The decision late last month by the Illinois Department of Revenue to revoke the tax-exempt status of Provena Covenant Medical Center in Urbana will not only harm the mission of our hospital but also it has potentially far-reaching consequences for every not-for-profit hospital in the country.
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Tax-exempt revocation should have not-for-profits en garde
My system, Provena Health, will appeal this incorrect decision quickly and forcefully. But as we move forward on the appeal I hope this ruling prompts hospitals and elected officials to engage in a dialogue about how we define charity care and better ensure that the people who need financial assistance get it.
All of us in the healthcare industry know that not-for-profit hospitals care for every patient who comes to us for treatment. Yet, the revenue department in its ruling argued that Provena Health does not "dispense charity to all who need it," and benefits "an indefinite number of persons." We strongly reject these statements.
The real question lies in how we define charitable care and contributions to our community—a question that hospitals and governments are grappling with throughout the country. Nobody can reasonably set requirements and quotas when every party takes a different view of what constitutes charity.
For example, the state's 2005 Medicaid reimbursement to Provena Health fell $48.2 million short of what our hospitals actually spent caring for those patients. Government payments are often six to nine months late. In the case of people who are newly qualified for Medicaid, repayment can take up to one and a half years in some cases, so the inadequate funds we receive also come with a significant delay.
Provena Covenant alone commits more than $21.8 million each year to charitable works within the Champaign community. This includes the Medicaid shortfall and additional funds that cover care to people who cannot pay and choose not to use the financial-assistance program. According to the ruling, only $800,000 of the 120-bed hospital's expenditures count as charity—defined as patients who applied for and used the financial assistance program.
This ruling is a grave and troubling precedent for community hospitals because it seeks to redefine charity care. A state revenue department is certainly not qualified to do that, and we hope no other state tries to do so, but in this climate it is possible. Regardless, we dispute the notion that counting the costs incurred because of patients who turn out not to be financially able to pay is not a charity or a charitable act. I find it hard to believe that providing free health screenings to children in impoverished areas, shelter to abused women, neonatal care or donating medical supplies and staff resources to free clinics is not charity.
As a Catholic healthcare system, Provena Health takes its role as community caretaker very seriously—this is part of our mission, not just a way to justify a tax break. Our facilities have a very specific calling to do good, and revoking our tax-exempt status drains millions of dollars from these efforts. Since the original denial in 2003, Provena Covenant has paid more than $4.4 million in property taxes.
The revenue department ruling also criticized Provena Covenant for the common practice of contracting with for-profit vendors for some emergency department and pharmacy services, laboratory, diagnostic scans, neonatal staff, laundry and cardiovascular surgery services.
If that standard is applied to all hospitals, not one hospital in Illinois would be considered a charitable institution or qualify for tax exemptions.
Community hospitals today hold dual roles that increasingly seem to be incompatible. We have a responsibility to all our patients to provide the highest level of care at a reasonable cost, even if that care isn't profitable, or when staff shortages and low government reimbursements combine to send our costs through the roof. Meanwhile, we need to generate sufficient margin to support the charitable services that increasing numbers of community members and local governments rely on. If the state revokes our charity-care resources, it would fall to local governments to provide a substitute, and taxpayers would inherit these additional costs.
Provena Health provides care to every patient regardless of their ability to pay for it through our charity-care program. We have invested considerable resources in advertising that fact as well as educating our staff so they know how to communicate that these options exist and are able to disseminate that information throughout the hospital and the community. Despite these efforts, many people choose not to participate, yet they receive the same quality of treatment as anybody else.
If we did limit our care to strictly those who apply for our reduced-fee program, Provena Health would certainly spend much less money, and our charity care would be the same in the revenue department's eyes. But turning away those who need care and ignoring the underserved in our communities is incompatible with our mission of healing.
We are confident a fair hearing on appeal will overturn this misguided and incorrect decision and our tax-exempt status will be renewed. The crucial question remaining is whether hospitals and the leaders elected to represent our patients and taxpayers can work together to ensure patients have help in paying their bills, while hospitals remain viable and able to provide care to all.
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