March 2007

The Way Law Should Be Practiced

Healthcare Department Healthcare Update

For further information on the Healthcare group or this update, Charity Care Update please contact one of our partners: Last month, Ungaretti & Harris LLP hosted its second annual charitable care seminar. The seminar addressed the recent challenges to the property and sales tax exemptions Thomas M. Fahey, Chair of hospitals and other healthcare facilities in Illinois. The following is a summary of the 312.977.4376 seminar. [email protected] Seminar Overview Edward Clancy, Partner 312.977.4487 [email protected] Cook County Assessor James M. Houlihan discussed the tests his office uses to assess whether property is exempt. Assessor Houlihan first looks at whether the organization John J. Durso, Partner that owns the property is charitable and then determines whether the use of the property 312.977.4440 is charitable. He mentioned that his office looks at the Community Benefits Plan Annual [email protected] Report that hospitals submit to the Attorney General as part of the exemption analysis. Assessor Houlihan and his colleagues also walked through how they assess properties Lynn Gordon, Partner in Cook County. 312.977.4134 [email protected] Anne M. Murphy, Senior Counsel to the Illinois Attorney General, discussed Attorney Joseph K. Hasson, Partner General Lisa Madigan’s ongoing investigations into the charitable practices of Illinois 312.977.4437 hospitals. Ms. Murphy emphasized the need for a measurable standard for the amount [email protected] of financial charity provided by a healthcare facility. She mentioned that the Attorney General is currently investigating 25 percent of not-for-profit hospitals to determine the Anne M. Haule, Partner validity of their state tax exemptions. Ms. Murphy also referenced the consumer fraud 312.977.4323 case currently pending in the U.S. District Court for the Northern District of Illinois [email protected] alleging that a hospital failed to offer charity care to an uninsured patient and alleging that the facility charged the patient an unreasonable amount for services. Floyd D. Perkins, Partner 312.977.4411 [email protected] Ungaretti & Harris attorneys provided an overview of the statutes and case law governing the area of property tax exemption and the regulatory environment in Illinois. Speakers Julie K. Seymour, Partner discussed pending healthcare legislation, including bills to extend and repeal the Health 312.977.4353 Facilities Planning Act, and analyzed the impact such legislation would have on Illinois [email protected] healthcare facilities.

Sam Vinson, Partner Several speakers emphasized that the definition of charity under Illinois law is not 312.977.4388 limited to financial charity. Illinois courts have looked at the overall mission of not-for- [email protected] profit healthcare organizations, not just the discounts or free care these facilities provide. Speakers emphasized that healthcare facilities must investigate every avenue of exemption available to them, including exemption based on religious use of the property. Attendees also learned that the Department of Revenue is currently drafting new guidance on sales tax exemptions for hospitals in light of the standards articulated by the Department in the Provena Covenant Medical Center decision. To receive future editions of Healthcare Updates via email, please send your HICAGO ASHINGTON SPRINGFIELD name, company or firm C W 3500 Three First National Plaza 1500 K Street, NW 400 East Jefferson Street name and email address to 70 W. Madison Street Suite 250 Suite 1200 Jennifer Morrison at: Chicago, IL 60602 Washington, DC 20005 Springfield, IL 62701 312.977.4400 202.639.7500 217.544.7000 [email protected] 312.977.4405 fax 202.639.7505 fax 217.544.7950 fax www.uhlaw.com The Way Law Should Be Practiced

Healthcare Update March 2007

Page 2 What You Can Do

Given the tumultuous environment regarding property and sales tax exemption in Illinois, and in anticipation of future legal and administrative guidance, we strongly recommend that charitable and religious not-for-profit hospitals and healthcare facilities review their charitable care policies and revise them as necessary. Further, as the Attorney General’s Community Benefits Plan Annual Report may be analyzed by your local assessor, we recommend adequately tracking your community benefit activities and ensuring that your Annual Report represents complete documentation of these activities.

Recent Developments

Tax Exemption

• The Illinois Department of Revenue continues to draft updated sales tax exemption guidance. This guidance is expected to apply the Department’s recent property tax exemption stance (as articulated in the Provena decision) to sales tax exemptions.

• The Department denied property tax exemption applications from Richland Memorial Hospital and Carle Foundation Hospital.

• Provena Covenant Medical Center filed its brief in its property tax exemption appeal. The Illinois Hospital Association, the American Hospital Association, and the Catholic Health Association/Illinois Catholic Health Association/Illinois Catholic Conference filed amicus briefs in this case.

Certificate of Need

• The Illinois Senate passed SB611 on March 15 by a vote of 56 to 1. This bill would have extended the Illinois Health Facilities Planning Act until 2012. On March 27, SB611 was amended to change the sunset date to May 31, 2007. This proposed legislation could be further amended and must also be passed by the Illinois House and signed by the Governor. Other proposals to amend the Planning Act are pending in the Illinois legislature.

The legal issues associated with the delivery of healthcare services have become substantially more complex. An evolving and complicated regulatory environment, new technologies and medical procedures, shifts in reimbursement programs, shrinking capital sources and market demands are just a few of the reasons why healthcare providers require specialized legal services.

Ungaretti & Harris’ Healthcare Department remains devoted to meeting the changing needs of the healthcare This Healthcare Update has been industry. Our firm of 100-plus lawyers devotes a substantial portion of its firm-wide practice to the legal prepared by Ungaretti & Harris LLP needs of healthcare providers and other related clients. solely for informational purposes and does not constitute legal advice. This information is not intended to create, CHICAGO WASHINGTON SPRINGFIELD and receipt of it does not constitute, an 3500 Three First National Plaza 1500 K Street, NW 400 East Jefferson Street attorney-client relationship. Readers 70 W. Madison Street Suite 250 Suite 1200 should not act upon this information Chicago, IL 60602 Washington, DC 20005 Springfield, IL 62701 312.977.4400 202.639.7500 217.544.7000 without seeking professional counsel. 312.977.4405 fax 202.639.7505 fax 217.544.7950 fax © Copyright 2007 UNGARETTI & HARRIS LLP www.uhlaw.com