Montana health officials are seeking increased oversight of nonprofit hospitals amid a debate over whether they are paying their fair share. The proposal comes nine months after a KHN survey found that some of Montana’s wealthiest hospitals, such as the Billings Clinic, lag state and national averages in community giving.
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Lynn Donaldson/Bloomberg via Getty Images
Montana health officials are seeking increased oversight of nonprofit hospitals amid a debate over whether they are paying their fair share. The proposal comes nine months after a KHN survey found that some of Montana’s wealthiest hospitals, such as the Billings Clinic, lag state and national averages in community giving.
Lynn Donaldson/Bloomberg via Getty Images
Montana health officials are proposing to oversee and set standards for the charitable contributions that nonprofit hospitals make each year in their communities to justify their access to millions of dollars in tax exemptions.
The proposal is part of a package of laws that the state Department of Public Health and Human Services will ask lawmakers to approve when they meet in January. It comes two years later a state audit called on the ministry to play more of a watchdog role and nine months after a KHN survey found that some of Montana’s wealthiest hospitals lag state and national averages in community giving.
A call for more transparency on what counts as charity
Montana State Senator. Bob Keenana Republican who has questioned whether nonprofit hospitals deserve their charitable status, calls the proposal a start that could be developed later.
“Transparency is the name of the game here,” says Keenan.
The IRS demands nonprofit hospitals to account for what they spend to “promote health” for the benefit of “the community as a whole.” How hospitals account for these contributions to justify their tax exemptions is opaque and varies widely. National researchers studying community benefits have called for strengthening the standards for what counts for the requirement.
Montana is one of the most recent states to consider imposing new rules or increasing oversight of nonprofit hospitals amid questions about whether they are paying their fair share. dr. Vikas Saini, president of the national healthcare think tank Lown Institute, says at the state and local level, Californians are considering whether to monitor benefits to the hospital community and enforce new standards. . Last year, Oregon has initiated a minimum amount nonprofit hospitals must spend on community benefits. And Massachusetts has updated its community benefits guidelines in recent years, pushing hospitals to give more detailed assessments of how spending matches identified health needs.
Montana hospital industry officials say they want to work with the state to shape the proposed legislation, which they say the industry would support if it doesn’t conflict with federal rules. Saini says that to have an impact, any legislation should go beyond federal requirements.
Significant tax breaks are at stake
In recent years, more and more people, like Keenan and Saini, have questioned whether nonprofit hospitals contribute enough to their communities to deserve the major tax breaks they enjoy while becoming one of the biggest corporations. from the city.
“Hospitals are sort of the pillars of communities, but people are starting to ask these questions,” Saini says.
Saini’s institute reviews hospital donations each year and has found that the majority nonprofit systems nationwide spend less on what the institute calls “significant” benefits than the estimated value of their tax breaks. The actions of the institute include financial assistance to patients and community investments such as food aid, health education or services offered at a loss, including the treatment of addictions.
Montana’s 2020 audit found hospitals in the state report benefit in vague and inconsistent ways, making it difficult to determine whether their charitable status is warranted. However, state lawmakers did not address the issue in their 2021 biennial legislative session, and a memorandum from the Legislative Audit Division released in June found that the state health department had “made no significant progress” toward developing oversight of charitable donations from nonprofit hospitals since then.
KHN found that nearly 50 Montana nonprofit hospitals spent about 8% of their total annual expenses, on average, on community benefits in the tax year that ended in 2019. national average was 10%.
In some cases, hospital donation percentages have since declined. For example, in the tax year that ended in 2019, Logan Health-Whitefish—a small hospital that is part of the larger Flathead Valley Health System—reported that less than 2% of its spending were devoted to community benefits. In its latest available records, for the period ending in 2021, the hospital said it spent less than 1% of its expenses on community benefits despite earning $15 million more than it spent.
An alternative to surveillance?
Logan Health spokeswoman Mellody Sharpton said the medical system’s overall benefits to the community equaled nearly 9% of its spending, reaching its six hospitals. It also has clinics throughout the valley. “It is important to consider the benefits of our organization to the community as a whole,” says Sharpton, “as our facilities work together to ensure the appropriate care is provided in the appropriate facility to meet the health needs of our patients. .”
State health officials have asked lawmakers to authorize the agency to draft a bill that would give the health department clear authority to require hospitals to submit annual reports containing data on community benefits and charitable care. The measure would also allow the ministry to develop standards for such expenditures for the benefit of the community, according to the department’s description of its proposal.
“We see a great need here to get the ball rolling,” state health department chief Charlie Brereton told lawmakers in August.
President of the Montana Hospital Association Rich Rasmussen says his organization wants to work with the health department to refine the legislation, but says the definition of what counts as benefits should be kept broad so hospitals can meet the most pressing needs in their area.
Additionally, he says, hospitals are already working on their own reporting standards. This year, the association created a handbook for members and set a 2023 goal for hospitals to consistently report their community benefits, Rasmussen said. The association declined to provide a copy of the manual, saying it would be made available to the public once hospitals are trained in its use later this fall.
The association also plans to create a website that will serve as a one-stop-shop for people who want to know how hospitals are reporting community benefits and responding to local health issues, among other things.
Rep. Republican state. Jeanne Gillet says she supports increased health department oversight and the idea behind the association’s website, but doesn’t think the hospital industry should produce this public resource alone. Gillette says it plans to introduce legislation to require hospitals to report community benefits data to a group outside the industry — like the state — who would then post the information online.
Hospitals have resisted new rules like these in the past
In the past, hospitals have resisted attempts to impose new rules on spending community benefits. In an interview with KHN last year, Jason Smith, then Bozeman Health’s director of advancement, said the system supports efforts to improve contribution reporting “apart from new legislation,” adding that hospitals can do a better job without “state oversight bodies being placed in the arena with us.”
When asked if the health care system still adheres to that statement, Denise Juneau, government and community affairs manager for Bozeman Health, said hospital officials hope any new legislation aligns with federal guidelines. existing. She says Bozeman Health will continue to work with the Montana Hospital Association to define and provide better information about community benefits, with or without new legislation.
A lawmaker is expected to back the state’s proposal by mid-December to keep it alive.
KHN (Kaiser Health News) is a national and editorially independent project of the Kaiser Family Foundation.