Advocate backs Provena in tax-exemption dispute

By Brian Mellen

The Illinois Hospital Association is currently at odds with the Illinois Department of Revenue for their recent decision to deny Provena Convenant Medical Center’s request for a renewal of their property tax exemption. But the Illinois Department of Revenue stands by their decision that Provena is not exclusively a charitable institution.

“It’s an outrageous and a very disturbing decision,” Danny Chun, the assistant vice president of communications for IHA, said in an interview. “It ignores 100 years of legal precedence.”

The IHA is an organization that advocates for and supports hospitals and health care systems in Illinois.

The problem began in January 2003, when the Champaign County Board of Review recommended that the state deny Provena’s application for property tax-exemption. The Illinois Department of Revenue took the board’s advice, and refused to grant Provena a renewal.

The decision to appeal was then brought before an administrative law judge in December 2004.

The judge sent a recommendation to the Department of Revenue, siding with the hospital. However, the Department of Revenue, which has the power to change the recommendation, ruled against Provena.

Kenneth C. Robbins, president of the IHA, said he is worried that new tax burdens on Provena might jeopardize other Illinois hospitals. He said new taxes would reduce the quality of service and increase health care costs for patients and employers.

Robbins cited an Illinois Supreme Court decision from 1907 as proof that Provena should be exempt from property taxes.

“A hospital that treats patients, regardless of their ability to pay and that does not provide profits to private individuals, is charitable and merits an exemption from property taxes,” Robbins said in a statement released by IHA.

Like most hospitals in the state, Provena Convenant Medical Center is non-profit. It is part of a Catholic health system that has hospitals, facilities and clinics in Illinois and Indiana, with operations in Urbana-Champaign.

The Department of Revenue does not share Robbins’ point of view. Mike Klemens, manager of policy and communications for the Department of Revenue, said that the ruling by the Department of Revenue is solid.

“Provena is not primarily a charitable institution,” Klemens said.

Brian Hamer, director of the Department of Revenue, wrote the opinion that denied Provena their request.

“I find that (Provena) does not qualify for the charitable institution tax exemption because the evidence is clear that this property is not used exclusively for charitable purposes,” Hamer said in the opinion.

Hamer based his conclusion on the following figures: Provena admitted that, during 2002, revenues exceeded $113,000,000 and charitable costs accounted for only $831,724. Charitable costs only amounted to 0.7 percent of total revenue. As a result, Hamer said he thinks Provena’s primary purpose is not for charity. But Provena Health says that Hamer’s numbers do not take into account Provena’s full charitable benefit to the community, $21.8 million last year alone according a Provena press release.

As for what move Provena takes next, Mike Klemens ventured a guess.

“Provena has said they will appeal,” Klemens said. “I’m guessing they won’t.”

Danny Chun of IHA had a different prediction on what might happen in the future.

“It should and will be overturned,” Chun said.

The Illinois Department of Revenue’s opinion can be viewed online at www.tax.illinois.gov.