Not-for-profit hospitals are tax exempt. Seven of the ten most profitable U.S. hospitals are nonprofit, according to new research. One hospital, located in Urbana, Ill., is involved in a contentious court battle. The decision could determine whether medical facilities are paying their fair share of taxes.
According to this study, delivery of patient care was a money-loser for 55% of hospitals in 2013, which was the year the study was done. About one-third of these hospitals made some money, up to $1,000 per patient. About 12% of those in the sample research group made more than $1,000 per discharged patient. The highly profitable hospitals were mostly for-profit corporations. In this group were Medical City Dallas Hospital in Texas and Swedish Medical Center in Englewood, Colo.
The not-for-profit hospital Carle Foundation Hospital in Illinois claimed tax exemption, but state appeals court in January 2016 ruled Illinois law allowing hospitals to avoid taxes is unconstitutional.
Carle Foundation Hospital stopped paying $6.5 million in taxes each year in property taxes. According to the Urbana, Ill., mayor, the city lost 11% of its assessed tax value when the hospital stopped paying property taxes.
According to a Carle Foundation Hospital spokesperson, the hospital spent $25.8 million in charity care in 2013. “A positive bottom line does not mean a hospital does not deserve tax-exempt status,” said Danny Chun of the Illinois Hospital Association.
“Taxing hospitals could force hospitals that are operating on thin margins anyway to reduce services, lay off staff and delay the purchase of equipment or facility upgrades,” Mr. Chun said.
Hospital care represents one-third of all U.S. health-care spending. That figure increased by 4% from 2013 to 2014 to reach $972 billion.
The study showed that hospitals affiliated with larger health-care systems and those in less competitive markets did better on profits. When hospitals consolidate, it may mean that the business of providing health-care could be more efficient and at a higher quality but it also may mean that the hospitals are going to negotiate higher prices with private insurers.
In the meantime, the public may be suffering. Hospitals are treating fewer uninsured patients because of the expansion of coverage under the Affordable Care Act. At the same time, the value of the tax benefit to these hospitals has not changed. The Illinois Supreme Court’s decision will be watched carefully in the hospital community.
Kreisman Law Offices has been handling medical malpractice cases, hospital negligence cases, birth trauma injury cases and nursing home abuse cases for individuals and families who have been injured or killed by a medical provider for more than 40 years, in and around Chicago, Cook County and its surrounding areas, including Calumet City, Flossmoor, Schiller Park, Hanover Park, Elmhurst, Elmwood Park, Melrose Park, Hanover Park, Hinsdale, Wheaton, Cary, Aurora, Crystal Lake, Niles, Des Plaines, Hoffman Estates, Winnetka, Buffalo Grove, Franklin Park, Crete, Bensenville, Highwood, Lake Bluff, Wheeling and Vernon Hills, Ill.
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