CHICAGO - The Illinois Supreme Court on Wednesday announced it would hear Provena Covenant Medical Center's appeal of a lower court opinion that stripped the Urbana hospital of its property tax exemption for failing to provide sufficient charity care.
"We are hopeful that the Supreme Court will overturn a recent appellate court ruling that contradicted 100 years of Supreme Court decisions regarding property tax exemption," Ken Robbins, president of the Illinois Hospital Association, said in a statement.
The hospital's lawyers and the association contend that the state's high court has long recognized that a "hospital that treats patients regardless of their ability to pay and that does not provide profits to private individuals is charitable and merits an exemption from property taxes, without regard to the specific amount of free care it provides," Robbins added.
The state high court's acceptance of the case was disclosed Wednesday on its Web site. Provena Covenant, part of the six-hospital Mokena, Ill.-based Provena Health system, petitioned the court in September to review the decision handed down by the Fourth District Appellate Court of Illinois in Provena v. the Illinois Department of Revenue.
The appellate court in August reversed a lower court decision that had restored the Catholic hospital's tax exemption after the state Department of Revenue removed it. At the time, Provena argued that the opinion unfairly impugned the hospital's charitable and religious record and threatened its operations.
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 and religious 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 prevailed at the circuit court level in Sangamon County, winning the return of $5 million in property taxes paid by Provena since the state's action. The appellate court reversed that decision, with panel members siding with the state.
The appellate court found that if the "operation of the property is businesslike and more characteristic of a place of commerce than a facility used primarily for religious purposes, the property is not exempt from taxation."
The opinion noted that during the year cited by the state, nearly all of the hospital's patients entered into contracts to pay for their care and nearly all of its $115 million in revenue came from insurance companies, paying patients, and other contractual sources.
Health care market participants have called the case significant because not-for-profit hospitals face growing scrutiny at the local, state, and federal levels to justify their tax-exempt perks - from their exemptions from certain taxes to their ability to access the tax-exempt bond market.
Provena Covenant provided more than $21 million in charity care and other community benefits in 2008, including unlimited free care to the poor and underserved as well as other, non-reimbursed Medicaid costs, and community services, according to a hospital statement.
Illinois Attorney General Lisa Madigan did not have an immediate comment on the high court's decision to take the case. Madigan has pushed for legislation that would set a minimum threshold for charity care in order for such institutions to keep their property tax exemption and use the Illinois Finance Authority to access the tax-exempt bond market.