.
Robbins said the hospital association has retained two law firms to prepare its case against the state.
"If the budget passes resembling what (Edgar) proposed, we will file suit immediately," Robbins said.
Similar lawsuits have been filed in Kentucky and the District of Columbia.
Still, the association is hoping to avoid going to court and is lobbying state lawmakers to kill the provider tax. The association is airing radio advertisements across the state, saying 15 to 20 hospitals will close if the hospital tax is approved.
"Hospitals are crying poor, their critics say," Robbins said. "If the proposed Medicaid budget passes, hospitals, unfortunately, will be able to prove their critics wrong-dead wrong."
Although the association dismissed the state report on hospital profits, the state's figures are supported by data from the American Hospital Association.
The AHA said Illinois hospitals earned $856 million on total revenues of about $13.8 billion in 1993. The AHA's figures are based on data from 208 acute-care hospitals. That represented a 6.2% profit margin, compared with a 4.4% profit margin for hospitals nationally that year.
The state's report, prepared by the Illinois Health Facilities Planning Board, was based on data from 169 hospitals.
Also, total Medicaid payments to Illinois hospitals will rise a whopping 29% in fiscal 1995 to more than $2.1 billion, according to the Illinois hospital association's figures.