Robert Ruark, the novelist and big game hunter, used to encourage his fellow hunters to “use enough gun” when hunting dangerous animals. If the reasoning of the Illinois Supreme Court recently in Provena Covenant Medical Center V. Department of Revenue 2010 WL966858 (2010) gains traction beyond the state court ruling on local property tax exemptions and spills over into the analysis of federal and state income tax exemptions, not-for-profit hospitals may be in for some rough sledding with the Internal Revenue Service and Sen. Charles Grassley (R) Iowa. Senator Grassley who inserted the enhanced “community benefit” requirements into the Patient Protection and Affordable Care Act enacted last fall has been anxious to hold non-for profit hospitals accountable for the very lucrative tax exemptions that they receive under the Internal Revenue Code.
The Provena Court held that the hospital did not meet the state requirements for property tax exemption because it did not provide enough charity care under state law precedents. Provena had a charity case policy in place with a “sliding scale” payment obligation based upon eligibility requirements tied to federal poverty guidelines. The problem was that they didn’t use it much. While Provena received approximately $1.1 Million Dollars in property tax relief the actual cost of its charitable care was only $831,734.00 or 0.723% of its annual revenues. The hospital provided charitable care in only 302 of 110,000 patient visits or .27% of hospital visits.
The court relied on an earlier definition of charity as “a gift . . .for the benefit of an indefinite number of persons, by relieving their bodies from disease suffering or constraint, . . . or otherwise lessoning the burden of government.” Provena argued that its “free or discounted care ” should count toward its charitable tally. The court found that there was little to distinguish Provena’s dispensation of “charity” from for profit hospital write offs of bad debt. Since the county in which Provena is located has approximately 25,000 people and 20,000 county residents are uninsured the court felt that 302 charitable patient visits was not convincing and that the hospital’s tie to a religious mission did not further the cause.
In this case, the record clearly established that the primary purpose for which the (Provena) property was used was providing medical care to patients for a fee.
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We note, moreover, that no claim has been made that operation of a fee-based medical center is in any way essential to the practice or observance of the Catholic Faith.
One is reminded of the words of the novelist Jack London, “A bone to a dog is not charity. Charity is the bone you shared with the dog, when you are just as hungry as the dog.”
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