Now that I've had a day to cogitate (love that word!) on the Provena case, here are a few final thoughts about things.
First, the impact in Illinois. While I (and probably many others) are disappointed that there was no definitive ruling on the question of what constitutes charitable use of property by a hospital (e.g., whether a substantial charity care program is required or not), the fact of the matter is that the Provena decision leaves intact a body of appellate case law (cases from the 1st, 2d, 3d, and 4th districts, including the Provena 4th District appellate opinion) that all have concluded that substantial charity care is a requirement, and all have rejected the federal community benefit test as a standard for exemption. All these cases also agree that contractual discounts (e.g., Medicare/Medicaid shortfalls) do not "count" for purposes of computing charity care, and have accepted the Department of Revenue's position that charity care must be measured against a hospital's average costs as opposed to customary charges. On top of this, we know that at least 3 justices of the Illinois Supreme Court agree with this body of law; while that might not be a majority, it certainly would be foolish for any hospital to "bet the house" on a final, majority decision coming out the other way - after all, all the plurality needs is for one of the two justices that recused themselves to agree with their position, while the two dissenters would have to pick up both of the recusals to become the majority. So if I were an attorney advising an Illinois hospital, I'd tell them that they need to have a fairly generous charity care policy; that such policy needs to be advertised and proclaimed from the rafters, that they need to be extremely careful with how they treat debt collection (a relatively new Illinois law, passed a couple of years ago, addresses that anyway, and the federal health care bill that might actually pass Congress this weekend also might have something to say about that issue) and that they shouldn't count on "community benefit" expenses (like running health fairs or prenatal care seminars) to count for much. And if I were a tax assessor in Illinois, I wouldn't be shy about challenging nonprofit hospitals in my assessment district to document their charity care before handing out exempt status. On a practical note, however, I expect this is mostly water under the bridge. Illinois hospitals, including Provena, have already substantially changed the way they do business with respect to charity patients. Where it was once difficult to find out about charity policies, today you can't walk in the front door of a hospital without being bombarded by information about charity policies. The folks at the desks have pamphlets, forms, pens and paper. The hospitals have already throttled back on the use of collection agencies. In short, it would be an awfully stupid hospital that hasn't already made major adjustments in its operations to take into account the trend of Illinois case decisions.
With respect to the national picture, I still think the impact of Provena will be muted. That's not to say that the decision won't have any impact at all - far from it. Tax assessors in other states certainly will have a tool and a blueprint for arguing that charity care is the key to local property tax exemption. But it will be hard for these folks to claim that such is the law in Illinois - in other words, they will not have a direct, strong precedent to cite. It will be interesting to see, for example, whether Provena plays much of a role in the current litigation in Ohio that pits the state department of revenue against Cleveland Clinic with respect to a satellite care facility that itself provided no charity care. Ohio is Ohio, and Illinois is Illinois, but I wonder if the lawyers representing the Department of Revenue in Ohio will try to use Provena as a precedent to bolster their case. I think that is going to be hard to do, since the counterargument is that there is no precedential value to Provena even in Illinois.
And finally, I will reiterate what I said yesterday. If states are going to go down a "strict charity care test" road, the proper place for this is the state Legislature. The dissenters in Provena are correct about one thing: we don't know for sure in Illinois how much charity care is required to be exempt, nor do we know for sure how to calculate it. These are technical issues that need legislative attention. But as to the underlying policy, both the community benefit test and the "strict charity care" approach to tax exemption for nonprofit hospitals are wrong-headed. We should be asking what nonprofit hospitals "bring to the table" that their for-profit competitors do not. Instead of asking "how much charity care do you offer?," we should be asking "What services do you bring to your community that people cannot get from the private market?" Nonprofits should be "gap fillers" - that is, they should be providing services that are not otherwise provided by the private sector or the government. That is ultimately why nonprofits exist. It would not be so difficult to apply this theory to nonprofit hospitals, and doing so would both relieve the "straitjacket" of a strict charity care test, while requiring real accountability from hospitals regarding their services. No more claims that "community building" expenses are "community benefits" that support tax exemption - tell me you operate a major burn center at a loss, and we'll talk. I know that trying to get the debate on this issue refocused at this point probably is futile, but I intend to die trying.