Taxpayers who feel they already underwrite hotels, retailers or private development through publicly funded incentives or financing may lump in hospitals as businesses at the trough.
Although hospitals are appreciated and respected institutions that provide communities with health care and good jobs, resentment at medical bills can collide with assumptions that the ventures get something for nothing. After all, non-profits need not pay property, income or sales taxes.
But Peoria hospitals do well – and do good. They have to pay salaries and bills, of course, so they must generate income. Plus, non-profit hospitals provide charity care – and also have subsidiaries that are for-profit, meaning they pay taxes sometimes.
Some hospitals generate a lot of revenue and also net income (profit) but have no stockholders and pay no dividends. (Some show net losses.) They can compile substantial cash reserves, pay executives handsomely, buy costly equipment, and launch huge construction projects.
“Whether or not we pay property taxes depends on which entity is located on a particular property,” said Senior Marketing Communications Specialist Blake Long of UnityPoint Health-Peoria. “We have a few business entities that do not qualify for tax-exempt status. One of them is Proctor First Care, with several locations that offer walk-in care and primary care, extended hours, etc. So the properties that we pay taxes on are all connected to these entities.”
Who’s who?
“Basically, OSF Healthcare System is [our] umbrella over everything,” said Senior Media Relations Specialist Shelli Dankoff at OSF Saint Francis Medical Center. “All other components come under that.”
OSF HealthCare is owned and operated by the Sisters of the Third Order of St. Francis, based in Peoria. It includes OSF Healthcare System, with 11 acute-care facilities and two colleges of nursing, and OSF Medical Group, a physician organization, and employs about 900 physicians and hundreds of other practitioners in 100-plus sites. OSF HealthCare also operates a network of home health services, owns OSF Saint Francis, Inc., a group of health-care-related businesses; and OSF Healthcare Foundation, a philanthropic arm.
“Methodist Health Services corporation is the umbrella under which all UnityPoint Health services in Peoria fall,” said Long. “Methodist joined the system in 2012.”
In 2013, UnityPoint Health-Methodist and Proctor Hospital also affiliated.
“We consider the organization one hospital with two campuses,” Long said. “The Peoria affiliate also includes UnityPoint Clinic, which is comprised of more than 40 physician offices, the Illinois Institute for Addiction Recovery, Methodist College, and the Hult Center for Healthy Living.
“All of the Proctor names have become part of the Peoria affiliate family,” he continued. “Proctor Hospital is now UnityPoint Health-Proctor. Proctor Health System refers to Proctor Hospital and Proctor Medical Group (physician offices).
“Being an affiliate of a health system means local ownership is maintained,” he added.
Health care isn’t mentioned in the Internal Revenue Service’s purposes for non-profit tax-exempt qualifications, which includes “charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals.”
Ken Harbaugh, chief financial officer at OSF Saint Francis Medical Center, explained, “Regarding the financial status of non-profit organizations, a common misperception is that non-profit organizations break even or lose money. No organization would be able to exist under that model. Excess revenues over expenses are used for a couple of primary purposes. One is to provide charity care and financial assistance to those patients who do not have the financial means to pay. The other primary use is to purchase new and replacement equipment in order to continue to offer world-class health-care services.”
Long, at UnityPoint echoed that.
“Non-profit status means that net revenue has to be invested back into the organization,” he said. “So it must be used for things like capital improvements.”
How much?
According to tax returns filed last year:
Methodist reported assets of $241,492,056 in 2013, with the top executive pay $760,431 for the year and the average of the top six executive-compensation packages $694,045.
Proctor reported a loss of $7,860,841 that year, with the top executive pay $491,999 for the year and the average of the top six executive-compensation packages $310,459.50.
OSF reported assets of $955,854,448 in 2013, with the top executive pay $2,881,568 for the year and the average of the top six executive-compensation packages $1,503,382.80.
As far as property taxes, each of the community’s three non-profit hospitals paid on some real estate, according to the County’s Supervisor of Assessments’ current data:
Methodist owns properties with a total assessed value of $12,264,693, with its highest-value parcel worth $3,494,480, and paid on 38 parcels and paid no taxes on 95 parcels.
Proctor owns properties with a total assessed value of $642,170, with its highest-assessed parcel worth $551,750, and paid on 12 parcels and paid no taxes on 11 other parcels.
OSF owns properties with a total assessed value of $16,226,072, with its highest-value parcel worth $5,628,220, and paid on 45 parcels and paid no taxes on 75 parcels.
(Kindred, Peoria’s for-profit hospital, has one parcel valued at $6,907,150.)
“In order for a parcel of land to be exempt from property taxes, the current use of that parcel must be utilized for services provided by a non-profit organization,” said Harbaugh, of OSF. “Occasionally a parcel of land will be purchased for future development. The time period prior to the parcel being utilized for health-care services is the time period in which the parcel is subject to property taxes.”