The loss of property tax breaks would add financial constraints and could weaken credit for Illinois not-for-profit hospitals, Moody's Investors Service said.
Loss of property tax break could weaken Ill. not-for-profits' credit: Moody's
The state revoked property tax breaks for three hospitals in August and analysts expect more challenges as states struggle with budget deficits, Moody's said in a newly released report. Smaller hospitals would find the lost tax break more difficult to manage than larger systems, the report said.
Hospitals that lost Illinois property tax exemptions did so because state officials determined they did not provide enough free medical care for low-income patients to earn the tax break.
Moody's said the rulings, which the governor suspended until March 2012, created confusion over how much free medical care would be enough to justify tax breaks. “This ambiguity creates additional uncertainty for hospital management during a tenuous economic recovery,” the report said. Recommendations for exemption standards by the Legislature, state attorney general and hospitals are expected in March, analysts said.
Six of the 23 Illinois tax-exempt hospitals in Moody's portfolio lost money on operations in 2010, the report said. Illinois hospital revenue growth slowed in fiscal 2010 to 4.3% after a more robust 6.4% gain the prior year.
Not-for-profit hospital charity care, or free and discounted medical care, and other subsidized services for the community have been the target of increasing public scrutiny and regulations, including new requirements under the Patient Protection and Affordable Care Act. A Modern Healthcare analysis of charity care and profits for 156 hospitals at 20 large health systems found hospitals spent an average of 2.5% of expenses on charity care.
Send us a letter
Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.