Elmhurst Memorial Healthcare Watching Fallout From Tax-Exempt Ruling

Just as they are , officials and staff at are watching a turbulent issue that may change the way the organization does business.

The Illinois Department of Revenue announced in August that three hospitals—Northwestern Memorial's Prentice Women's Hospital in Chicago, Edward Hospital in Naperville and Decatur Memorial Hospital—might lose tax-exempt status because they did not provide enough charity care. Now, other nonprofit hospitals are wondering if the state will go after their tax-exempt status.

According to Elmhurst Memorial Healthcare President and Chief Executive Officer W. Peter Daniels, the recent rulings raise many more questions than they answer.

“We are vigorously trying to wrap our arms around this tax-exempt issue. ... Right now, we don't know how we are affected,” Daniels said.

EMHC is not the only Illinois hospital with serious concerns about the state's intentions.

“Taxing hospitals will force them to reduce services and increase health care costs for patients and employers, jeopardizing access to quality hospital services as well as the financial survival of some hospitals,” Mary Jane Wurth, president of the Illinois Hospital Association said in a statement after the ruling.

EMHC has a pending nonprofit application under review because of the construction of the $450 million new hospital. Daniels says the hearing may take place this fall.

The decision follows an Illinois Supreme Court ruling last year affirming the state revenue department's reversing Urbana-based Provena Covenant Medical Center's property tax exemption in 2004 because of the level of charity care provided. Daniels said it is unclear what standards the state is using, but it seems that the Department of Revenue is only looking at the charity care component.

“We believe we already make a considerable contribution and that we are a vital community resource,” he said.

EMHC can count $7 million in charity care, but Daniels says the total community benefit is closer to $80 million, including Medicare and Medicaid shortfall reimbursements, discounted care for the uninsured, public wellness seminars and other activities. Daniels notes that EMHC also spent millions in the community during the hospital construction process. In addition, the company's more than 31,000 employees contribute to local businesses and municipalities.

While it is hard to estimate the tax amount that could be owed should the tax-exempt status be revoked, Daniels' “back of the napkin” estimate puts the bill at around $500,000 per year for the Center for Health alone. Elmhurst Director of Finance and Admininstration Marilyn Gaston says the city has not at this time completed any analysis of what a change in EMH's nonprofit status might mean.

Daniels said he wonders if the state is looking for ways to raise revenue, but asks to what extent this pursuit can detract from a local economy. The uncertainty puts stress on EMHC, he said, affecting decisions to make major purchases or upgrade technology.

The three hospitals affected by the ruling are “vigorously pursing this matter,” Daniels said. EMHC, for its part, is in contact with state legislators and is encouraging staff and trustees to do the same.