Standard & Poor’s late last week said Provena Hospitals’ BBB-plus rating would not be affected by the Illinois Supreme Court decision upholding a ruling that cost Provena Covenant Medical Center its property tax exemption because it failed to provide sufficient charity care.
“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, we believe Provena’s balance sheet provides sufficient cushion against the need to pay its tax liability,” analysts wrote. “However, we will monitor Provena’s financial profile and the ultimate payments Provena will need to make under this ruling.”
It’s unclear how many years of taxes Provena will be required to pay. State officials stripped it of its 2002 tax exemption when $1.1 million was owed. If required to pay for all years since, it would face a $10 million bill. Standard & Poor’s said even the higher amount is unlikely to materially affect Provena’s unrestricted cash position.
“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,” analysts wrote.
The high court upheld an appellate court decision supporting the state’s decision to strip Provena Covenant Medical Center in Urbana of its property tax exemption. It rejected most of the hospital’s arguments and sided with the appellate ruling that upheld the Illinois Department of Revenue’s position that Provena spent too little — less than 1% of its revenue according to the state — on charity care.
The hospital is one of six operated by the Catholic-sponsored Provena Hospitals system. Moody’s Investors Service rates the system Baa1.