Tax Exemtion Case Analysis

954 words - 4 pages

Article Analysis:
Hospitals use tax exemption as a way for facing financial burdens. This allows hospitals to continue their operations by providing high quality care and providing free or discounted care to poor individuals. The implications for denying tax exemption can be financially detrimental to many non-for-profit hospitals and subsequently for many uninsured individuals who need access to care. Although I truly believe that there should be very strict regulations to rule tax exemptions for hospitals and healthcare organizations and I totally agree with the Supreme Court ruling in this case, I feel that this case is very controversial and leads to many fundamental arguments in regards to this subject.
The court analyzed each of the factors outlined in Korzen’s case and concluded that Provena only satisfied two of the necessary factors and therefore did not qualify for the tax exemption. According to the court, Provena’s funds were mainly generated from providing medical services for a fee rather than from charities organizations. Patients were billed regularly and they were automatically referred to collections agencies when they could not pay. Hospital charges were waived only after it was determined that patients did not have or were not eligible for insurance coverage, lacked the resources to pay directly, and were eligible for the charitable care program. On the other hand, Provena alleges several important arguments in response to the courts analysis. They alleged that the hospital provided care to everyone who requested it regardless of their financial circumstances and that they provided discounted care for poor individuals. Nevertheless, the court stated that the discounted care was illusory because the charges were more than double the actual costs of care and therefore the hospital was still able to generate a profit when it gets paid. Furthermore, Provena urged the court to consider its treatment of Medicare and Medicaid patients as charitable care because the payments it receives for treating such patients do not cover the full costs of care. The court rejected this argument stating that accepting Medicare and Medicaid patients is optional and even with the lower reimbursement rates the hospital will still receive a reliable stream of revenue and generate income from hospital resources that might otherwise be underutilized. For all the above reasons, I agree with the court’s decision that the hospital did not provide enough evidence to prove its role in supporting the “charitable purposes”, lessening the burdens of the Government, and promoting social welfare.
Although I believe that the court delivered a clear statement that tax exemption rules are very strict, one of the main criticisms is that the court relied on old precedent to determine whether hospitals should be granted tax exemption without taking into account current market and social conditions. Since the Korzen case in 1968, the hospital industry has...

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