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Wednesday, April 1, 2020

Quinn signs bill to clear up court's 2010 Provena ruling

By Bethany Krajelis | Jun 14, 2012


Gov. Patrick J. Quinn today put his stamp of approval on a handful of Medicaid-related bills, including one proposed in direct response to a 2010 Illinois Supreme Court ruling over property tax exemptions for non-profit hospitals.

Senate Bill 2194, one of the five bills the governor signed into law today, imposes a $1 per pack tax hike on cigarettes, creates a hospital assessment program and establishes criteria on how much charity care non-profit hospitals must provide in order to qualify for a property tax exemption.

Maryjane A. Wurth, president and CEO of the Illinois Hospital Association, said in a statement today that she commends the governor and legislature for passing the package of bills that aimed to save the state's cash-strapped Medicaid programs from collapse.

The legislation "sets clear, fair and workable criteria that states which activities and services are sufficient for hospitals to qualify for tax exemption and how charitable care is determined," Wurth said in a statement issued on May 29, the day the General Assembly approved SB 2194.

Under the measure that took effect today as Public Act 97-688, a hospital qualifies for a property tax exemption if the value of charitable services equals or exceeds the estimated value of its property tax liability. So if a non-profit hospital's property tax assessment is valued at $10 million, it must provide $10 million in charity care to receive the exemption.

The new law also expands the definition of charity care, which previously only covered care for indigent populations. It now includes free and discounted hospital services for the poor and underserved, as well as Medicaid shortfalls, subsidizing physicians who treat low-income patients and other charitable activities and services.

The issue over the charity care-based property tax exemption reached the Illinois Supreme Court in 2009 in Provena Covenant Medical Center v. The Department of Revenue. In 2004, the Department of Revenue denied the Urbana hospital's application for a property tax exemption for charitable care in the Property Tax Code.

After paying the property taxes it sought exemption from based on charity care, the hospital argued its case before the department's administrative law judge. The judge agreed with Provena, but the department denied the hospital's application.

The hospital took the matter to the Sangamon County Circuit Court, which reversed the department's denial. On appeal, the 4th District Appellate Court held that the hospital failed to prove it was a charitable institution.

In 2010, the majority of the Illinois Supreme Court affirmed, holding that Provena did not provide enough free care to qualify for the exemption. Written by Justice Lloyd A. Karmeier, the majority's ruling noted that while Provena provided nearly $832,000 in free care in 2002, that amount only accounted for .07-percent of the revenue that year.

Justices Ann M. Burke and Charles E. Freeman dissented from the majority, pointing out that the court's ruling did not provide any guidance to hospitals on exactly how much charitable care is needed to receive the exemption.

"The plurality has set a quantum of care requirement and monetary requirement without any guidelines," Burke wrote in her dissent. "This can only cause confusion, speculation, and uncertainty for everyone: institutions, taxing bodies and the courts."

It appears that the new law settles the issue by establishing specific guidelines and providing formulas for hospitals to follow when calculating the value of their charitable care. The new law also creates income tax credits for for-profit hospitals.

In addition to SB 2194, Quinn also signed into law House Bill 5007 and Senate Bills 3397, 2840 and 3261. Quinn said in a statement that the package of bills will create $2.7 billion in Medicaid savings through eligibility reforms, reductions in services, controls on utilization and cuts in provider rates.

"One of our most important missions in Springfield this year was to save Medicaid from the brink of collapse," Quinn said in a statement.

"I applaud the members of our working group and of the General Assembly, who worked together in a bipartisan manner to tackle a grave crisis. As a result, we preserved our healthcare program that millions of our most vulnerable rely upon."

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Illinois Hospital AssociationIllinois Supreme Court