A debate rages in Illinois about how much of its annual revenue a hospital must spend on charity care and still qualify for the tax abatement offered due to their non-profit status. In 2010, a downstate Illinois hospital in the Provena system lost its tax exempt status after allocating only about 0.7% of its annual revenue as charity care.
In September of this year, the State challenged the property tax exemptions of 3 more hospitals. State regulators use a narrow definition of charity care limiting the dollars they count to free clinical services provided to patients on hospital campuses and ignoring other significant community benefit such as funding community wellness and preventive programs, teaching, and research.
Now comes a proposal from the Illinois Department of Revenue -- a carrot and stick approach to encourage hospitals to provide more pure charity care in exchange for tax credits. If a hospital does more direct charity care, the more tax credits it gets. If it does less, the more taxes it pays. Perhaps the taxes paid could even be directed into funds to shore up the State's Medicaid program or go into an account to support community clinics.
To me it sounds like the power industry's carbon cap and trade program for carbon emissions.
Although the proposal is creative and could encourage laggard hospitals to pull their charity care weight, the first thing to do is to agree on what counts as charity care. Is it the narrow definition of providing free care for a patient in the hospital or an x-ray or scan? Or does it include the broader resources that hospitals provide as community benefit? The more taxes a hospital has to pay, the less community benefit it will want to provide.
Non-profit hospitals are not paying shareholders and investors. They are reinvesting in the community. As one of the only expanding industries in our sputtering economy, their new buildings and projects create jobs, massive durable goods and supply orders, and community investment.
Let's hope that in the effort to evaluate and redesign hospitals' commitments to community benefit, that we don't end up in the trauma unit with a shot to our own collective foot.
3 comments:
Interesting. I didn't know any of this. But I don't think I understand what you're saying at the end. I think it is this:
With the "carrot and stick" proposal from the Illinois Department of Revenue, you fear that non-profit hospitals will end up investing less in community partnerships and programs in, fearing wrath of the "stick" (i.e., taxes), because community partnerships and programs do not (or may not? not sure how it works currently) "count" as charity care.
So the implicit suggestion is if community partnerships were considered charity care, you would support the proposal. Because I'm assuming you don't support hospitals having non-profit status and doing nothing for the community or needy patients. Doesn't sound like you.
Sorry, after writing that I think I understand what you are saying now. But, maybe I'm putting words in your mouth. Did I get it right?
The only thing, then, is that it seems quite simple to determine when charity care was provided to a patient (like in your example of a free x-ray). But how to determine which investments in community partnerships should count? Will every dollar a hospital spends on a program that involves, even nominally, a community organization end up being a tax write off? I feel like this could be an exploitable loophole of sorts. But maybe I'm too cynical. But maybe not. See: economy.
You basically have it right, Kate, although, I think your concept of "loophole" deserves further exploration. I think what really counts is whether or not one hospital dollar spent does community good or not. For example, whether it is direct charity care (paying for an x-ray) or supporting, say, a diabetes care program at the community level.
Right, right. I'm certainly not disputing the charitable value of diabetes programs and the like. I'm just saying, if one wanted to, it would be easy to call a lot of things community programs that are equivalent to charity care that in fact are not. I guess it goes to whether or not the impact is measurable. You can easily count the number of patients were provided free medical service. You can't as easily quantify the impact a community program had. I REALLY don't mean that community programs shouldn't count - or that they aren't vital, and I see how without support from hospitals they would have a tough time finding funding. It's just an observation, I guess, that it may be difficult to say that a dollar spent on free hospital care is equivalent to a dollar spent in the community. In some cases the impact may be much greater than in hospital spending, while in some cases it could be waste and tax fraud.
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