Montana health officials are proposing to monitor and set standards for charitable donations that nonprofit hospitals make in their communities each year to justify their tax exemption every year. millions of dollars.
The proposal is part of a package of legislation that the state Department of Public Health and Human Services will ask lawmakers to pass when they convene in January. It comes two years after a state audit called for the department to play a more oversight role, and nine months after a KHN investigation found some of Montana’s wealthiest hospitals lag behind the state average. state and national in community contributions.
Montana Senator Bob Keenan, a Republican who has questioned whether nonprofit hospitals deserve their charitable status, said the proposal was a good start. may be expanded later.
“Transparency is the name of the game here,” Keenan said.
The IRS requires nonprofit hospitals to tally the money they spend to “promote health” to benefit the “community at large.” How hospitals charge such contributions to justify their tax exemption is unclear and varies widely. National public interest researchers have called for tightening standards for what counts towards the requirement.
Montana is one of the most recent states to consider imposing new regulations or increasing oversight of nonprofit hospitals amid questions about whether they’re paying them fairly. Vikas Saini, president of the Lown National Institutes of Health Care Research, said both at the state and local levels, people in California are learning whether to monitor the public interest of hospitals and practice test the new standards or not. Last year, Oregon initiated a minimum amount that nonprofit hospitals must spend on public benefits. And Massachusetts has updated its public benefit guidelines in recent years, prompting hospitals to make more detailed assessments of how spending matches identified health needs.
Montana hospital industry officials said they want to work with the state to shape the proposed law, which they said the industry would support if it didn’t conflict with federal rules. Saini said that to have an impact, any legislation would have to go beyond federal requirements.
In recent years, many, like Keenan and Saini, have questioned whether nonprofit hospitals are contributing enough to their communities to deserve the large tax breaks they receive while becoming into some of the biggest businesses in town.
“Hospitals are the backbone of the community, but people are starting to ask these questions,” says Saini.
Saini’s institute reviews hospitals’ contributions each year and finds that most nonprofit systems across the country spend less on what the institute calls “meaningful” benefits compared to the cost. estimated value of their tax relief. Actions the institute takes into account include financial assistance to patients and investments in the community such as food assistance, health education, or services provided at a loss, including addiction treatment.
The 2020 Montana audit found that hospitals in the state reported benefits vaguely and inconsistently, making it difficult to determine if their charity status was justifiable. However, state lawmakers did not address the issue during the biennial legislative session in 2021, and a Legislative Audit Division memo issued in June shows the health department The state has made “no meaningful progress” in developing nonprofit hospital philanthropic oversight since then.
KHN found that Montana’s nearly 50 nonprofit hospitals averaged only about 8% of their total annual expenditures in the public good during the tax year ending in 2019. The national average was 10%. .
In some cases, hospitals’ coverage rates have dropped since then. For example, in the tax year ending 2019, Logan Health-Whitefish — a small hospital that is part of the larger Flathead Valley health system — reported that less than 2% of its total spending went to profits. community benefit. In its latest available documents, for the period ending 2021, the hospital reported spending 1% less on community benefits while earning $15 million more than spending level.
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Logan Health spokesperson Mellody Sharpton said the health system’s overall public benefit equates to nearly 9% of its spending, reaching across its six hospitals. It also has clinics throughout the valley. “It is important to consider the public interest of our organization as a whole as our facilities work together to ensure appropriate care is provided in the appropriate facility to meet the needs of the community,” Sharpton said. meet the health needs of the patient,” said Sharpton.
State health officials have asked lawmakers to allow the agency to draft a bill that would give the health department explicit authority to require hospitals to submit annual reports that include public benefits. community and charity care data. The measure will also allow the department to develop standards for spending in the public interest, according to the department’s description of its proposal.
“We see a great need here to move the ball forward,” state health department leader Charlie Brereton told lawmakers in August.
Montana Hospital Association president Rich Rasmussen said his organization wants to work with the health department to finalize the legislation but said the definition of what counts as benefits should remain broad to hospitals. able to meet the most pressing needs of their region.
Furthermore, he said, hospitals were working on their own reporting standards. This year, the association created a handbook for members and set a 2023 goal for hospitals to uniformly report on their public interest, Rasmussen said. The association declined to provide a copy of the handbook, saying it will be made available to the public after hospitals receive training on how to use it later this fall.
The association also plans to create a website that will act as a one-stop shop for people who want to know how hospitals are reporting for the public good and addressing local health concerns. side, among other things.
Republican Representative Jane Gillette said she supported increased oversight of the health department and the idea behind the association’s website but did not think the hospital industry should produce that public resource alone. me. Gillette said she plans to introduce legislation that would require hospitals to report public interest data to a group outside the industry – such as the state – which would then post the information online.
In the past, hospitals have resisted attempts to impose new rules on public benefit spending. In an interview with KHN last year, Jason Smith, then director of promotion at Bozeman Health, said the system has supported efforts to improve reporting contributions “beyond the new law”, added that hospitals could function better without “state watchdogs being placed in the arena with us. “
When asked if the health system would still survive that statement, Denise Juneau, Bozeman Health’s director of government and community affairs, said hospital officials hoped any new legislation would consistent with applicable federal guidelines. She said Bozeman Health will continue to work with the Montana Hospital Association to better identify and inform the public interest, with or without new legislation.
A lawmaker would have to backtrack on the state’s proposal by mid-December to keep it alive.
Kaiser Health News is a national health policy news service. This is an editorially independent program of the Henry J. Kaiser Family Foundation that is not affiliated with Kaiser Permanente.
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