MOKENA – Provena Health says its hospitals in Urbana, Danville and four other cities would be saddled with a total $45 million in penalties if the state begins imposing new charity care requirements.

And that's money the six-hospital system can ill afford, said Lindsey Artola, Provena's assistant director of community and ministry advocacy.

"That wipes out any operating margin we have," she added.

Illinois Attorney General Lisa Madigan proposed the new requirements last month to force hospitals to provide more free and discounted care to the needy.

Part of her proposed legislation would require hospitals to provide charity care equal to at least 8 percent of their operating costs.

Hospitals could count in that minimum requirement both the direct charity care they provide and their costs that aren't reimbursed by the state for treating patients on Medicaid. But hospitals wouldn't be allowed to count the bad debts they end up shouldering when patients don't pay their bills, Madigan said.

Madigan said hospitals throughout the state benefit richly from the tax exemptions they receive, but aren't living up to their responsibilities to provide enough free and discounted care for needy patients.

Looking at how much charity care the six Provena hospitals provided in 2004 and a minimum requirement of 8 percent of their operating costs, Artola said Provena would have about a $45 million shortfall that would have to be paid in the form of a penalty to the state.

Specifically, for the two local hospitals:

– Provena Covenant Medical Center, Urbana, would be required to provide $10.9 million worth of charity care under the new requirement based on 2004 operating costs, and would fall $4.2 million short.

In 2004, Covenant provided $1.3 million in charity care and covered a $5.4 million Medicaid shortfall, Artola said.

Covenant, which is currently operating in the red, also absorbed a $6.6 million Medicare shortfall, but that won't count toward the 8 percent requirement, she said.

– Provena United Samaritans Medical Center, Danville, would be required to provide $7.7 million worth of charity care based on 2004 figures, and would fall $3.4 million short, Artola said.

And all that is a drop in the bucket compared to the potential loss of community benefit programs – things hospitals pay for in their local communities – such as social services, medical education and money-losing but necessary medical services that also wouldn't count toward the minimum requirement, Artola said.

Provena's six hospitals together provided $118 million worth of community benefit services in 2004, she said.

"That money has to come from somewhere," she added.

Illinois Assistant Attorney General David Buysse said his office recently met with Provena Health officials and he questions how that hospital system is calculating its potential shortfall.

"We believe they're not taking into consideration all the factors we think they should," he said.

For example, Buysse said, many hospitals are basing their potential charity care obligation on a percentage of their actual operating costs rather than using the lower figure that is intended in the legislation – only those operating costs that are allowed by Medicare, he said.

Hospitals are also misunderstanding the opportunities they'll have to transform bad debt to charity care – by doing a better job at the time of admission of identifying those patients who won't be able to pay their bills, Buysse said.

The attorney general's office contends hospitals could transform 40 to 60 percent of their bad debt to charity care if they do a better job of screening patients up front, he added.

Some other provisions under Madigan's proposals would require hospitals to:

– Provide free care to uninsured Illinois residents with family incomes at or less than 150 percent of the federal poverty level.

– Allow sliding scale discounts to qualified uninsured patients.

– Provide all care exceeding $10,000 in a 12-month period free for an uninsured patient who qualifies for a discount.

– Exercise reasonable practices when pursuing patients who don't pay their bills and offer reasonable payment plans.

Hospital executives from throughout the state were scheduled to gather in Springfield this afternoon to talk about how they believe hospitals – and the state's business climate – would be hurt by the Madigan proposals.

Officials at Carle Foundation Hospital, Urbana, declined to take a position on the legislation or talk about how the hospital would be affected financially.

But Howard Peters, senior vice president of the Illinois Hospital Association, said the impact on hospitals throughout the state would be devastating.

The new requirements likely would be a disincentive for hospitals to add staff and technology that would drive up their operating costs and further increase their new charity care obligations, he said.

Peters also said the hospital association objects to an arbitrary charity care requirement such as 8 percent.

"What really should be done is hospitals should provide charity care for the people who need it in the community and the people who apply for it and the number takes care of itself. It's what it is," he added.

Peters said hospitals would also be hurt by Madigan's proposals to restrict billing and collection practices, and the new rules would disrupt relationships with all payers with whom the hospitals do business.

"It would make it very hard for them to get paid by anybody," he added.