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Carle Foundation's tax-exempt status called into question

Compliance Monitor, May 4, 2005

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Most of the lawsuits filed in federal court by Richard Scruggs and other attorneys alleging nonprofit hospitals overcharge the uninsured have been dismissed, but the charity care issue is still hot, reports USA Today.

Many allege that nonprofit hospitals, which represent 85% of the industry, have an obligation to provide discounts and charity care because of their tax-exempt status.

Last week, the tax-exempt issue was brought to light for the Carle Foundation. USA Today reported April 25 that Illinois tax officials recommended denying an estimated $2 million property tax exemption for the hospital system, which is based in Urbana, IL.

The officials said Carle doesn't meet the state's criteria for exemption because it overcharges the uninsured, spends only one-half of 1% of its revenue on charity care, and allows a for-profit physician group to run many of its services. While the hospital offers discounts to some uninsured patients, the for-profit physician group does not.

"The primary use of the hospital is to serve as a platform from which a private physicians' group ... benefits," the Board of Review of Champaign County wrote, calling the arrangement "troubling" in light of "the hospital's practice of overpricing and then suing their uninsured patients."

Carle officials said they are closely monitoring a similar property tax ruling affecting nearby Provena Covenant hospital, which is now on appeal to an administrative law judge, USA Today reports.

"Revoking a hospital's not-for-profit status does not bode well for the health of our community," Carle leaders said in a statement. "It risks hospitals' ability to provide no-cost and discounted care to those in need."

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