NEW YORK - Standard & Poor's Ratings Services said today that its ratings on Provena Health System (Provena; BBB-plus/stable), Ill., are not affected by yesterday's Illinois Supreme Court ruling against Provena Covenant Medical Center, part of the system, on the center's property tax exemption status.
Although the ruling sets an important precedent that could affect other health care systems and hospitals in Illinois, as well as nationwide if adopted elsewhere, Provena's balance sheet provides sufficient cushion against the need to pay its tax liability. However, Standard & Poor's will monitor Provena's financial profile and the ultimate payments Provena will need to make under this ruling, details of which are still being determined.
The ruling addresses only exemption for Provena Covenant Medical Center. The case stems from Champaign County's challenging the tax status of Provena Covenant Medical Center for fiscal 2002. The amount that Provena owes for that year is approximately $1.1 million. It is still unclear whether Provena will be required to make payments for years following 2002, which could be up to about $10 million in total, assuming each year's property tax amount was about the same as in 2002.
Although the 2002 payment (or even additional payments for years since 2002) is unlikely to materially affect Provena's unrestricted cash position at this time, we will closely watch for the impact of this ruling on other health care providers in Illinois as well as nationwide.
Charity care and questions of whether hospitals and hospital systems are providing enough of same have been under discussion for several years. But at a time when the economy has put pressure on local, county, and state governments as well as many health care providers, we believe that this ruling could have wider consequences.
