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August 16, 2012

Bullock Releases 5th Annual Report on Charitable Purposes of Montana’s Hospitals

Attorney General Steve Bullock today released the fifth annual report on the charitable performance of Montana’s nonprofit hospitals. The report examines the 10 largest hospitals in the state, as well as the 12 smaller, critical access facilities.

The report, titled Montana’s Hospitals: Issues and facts related to the charitable purposes of our hospitals and the protection of Montana’s consumers, is available online along with a cover letter from Attorney General Bullock (pasted below).

Nonprofit hospitals in Montana are granted tax exempt status, a standing that saves them tens of millions of dollars a year.  With this valuable status comes an obligation to provide benefits to the communities they serve.

This year’s report focuses more specifically than previous reports on the apparent growth in “subsidized services” as a claimed community benefit by the hospitals.

“This category of community benefits now represents the largest amount reported by the study hospitals and is growing the most,” the report notes. “In FY 2010, the large hospitals reported 33% more in subsidized services costs than the prior year; small hospitals had a 52% increase.”

The Montana Department of Justice oversees nonprofit corporations in the state. This report is the fifth annual assessment of the charitable achievements of hospitals in Montana.

In September 2006, the Attorney General’s Office began surveying pricing policies, including variations related to insurance coverage; charity care policies and practices; and debt collection practices.

Bullock’s letter introducing the report is below.


August 2012
The first Montana Hospitals Report was initiated by Attorney General Mike McGrath and published in January 2008.  At the time, Attorney General McGrath wrote that it was his hope that the report would “provide a valuable starting point for an informed public policy discussion on the health care concerns so important to our quality of life in Montana.”

Five years later, the wealth of information summarized in the series of annual hospital reports undertaken by Larry White from The University of Montana has helped inform the public debate by shining a light on the charity care and other community benefits provided by the 10 major nonprofit hospitals in Montana.  Along the way, the reports have expanded to include an analysis of 12 small critical access hospitals, as well as hospital foundations.

I would like to acknowledge and thank Larry White and his team for the significant contribution their work has made to our understanding of the role Montana’s nonprofit hospitals play in providing health care in our communities.

With this fifth report, we are beginning to see some clear trends emerging.

Charity care applications have increased substantially.  In the three years from 2008 to 2010, the number of applications for charity care received by the study hospitals increased dramatically, from 27,200 in 2008; to 41,600 in 2009; and to 46,800 in 2010.  This is likely related to both increased need and awareness, since the economic downturn associated with the Great Recession of 2008 coincided with efforts by Montana hospitals to improve access to their charity policies and application forms online.  Over this same three-year period, the overall approval rate for charity applications declined from 93% in 2008 to 90% in 2010.

The first Montana Hospitals Report found that in fiscal year 2006, the 10 large hospitals provided $33.56 million in charity care.  In this fifth report, for fiscal year 2010, the amount of charity care those hospitals provided had reached $61.41 million.  When adjusted for inflation (based on the overall CPI), that represents an increase from $33.56 million to $56.78 million – a 70% increase over the five-year span of the reports (shown in Graph 3 on page 14).

In 2010, Montana’s nonprofit hospitals reported almost $195 million in community benefits in return for total tax exemptions valued at $58 million.  As the report notes, the composition of the community benefits provided continues to change from year to year for various reasons.

This report notes that significantly, for the first time, the costs of subsidized services exceeded charity care for the large hospitals.  In FY 2010, the large hospitals reported 33% more in subsidized services costs than in the previous year; small hospitals had a 52% increase.

Much of this increase in subsidized services can be attributed to certain hospitals claiming the costs of their physician clinics.   St. Peter’s Hospital in Helena claimed $5.06 million, Bozeman Deaconess $5.69 million and Community Medical Center in Missoula $4.26 million for their hospital-owned medical practices located within their metropolitan areas.  This relatively recent development reflects changes in the way health care services are provided for many Montanans.

As the report notes, this trend in claiming hospital-owned physician clinics as a community benefit – and its implications for the extent to which Montana’s nonprofit hospitals are fulfilling their charitable purposes – is “appropriately a matter of concern and attention.”  Thus, this is a subject that merits consideration by hospital management and boards of directors.

As I have noted in previous years, Montana’s hospitals provide invaluable, essential services.  They are to be commended for the increases in charity care they provide to Montanans.  In a changing health care environment, it is essential that our hospitals continue to offer charity care to those in need.

Attorney General