New rules in Illinois that would link hospitals' state and property tax exemptions to their charity-care levels also gave an unusual nod to for-profit providers.
They too got a piece of the legislation, expected to be signed by Gov. Pat Quinn, which was the target of a heavy lobbying campaign by the Illinois Hospital Association.
While the actual effect in dollar terms is still unclear, the legislation was generally regarded as a positive development for the entire hospital industry, for-profit and not-for-profit operators alike.
The law would provide property tax exemptions to not-for-profit hospitals that provide charity care at a level equal to or exceeding their property tax liability. For-profit providers, meanwhile, would receive an income tax credit for charity-care services, up to the amount of their property tax liability.
Lawmakers crafted the bill after three high-profile cases where the Illinois Department of Revenue denied tax exemptions to local hospitals for not providing enough charity care.
“The most important thing that (the legislation) does is that it provides badly needed clarity,” said Steven Pflaum, a partner at law firm Neal, Gerber & Eisenberg. “The uncertainty that existed was bad for everyone.”
Elizabeth Mills, senior counsel at law firm Proskauer, called the nod to for-profits “very unusual” among state statutes. “I think it's a creative response to the for-profits' frequent response that we're providing charity care as well,” she said.
Richard Gundling, vice president at the Healthcare Financial Management Association, also could not identify another state that provides similar tax credits to for-profits, though he noted that tax law varies in each state. However, he suggested that Illinois' move will prompt all hospitals to place a greater focus on accounting for charitable care provided.