Lancaster General Health, a 501(c) 3 Public Charity, seeks to conceal its failure to bestow but a tiny percentage (usually less than 4%) of its average $100 million earnings by claiming that services provided below cost to patients quality as charity. This is patently incorrect because, rather than gifts, such losses are simply expenses incurred prior to profits or ‘Surplus.’
The point is made in a decision by the Illinois Supreme Court concerning the eligibility of the Provena Hospital, also a 501(c) 3 Public Charity pertaining to the denial of property tax exemption. According to an account by AAHSA:
“The [Court’s] plurality focused almost exclusively on the amount of free or discounted care Provena Hospitals provided patients. The plurality concluded that neither Medicaid nor Medicare ‘shortfalls’ (the amount government reimbursement falls short in covering the costs of providing the care) should count as charity, because these are essentially ‘pay for service’ transactions and Provena Hospitals voluntarily chose to take part in these programs. The plurality observed that both provide stable sources of revenue and other benefits (such as eligibility for federal tax exemption); therefore, the decision to treat Medicare and Medicaid patients was not a ‘gift’ but self-interested behavior.”
LGH claims to make contributions to the City of Lancaster and the School District of Lancaster in lieu of paying taxes. In fact, since LGH is considered tax exempt, little effort has been made to calculate its true ‘Market Value’ as is done with taxable properties. (The same is true for tax exempt Franklin and Marshall College and others.) Therefore LGH’s contribution is less than half and perhaps closer to a quarter than what otherwise would be the tax.
(‘Market Value’ is first determined before a State determined ratio is applied for the actual ‘Assessment’ so that all properties are treated equally since they were assessed over the years. This serves as a correction for inflation.)
Were the hospital’s real estate assets offered for sale at the ‘Market Value’ basis for its assessment, investors would line up to acquire the facilities at such a bargain.
As State and Federal funding for local governments are slashed in the name of “smaller government”, real estate taxes for non-profits could very well be inevitable.