CHAMPAIGN, IL - Officials at Provena Covenant Medical Center are seeking the Illinois Supreme Court's review of a state appellate court ruling which reversed an earlier order to restore the religious and charitable property tax exemption of the hospital.
The three-judge Fourth District Appellate Court panel in Springfield, Ill., last month reversed a Circuit Court decision that let the hospital keep its tax-exempt status.
The appellate court justices agreed with Illinois Department of Revenue Director Brian Hamer, who ruled two years ago that Provena Covenant's charity care was not enough to justify an exemption. In 2002, Hamer claimed that Provena Covenant's charity care was less than 1 percent of its revenue.
"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," wrote Justice Thomas Appleton in a unanimous opinion by the Fourth District Appellate Court panel. "In 2002, more than 99.99 percent of (Provena) Covenant's patients entered into contracts to pay for their medical treatment. Almost all of Covenant's $115 million in revenue came from insurance companies, persons paying for their own treatment and other contractual sources. Provena cannot ... prevail in its attempt to exempt itself from real estate taxation."
Hospital officials announced that their petition for "leave to appeal" would be filed by the end of September. Provena Covenant Medical Center is part of Provena Health, a Catholic health system that includes six hospitals, 16 long-term care and senior residential facilities and numerous clinics, home health agencies and other sites operating in Illinois and Indiana.
"The Appellate Court opinion runs counter to the law, facts and evidence of our case, but also unfairly impugns the proud history of charitable and religious mission service by Provena Covenant Medical Center," said Jon "Cody" Sokolski, chairman of the Board of Directors of Provena Covenant. "The ruling also impacts on the very ability of our hospital to continue caring for all regardless of their ability to pay. It flies in the face of our charitable history and reputation and disregards the undisputed fact that Provena provides unlimited charity care to all in need as well as other valuable charitable contributions to the Urbana-Champaign community."
While Illinois Attorney General Lisa Madigan lost her argument on behalf of the Illinois Department of Revenue last year in Sangamon County Circuit Court, the state Supreme Court's ruling appears to be a clear-cut victory.
"The Illinois Constitution and years of case law make clear that tax-exempt hospitals have a legal obligation to provide significant charity care in return for their tax exemption," said Madigan in a statement. "The Department of Revenue carefully and correctly applied this Constitutional standard and concluded that Provena fell far short of meeting its obligation to provide this care to the poor, and thus should not hold tax-exempt status."
Officials at the medical center and Provena Health have strongly contested the state's assertion that they don't provide enough charity care to warrant a tax exemption.
Fr. William Grogan, system director of ethics for Provena Health, said Provena Covenant has had religious sponsorship from its very beginnings and a commitment of caring for all regardless of financial condition. He said the hospital has contributed millions of dollars in charity and charitable benefits to the community on an annual basis, including during years where Provena Covenant has suffered operating losses.
Grogan cited more than $21 million in charity care and other community benefits that Provena Covenant provided in 2008, which included unlimited free care to the poor and underserved as well as other, non-reimbursed Medicaid costs and community services.
"The denial of recognition as a charitable institution and lack of charitable and religious property tax exemption to Provena Covenant is not only unjust, it reflects a fundamental error in reason and judgment," said Grogan. "The ruling prolongs a crisis for Provena Covenant and for non-profit hospitals in Illinois and across the nation. Community hospitals that care for the uninsured, Medicaid-insured and indigent populations are in need of property tax exemptions and other support in order to continue their missions of providing free care to all who need help."
The Provena Covenant case is being watched closely by hospitals nationwide. Some state and federal lawmakers have attacked non-profit hospital tax exemptions, questioning whether some healthcare facilities are providing enough charity care.
If the decision is allowed to stand, Grogan said, it would send a "chilling message that compliance with the process recognized under the laws of Illinois for more than 100 years has been abandoned in favor of some unknown new standard that ignores the true nature and extent of hospitals' charitable contributions to their served communities."
The Illinois Supreme Court's decision will likely influence how non-profit hospitals around the nation deal with the bills of uninsured Americans.
"Forcing non-profit hospitals to pay property taxes takes millions of dollars away from the ability of a hospital to provide free and other patient care." said Sokolski. "That is bad public policy and an atrocious decision that risks the ability of the community to continue to have the immense benefits provided by Provena Covenant."