CHICAGO - Chicago-area not-for-profit hospitals enjoy an estimated $498 million in tax-exemption benefits annually while collectively providing just $176 million in charity care, according to a new report from a Chicago-based fiscal research organization.
As part of a follow-up to a similar report released in 2006, the Center for Tax and Budget Accountability looked at 47 nonprofit hospitals in the region, comparing the various federal and state breaks on property taxes and sales taxes they receive to their levels of free or discounted care provided to low-income citizens and the uninsured.
"Tax breaks are essentially an expenditure of public funds. The value of the tax breaks given to nonprofit hospitals are public dollars in the hands of those hospitals that lawmakers intended to be spent on charity care," said the study's author, Heather O'Donnell.
The study found that the hospitals did increase their charity care by $40 million over the last three years, but the value of their tax breaks also grew by $94 million during the same period. The group included in its statement accompanying the report a comment from Illinois Attorney General Lisa Madigan, who several years ago introduced legislation proposing hospitals be required to meet a minimum threshold of charity care.
"As the number of uninsured Illinoisans increases, it has become even more important that nonprofit hospitals provide extensive free and discounted care ... CTBA's analysis underscores the continuing importance of this issue," Madigan said.
The Illinois Hospital Association, which annually releases a report on the level of community benefits provided by the state's nonprofit hospitals, called the CTBA's calculations flawed and countered that hospitals provide nearly five times the value of their tax exemptions in the form of community benefits.
"In essence, the report overstates the hospitals' potential tax liability while understating the benefits they provide," IHA president Ken Robbins said in a statement. "For example, it uses 2007 data instead of readily available data from the 2008 hospital Community Benefit Reports, thereby understating the actual increase in hospital charity care by 35%."
The association further slammed the CTBA report as overestimating the sales tax liability by applying the regular sales tax rate to all supplies, even though a 1% rate applies to prescription drugs, food, and consumable medical supplies, and there is no sales tax for supplies for Medicare and Medicaid patients. Property taxes were counted as representing 2.2% of a hospital's expenses, when the association said it represents a lower level of 1%.
Robbins also noted that the CTBA acknowledges that hospitals provided more than $2 billion in overall community benefits and that charity care levels rise to $600 million when bad debt and the difference between the cost of providing services to Medicaid patients and the level reimbursed by the government are factored into the equation.
Illinois has a been a focal point of the national debate over whether tax-exempt hospitals deserve their local, state and federal tax exemptions including those on interest earnings on their bonds. The state Supreme Court last year 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.
The Illinois Department of Revenue formally acted to strip the property tax exemption 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.