Whose side are you on?
URBANA — It's an easy five-minute drive between the Urbana mayor's office and Carle's main medical campus.
Not that the city's Democratic mayor, Laurel Prussing, goes to Carle for her health care.
If she needs a doctor or a hospital, she chooses Christie Clinic, Presence Covenant Medical Center or the Mayo Clinic in Minnesota, she says, but not Carle.
The public rift between the mayor and this Urbana-based health system has been growing steadily since 78 Carle properties, 71 of them in Urbana, were removed from the tax rolls in 2013.
Prussing has been so sharply critical of Carle that she joined Presence last year in an unsuccessful bid to stop Carle Foundation Hospital's latest plans to expand its number of inpatient beds. She asked the University of Illinois to join the city in a public meeting about the effect of Carle on the community — an invitation the university declined — and she's turned to other local governments looking to muster up support to help her fight Big Health Care.
If it seems strange for a mayor to be on the warpath with the second-largest employer in her city, Prussing says there's more at stake than the $60 million hole that was blown into Urbana's assessed value when Carle properties became tax-exempt.
She contends that Carle — with annual revenues approaching $2 billion — is really a big business behind its charitable curtain.
There are still some true charitable hospitals, and some that started out that way, Prussing says, but she believes Carle long ago adopted a policy of expanding, raising prices and putting others out of business.
"They've been on this toot for quite a while," she says.
Prussing also contends that at least one Carle official was a major force behind the new 2012 state law that redefined how non-profit hospitals become eligible for a tax break — partly by broadening the kinds of costs hospitals can count as charitable contributions to their communities.
Under terms of that new law, both Carle and Urbana's other hospital, Presence Covenant Medical Center, were granted tax exemptions in 2013.
"They got to rewrite the definition of charity," Prussing says.
The courts could decide otherwise, though.
The city of Urbana and a group of local government bodies and officials that have been defending two Carle lawsuits in Champaign County Circuit Court are mounting a constitutional challenge of the new state law in the 4th District Appellate Court.
Both of Carle's lawsuits, which continue in circuit court, seek refunds on the property taxes it paid under protest for several years, and Carle already scored on a major point when a Champaign County judge ruled that the new state law could be applied to Carle's pending exemption claims for 2004-2011.
Carle still pays property taxes on its non-exempt properties throughout its service region, but its new exemptions on taxes that would have been payable in 2013 added up to a $6.3 million loss for local taxing districts. That Carle still wants refunds for taxes paid in prior tax years galls Prussing.
"They win in the Legislature, and then they say, 'How do we go back and get back taxes?'" she says. "How do you spell greed?"
With Covenant Medical Center also gaining a tax exemption under the new state law, why is Prussing's beef largely with Carle?
It is and it isn't: There's another dispute festering between Covenant and the city over $9.8 million in back taxes for seven years that Covenant wants refunded, and Prussing says she'd actually like to see both hospitals paying taxes.
"I would like Carle to act like civilized people, pay their fair share of taxes and adopt a fair billing system," she says. "I would like (Presence) Covenant to be paying their fair share of taxes, and be a viable competitor."
'We're incredibly complex'
The Prussing-Carle dispute has some of its roots in what the mayor recalls as Carle's promise to make local taxing districts "whole" financially from the effect of Carle property-tax exemptions.
What Prussing would like to say to Carle Foundation CEO Dr. James Leonard, if they were at the table talking this out: "You said you would make us whole, and we'd like you to do that."
Leonard harks back to the outcome of a 2002 agreement Carle made with Urbana and three of its taxing districts centered on an exemption Carle sought for its property at 802 W. Anthony Drive.
In exchange for the taxing districts dropping their objections to the exemption, Carle agreed to pay them $775,000 over five years, with one more provision — those taxing districts wouldn't object to future exemptions for Carle over the life of the agreement.
Two years later, Leonard says, four long-exempt Carle properties were placed on the tax rolls.
"It was a two-way street, and that agreement was breached," he says.
Fast-forward to the new state law on hospitals and tax exemptions: It provided hospitals with a set of rules for charitable tax exemptions, Leonard says, but Carle doesn't have the kind of clout to have been the major force behind it.
The state Legislature really got interested in the issue of charitable exemptions for hospitals after two Chicago-area hospitals, Northwestern Memorial's Prentice Women's Hospital and Edward Hospital, lost their exemptions, he says.
Prussing has argued that the city of Urbana is bearing the entire burden of Carle's tax exemption for its entire far-reaching service region, but Leonard says one in 10 of the recipients of $44 million in charity care Carle gave out in 2013 lived in Urbana.
Another disagreement: The way Prussing sees it, fewer people are likely to be seeking charity care since the Affordable Care Act began requiring nearly everyone to have health insurance, but Leonard says the need for financial assistance isn't so much drying up as it is shifting to the middle class because of a growing number of people on high-deductible health plans.
In Illinois, the number of people in employer health plans with a deductible grew from 61 percent in 2003 to 85 percent in 2013, according to a study published this month by the Commonwealth Fund. The annual deductible for employees that was $542 in 2003 had grown to $1,301 a decade later.
Leonard says it's important to understand the drive for all hospitals to become more efficient dates back several decades, when they were accused of being not business-like enough.
"Rather than say we're too business-like, I'd say we're incredibly complex," he says.
His own $1.6 million salary package, a figure he says is kept in a competitive range, is a reflection of that.
"Where I come from as a blue-collar kid, that's a big number," Leonard says, but as health systems have grown increasingly complex, the pool of people who can run them has diminished.
Leonard says he won't allow himself to take Prussing's criticism of Carle personally, nor is he interested in painting the mayor in a negative light.
"I think it is very important to make this about an honest disagreement between two institutions," he says.
Leonard also says it's important to him that Carle plays by the rules, and, he adds, "it's important to me that we are a constructive part of the community."
He hears Carle portrayed as a drain on the taxing bodies, but not so much about how Carle contributes to the local economy.
Carle health services draw people to the community, Leonard says. Carle employs 6,200 people with a $507 million payroll, and spends another $78 million-plus through local businesses.
"What would this place look like if we weren't here?" he asks.
The mouse and the lion
Two signs about Carle's tax exemptions in Dannie Otto's yard make it clear where he stands in this debate.
When he bought his home in Urbana in 2004, his annual property-tax bill was just under $4,000. A decade later, Otto says his taxes have more than doubled, and he attributes the source of the $900 increase he paid last year to Carle's tax exemptions.
Also the spokesman for Concerned Citizens of Urbana, Otto says increases like that aren't sustainable on his and his wife's income. They're approaching retirement age and Urbana's taxes are already influencing where people want to buy homes in the community.
"Once the complete cost of the Carle tax exemption rolls in, I don't know what the exit strategy is when I need to sell my home," he says.
A 62-year old Eastern Illinois University philosophy professor who is also a Carle patient, Otto says his dispute is strictly with Carle's business model.
"Here's the deal," he says. "Carle's business model is that of a for-profit business. You can't, in a single way, find a difference."
Otto says Prussing is doing the right thing pursuing litigation, but he and his group aren't pinning their hopes on that. They also plan to keep talking to legislators about their concerns, and they aren't expecting a quick resolution.
"My real message is the fair share at Carle," he says. "It's not the Salvation Army out there with their red kettles collecting donations."
John Columbo, interim dean of the University of Illinois College of Law, says Prussing has a point, and he doesn't see all this as just Urbana's problem.
Nonprofit hospitals spread their economic benefits and charity care over a broad region, but by accident of geography, the taxing bodies that host hospital properties bear the brunt of their tax exemptions, he says. Other U.S. cities, among them Pittsburgh, have been in disputes similar to Urbana's with their local hospitals, Columbo says.
"How would you feel if you are the mayor of Champaign and Carle says it's buying up a chunk of North Prospect to move there?" he asks.
Champaign benefits from the existence of Urbana's hospitals, Columbo says. So do Savoy and Danville.
Coming up with a solution to spread the tax-exemption burden around the entire service region of a hospital such as Carle wouldn't be that difficult, he contends.
"I'm pretty sure that an undergraduate accounting student could figure this one out," he says.
Columbo says the courts will decide, but he sees good legal arguments that can be made to find the state Legislature exceeded its authority with the new state law for hospitals.
The new law tries to define what a nonprofit hospital is, he says, but the result isn't consistent with what the state Supreme Court decided in its breakthrough case on what was then Provena Covenant Medical Center, now Presence Medical Center. In that case, a plurality of the Supreme Court was willing to say a nonprofit hospital isn't a charity, he says.
"I certainly don't think it is crazy to suggest the legislation passed after the Provena case is unconstitutional," he adds.
Prussing's twice-defeated mayoral opponent, Rex Bradfield, is critical of Prussing's dispute with Carle.
"That's a huge mess, probably one of the worst decisions that a leader of a city could make," he says. "There's absolutely no reason for it at all."
Does he view Carle as a charitable institution? "Absolutely."
Bradfield now blames the mayor for the fact that Carle is considering moving the offices and employees of its insurance subsidiary, Health Alliance Medical plans, out of rented space in Urbana's Lincoln Square to Champaign.
But that has nothing to do with Urbana and Prussing, Leonard says. Carle is looking at consolidating all its leased spaces into a location it would own, because the cost of borrowing money is low right now, but no decisions, including one on location, have been made, he adds.
Still, Bradford says, "Why would you want to (tick) off Carle?"
"You've got a mouse biting at a lion's toe, and pretty soon the lion is going to get mad," he adds.
Gerard: Not our fight
Prussing says she's looking at a much bigger picture than Carle and Urbana.
With stacks of news articles about the cost of health insurance in Illinois and hospitals elsewhere raking in big bucks in hand, she says the health care system is "making America sick."
"Let's just say this is an industry that has gotten completely out of control," she says.
Prussing is well aware of the heat she's getting from some of the public over her stance on Carle, and says she's been criticized since she went into politics. What she cares about is that the public understands what's going on.
"I'm up against a huge adversary with a national agenda," she says.
When a tornado hits a community, everybody wants to come help, Prussing says, but nobody is coming to help Urbana with the loss of 11 percent of its tax base because of Carle's tax exemptions.
"We've been hit by a tornado, folks," she says.
Urbana would love to work with Champaign on this, Prussing says, but "they say it's Urbana's problem. They told me they don't want to offend Carle, because Carle is so big."
Champaign Mayor Don Gerard says Champaign and Urbana have each handled their finances differently, and Champaign made some strategic recession cuts that have worked out well.
"I think we all feel for Urbana," he says. "It's very unfortunate, but it's not really our fight."
What he'd rather fight for: bringing the high school boys' basketball state tournament to Champaign, Gerard says.
Carle is a big economic benefit to the area, he says, and he's not going to fault Carle and other hospitals in Illinois for taking legal exemptions under the new state law.
"The fact of the matter is, Carle is entitled to do what they're entitled to do," Gerard says. "I can know the education system is failing in Illinois, but that doesn't mean I'm going to pay more taxes than I'm obligated to."