Regional News

Chicago Hospital Touts Charity Record

CHICAGO - The University of Chicago Medical Center said yesterday it was "proud" of its charitable care record after receiving a questionnaire on its practices from the U.S. Senate's leading proponent of heightened congressional oversight of nonprofit hospitals and whether they warrant the perks of their tax-exempt status.

Sen. Chuck Grassley, R-Iowa, the ranking Republican on the Senate Finance Committee, this week made public his request for information sent July 23 to M.D. Anderson Cancer Center in Houston and to the University of Chicago Medical Center last week.

Grassley was prompted by an April Wall Street Journal article regarding Anderson's billing practices involving a leukemia patient and a Washington Post article from last month about a University of Chicago Medical Center program that steers under-insured and uninsured patients from the hospital's emergency room to local clinics.

"I keep hearing that tax-exempt hospitals are changing their ways ... It's troubling then to hear about two world-renowned hospitals engaging in questionable practices," he said in a release. "The answers to the questions I'm asking are critical to understanding whether these hospitals are setting standards for their peers. Those standards might include losing sight of the public service that comes with tax-exempt status."

The Post article looked at the university's programs for the poor and uninsured. Michelle Obama, the wife of Democratic presidential nominee Sen. Barack Obama, was a key architect of the hospital's program known as the South Side Health Collaborative that steers low-income residents who are not in need of urgent emergency care to clinics. She is currently on leave from her position as vice president of community and external relations at the hospital.

The article also noted the university's use of a firm co-owned by chief Obama political strategist David Axelrod to promote community support for the program. Grassley's questionnaire seeks information about the medical center's policies governing political activities.

"We have received Sen. Grassley's Aug. 29 letter and we are beginning the process of providing thoughtful and thorough answers to his questions. Much of the information he has requested is already a matter of public record and offers evidence of our vigorous pursuit and commitment to our patient care, education, research, and community missions. We are proud of our extraordinary record of charitable contributions," the university said in a statement.

The Obama campaign did not return calls to comment but the Washington Post posted a response supplied by the campaign on behalf of Sen. Dick Durbin, D-Ill.

"The fact that Sen. Grassley is questioning the work of the University of Chicago Medical Center - especially those programs aimed at reducing emergency department overcrowding and promoting preventive health - is troubling and shows that he simply doesn't understand the problems facing our hospitals today," Durbin wrote. "UCMC is providing more than $64 million a year in charity and unreimbursed care and has received high marks from everyone from community groups to the Illinois attorney general for their efforts. I am proud to have helped secure federal funds in support of that work."

Standard & Poor's recently assigned the University of Chicago Medical Center a AA-minus and Moody's Investors Service a Aa3. The hospital is planning on issuing about $500 million of new debt over the next few years to finance a new $700 million facility. The hospital has $260 million of unrated debt and $130 million of rated debt outstanding.

The University of Texas M. D. Anderson Cancer Center confirmed its receipt of Grassley's letter and said in a statement it would fulfill the request. "The problem of meeting the health care needs of uninsured and under-insured Americans demands immediate attention. This is an ongoing national issue that we and all health care providers struggle with every day. It is especially challenging for cancer centers like M. D. Anderson because cancer is a catastrophic illness, is very expensive to treat, and is rising in incidence as our population ages and grows," the statement read.

Grassley has led efforts to review whether hospitals that receive federal tax-exempt status warrant the perks that allows them to forgo some taxes and issue tax-exempt bonds. He has sent inquiry letters to other nonprofit hospitals in the past, and chaired a Senate Finance Committee hearing on the matter in September 2006.

Grassley has called for a closer look into whether nonprofit hospitals were doing enough charitable work to merit their tax breaks.

"Nonprofit hospitals receive billions in tax breaks at the federal, state, and local level. The public has a right to expect significant, measurable benefits in return," he has said. "There is often little to no difference between for-profit hospitals and nonprofit hospitals when it comes to charity care and community benefits provided."

The latest questions raised by Grassley come amid continuing efforts in Illinois for hospitals to justify the perks associated with their not-for-profit status that includes exemptions from property taxes and access to the tax-exempt debt market through the Illinois Finance Authority.

In the latest local development, an Illinois appellate court panel last week agreed with the state that Mokena-based Provena Health's Urbana hospital had failed to provide sufficient charity care to meet state requirements to warrant its property tax exemption. Provena spokeswoman Lisa Lagger said yesterday the system was weighing its options. Provena has until the end of the month to appeal to the Illinois Supreme Court.

The Illinois Department of Revenue formally acted to strip the property tax exemption two years ago after finding that the hospital failed to meet state requirements that govern charitable organizations because it provided less than 1% of its revenues for charity care. Provena countered the state's argument, asserting that it provided other community benefits and that state law does not define charity by percentages of care.

Provena took its appeal to the courts and at the circuit court level in Sangamon County prevailed, winning the return of $5 million in property taxes paid by Provena since the state's action. The appellate opinion reverses that decision.

The appeals court opinion cited that in 2002, almost all of the hospital's "$115 million in revenue came from insurance companies, persons paying for their own treatment and other contractual sources ... It is of obvious public benefit for any community to have available one or more modern hospitals, but until such time as the Legislature sees fit to either change or make definite the formula for the determination of medical/charitable use of real property, Provena cannot on the record before us here, prevail in its attempt to exempt itself from real estate taxation."

Health care consultant James Unland called the latest opinion a significant development - not just in Illinois where two other hospital property tax-exemption cases are pending - but also nationally because of the similarity in laws across states governing charitable organizations and property tax exemptions.

"The game so far has been in the minor league, but just turned to the major league," Unland said. "It's an incredibly clear-cut opinion."

While the cost of paying property taxes might not dramatically strain a hospital's balance sheet, Unland said the appellate panel's ruling could embolden Illinois or other states or local jurisdictions to impose charitable care thresholds on hospitals. "This is a game-changing event," he said.

A blue-ribbon panel established by the Illinois General Assembly is currently looking at proposals that could impact charity care levels provided by hospitals. The task force could require financially sound hospitals to help so-called safety net hospitals with higher volumes of poor and uninsured patients. The requirements would be tied to the approval of new hospital construction projects that come before the Illinois Health Facilities Planning Board.

The panel was set up to review the controversial planning board as its government statutes are expiring. Attorney General Lisa Madigan has several appointees on the panel. She has previously proposed that hospitals be required to meet minimum charity care thresholds.

The Illinois Hospital Association recently released a report that asserted that nonprofit hospitals in Illinois provided more than $4 billion in charitable care and other community benefits in 2006 and agreed to new pricing caps and discounts for the poor and uninsured.

Peter Schroeder contributed to this story.



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