August 17, 2011; Source: | Nonprofit hospitals are lately feeling increased pressure from many quarters, but one trend that is creating a stir, most recently in Illinois and Georgia, is the increased scrutiny of their tax-exempt status. In particular, states are looking at whether or not nonprofit hospitals are spending more or even as much as their for-profit counterparts on uncompensated care.

The Illinois Department of Revenue announced last week that it had denied property tax exemptions to three hospitals and that it is reviewing 15 additional applications. This followed a ruling by the Illinois Supreme Court last year that a central Illinois hospital was not spending enough on uncompensated care for it to be eligible for tax exemption, a ruling that triggered a $1.2 million annual property tax bill for the hospital.

While the requirements for being awarded a tax exemption are less than exact, one has to question how seriously these hospitals took the application process. None of the three documented any charity care in their accompanying financial statements, and all three had “for-profit entities in their ownership chains.” The three hospitals have 60 days to appeal.—Ruth McCambridge