As some non-profit hospitals in Illinois undergo review of their property tax exemptions, any additional costs of property taxes would negatively affect those hospitals' credit ratings, according to a recent report from Fitch Ratings (pdf).
In August, the Illinois Department of Revenue denied the property tax exempt status of Northwestern Memorial's Prentice Women's Hospital in Chicago, Edward Hospital in Naperville and Decatur (Ill.) Memorial Hospital due to low percentages of charity care as a percent of their net patient revenues. In September, the IDR announced it would re-examine the tax-exempt statuses of 15 other hospitals and health systems, but Gov. Pat Quinn agreed to halt the investigations until legislative recommendations were made regarding the definition of charity care.
Gov. Quinn has since lifted the moratorium on state reviews of non-profit hospital property tax exemptions after state and hospital officials were unable to reach an agreement on how much charity care a tax-exempt hospital should provide.
Fitch maintains ratings on 19 Illinois-based hospitals and health systems — with ratings ranging from AA to BBB+ and an average operating margin of 2.6 percent — and Fitch analysts believe lower-rated hospitals will have the most trouble in absorbing any additional expenses of property taxes. If property tax assessments reach 1 percent to 1.5 percent of total revenue, then the 2.6 percent average operating margin on those 19 Illinois hospitals would be cut in half, according to the report.
In August, the Illinois Department of Revenue denied the property tax exempt status of Northwestern Memorial's Prentice Women's Hospital in Chicago, Edward Hospital in Naperville and Decatur (Ill.) Memorial Hospital due to low percentages of charity care as a percent of their net patient revenues. In September, the IDR announced it would re-examine the tax-exempt statuses of 15 other hospitals and health systems, but Gov. Pat Quinn agreed to halt the investigations until legislative recommendations were made regarding the definition of charity care.
Gov. Quinn has since lifted the moratorium on state reviews of non-profit hospital property tax exemptions after state and hospital officials were unable to reach an agreement on how much charity care a tax-exempt hospital should provide.
Fitch maintains ratings on 19 Illinois-based hospitals and health systems — with ratings ranging from AA to BBB+ and an average operating margin of 2.6 percent — and Fitch analysts believe lower-rated hospitals will have the most trouble in absorbing any additional expenses of property taxes. If property tax assessments reach 1 percent to 1.5 percent of total revenue, then the 2.6 percent average operating margin on those 19 Illinois hospitals would be cut in half, according to the report.
More Articles on Illinois Non-Profit Hospitals:
Illinois to Resume Reviews of Non-Profit Hospitals' Tax-Exempt Statuses
What's Next for Illinois Non-Profit Hospitals and Their Tax-Exempt Statuses?
Illinois Department of Revenue Denies Tax-Exempt Status to 3 Illinois Hospitals