Sunday, October 08, 2006
Crain's Chicago Business

A Cook County commissioner wants to squeeze as much as $200 million a year from local hospitals to help fund the county's cash-starved health system.

Commissioner Larry Suffredin says he'll introduce a measure in coming weeks that will pose a choice to the county's more than 50 non-profit hospitals: Offer more free medical services to ease the burden on the struggling county hospital system, contribute cash to that system or pay property taxes.

Mr. Suffredin is moving quickly following a recent state ruling upholding Champaign County's right to tax Provena Covenant Medical Center of Urbana because it failed to meet charitable-care standards for tax-exempt hospitals. Mr. Suffredin's plan would face vigorous opposition from the industry, and it's too early to say whether other commissioners will back him.
Mr. Suffredin is pitting a government badly in need of revenue — John H. Stroger Jr. Hospital and other Cook medical facilities face a $94-million projected loss this fiscal year — against an industry already facing criticism in Illinois and Washington, D.C., over its charitable activities.

"The Provena ruling is going to put a lot more pressure on hospitals to show they have a charitable side to their operations," Mr. Suffredin says. "I'm setting up a framework to encourage them to come to us first. Those who aren't cooperative are the ones we'll ask the assessor to aggressively focus on."

Cook's health system makes up 28% of the county's $3.1 billion budget.
Tax exemptions for hospitals and other entities are determined by the state on recommendations from local governments. A ruling last month by Illinois Department of Revenue Director Brian Hamer could embolden local governments to put hospitals on their tax rolls. Mr. Hamer upheld Illinois' 2004 denial of Provena Covenant's tax-exempt status, concluding it didn't provide enough free care to warrant an exemption. Parent company Provena Health of Mokena plans to appeal the ruling in court.

"This ruling suddenly gives cash-strapped local governments an opening to say, 'Hey, maybe we should look at this charity-care issue more closely,' " says Stephen Weyl, a New Hampshire attorney who advises hospitals on tax-exemption issues.

Mr. Suffredin's measure would seek binding agreements from Cook County's non-profit hospitals to devote a set percentage of their operating budgets either directly to the county's health system or toward free medical care for uninsured residents. Hospitals that balk would be subjected to a detailed analysis of their charity care and property tax breaks.
Mr. Suffredin says hospitals would give free care or cash in the equivalent of 8% of their operating budgets, citing a figure proposed by Illinois Attorney General Lisa Madigan in a bill that stalled earlier this year amid hospital opposition. The state hospital lobby recently began fresh talks with Ms. Madigan, who intends to push for new legislation next year if the sides can't agree.

Cook County's tax-exempt hospitals provided $152 million in charity care in 2004, even though nearly half of them lose money on operations, according to the Metropolitan Chicago Healthcare Council.

"If you place this new burden on them, where are they going to come up with the money?" says Kevin Scanlan, the council's CEO. "They'll have to curtail programs and services, and that would push more people back on the county system." Cook County's health system should cut costs before looking to hospitals for revenue, he says.

Cook County Assessor James Houlihan is appraising all non-profit hospitals at the request of the board. A spokesman says values won't be available until early next year.
Some commissioners support forcing hospitals to provide more charity care, but differ on how to achieve that goal.

Cook County Board President Bobbie Steele wants to wait until Mr. Houlihan's work is complete before making any decisions, but says tax-exempt hospitals should provide charity care at least equal to their property tax exemption, a spokeswoman says.
Commissioner Forrest Claypool says he's open to a county measure to address the issue, but is skeptical of a "one-size-fits-all" solution that could hurt hospitals that serve large numbers of poor patients. He says the matter is best left to Ms. Madigan to settle.
"There's no doubt that some hospitals probably don't deserve their tax break, but I don't think we should throw the baby out with the bath water," Mr. Claypool says.