Tuesday, March 27, 2012

Illinois Hospitals Feeling Crunch from Law and Possible Loss of Funds

In Medicaid Cuts, Property Tax Battle a Stress Test for Many Hospitals, the Chicago Tribune reports that the combination of proposed cuts to the state's Medicaid program and the possibility that some hospitals may lose property tax exemptions for failure to provide sufficient charity care under state law “has Illinois hospitals on their heels.”  Children's Memorial Hospital, for example, is said to be facing a $37 million to $50 million budget deficit. 

The story explains that the Illinois General Assembly is considering Governor Pat Quinn's plan to reduce the state’s $14 billion Medicaid program by as much as $2.7 billion this coming fiscal year.  One proposal is to cut 6 to 9 percent of the amount that the state reimburses hospitals and other health care providers for Medicaid patients.  This comes at a time when, as previously blogged (see, e.g., this entry), Illinois is requiring hospitals to provide more charity care in order to claim property tax exemptions.  The story explains how the two issues are linked financially and legally, as illustrated in the case of Children's Memorial Hospital:

Children's Memorial doled out $1.2 million in charity care in 2011, as measured by the state. That represents a tiny fraction of its total patient revenue.

The hospital says it has little opportunity to provide free care because nearly all children in Illinois are eligible for Medicaid, a joint federal-state program whose payments don't cover the cost of services. The state's definition of charity care does not include losses incurred from Medicaid, which comprises more than half of the hospital's revenue.

That, in turn, could make it harder for Children's to qualify for a property tax exemption.

"What we're trying to do is make certain everyone understands this isn't apples and oranges when you compare us to (other Illinois hospitals)," [hospital CEO Patrick] Magoon said. "This is like apples and giraffes. We're totally different than anyone else because of who we serve, how the patients are financed and because everyone else feeds those children to us."

Magoon, along with other hospital executives, argues that hospitals should get credit for the losses they incur to provide services to Medicaid patients, as well as money spent on community outreach, research and other activities that he believes advance public health.

The article reports that the region's safety-net hospitals operating in impoverished communities are also concerned.  Although few of them are thought to risk losing their property tax exemptions, some apparently might have to close their doors if the legislature carries through with the proposed Medicaid cuts.



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