Illinois For-Profit Hospitals Get Tax Break

A bill signed into law by Illinois Gov. Pat Quinn earlier this year meant to cut costs in the Medicaid program contained a minimum $10 million annual tax benefit to the state’s 28 for-profit hospitals, the Associated Press reported earlier this week in a special investigation.

The legislation was part of a package of $2.7 billion in budget cuts and tax increases to help keep the Medicaid program functioning. Its provisions included eliminating working parents from the Medicaid rolls and raising the tobacco tax.

The bill was crafted in part by former state senator A.J. Wilhelmi. He left the Legislature in February to take a senior executive position with the Illinois Hospital Association. He estimated that the bill could benefit hospitals by as much as $15 million per year.

Wilhelmi told the Associated Press that the legislation represented good public policy because it supported “the charitable activities of investor-owned hospitals. “We want to encourage hospitals to continue to provide free and discounted care," he said.

However, the tax break, tucked into a bill that meandered for hundreds of pages and whose language would bewilder the most hard-boiled lawyer, was blasted by consumer groups.

“When they’ve got a hole of that magnitude in their existing budget, they’re giving a tax credit to certain investors. That's saying we'd rather spend that $10 million to subsidize the income of these mostly affluent investors than use that $10 million to pay for the core services we directly fund,” Ralph Martire, the executive director of the Center for Tax and Budget Accountability, told the Associated Press.

Under the provisions of the law, for-profit hospitals will be able to use their property tax liability or what they spend on charity care to offset their state income tax liability, although only the lesser amount is applicable.  However, those hospitals with a property tax liability higher than their income tax liability will be able to either sell their tax credits to other businesses, or apply it to their ongoing tax liabilities for the next five years.  The Associated Press calculated most of the state’s for-profit hospitals will have an offset that exceeds their income tax liability.

Nashville-based Vanguard Health Systems, which operates four hospitals in Illinoiswill share the lion’s share of the largesse. Vanguard is expected to receive a tax break of $5.5 million a year.