Montana’s Hospitals: Issues and Facts Related to the Charitable Purposes of Our Hospitals and the Protection of Montana’s Consumers

Montana’s Hospitals: Issues and Facts Related to the Charitable Purposes of Our Hospitals and the Protection of Montana’s Consumers

Fellow Montanans:

In 2008, my predecessor Attorney General Mike McGrath published the first Montana Hospitals Report. Upon its release, he pointed out that the “Attorney General’s Office has the dual role of protecting consumers and monitoring nonprofit corporations.” Then as now, the dedicated public servants at the Montana Department of Justice take this responsibility seriously.

When the first report was commissioned, there were concerns about how hospitals handled account collections, charity care policies, and patient bankruptcies. Over the years, the report has given us insight into these issues as well as contextual data for ensuring hospitals continue to provide adequate levels of charity care.

The majority of Montana’s hospitals – 46 of 60 – are classified as 501(c)(3) charitable organizations by the U.S. Internal Revenue Service (IRS) and are exempt from federal and state income taxes as well as state and local property taxes. The IRS requires these hospitals to provide a “community benefit” in exchange for their tax-exempt status. While a specific dollar amount is not required, the general expectation is that the benefits are commensurate with the value of the exemption.

Key points from the 2014 report include:

  • In Fiscal Year 2011, Montana’s nonprofit hospitals provided nearly $215 million in total community benefits.
  • In FY2011, large nonprofit hospitals provided $188,685,876 in total community benefits, up from $166,245,443 in 2010. Those benefits were 366% of the value of the hospitals’ tax exemptions, up from 284% in 2010.
  • In FY2011, small nonprofit hospitals provided $26,061,793 in total community benefits, down tax exemptions, up from 325% in 2010.
  • In FY 2011, though large hospitals received slightly fewer charity care applications than in 2010, the approval rate increased from 91.18% to 94.83%.
  • In FY2011, small hospitals received more charity care applications than in 2010 and the approval rate increased from 86.64% to 92.04%.
  • In FY2011, uncompensated care accounted for a median amount of 6.37% of operating expenses at large hospitals and 5.53% at small hospitals. The median amount for all U.S. hospitals was 5.9%.
  • In FY2011, for all Montana hospitals, accounts totaling approximately 4.38% of operating revenues were sent to collection agencies.
  • In FY2011, the average dollar value of patient accounts that hospitals wrote off in bankruptcy was $1,644 – so low that the report concludes those accounts were not the cause of bankruptcy but became included when patients sought bankruptcy due to other financial problems.

There is no doubt that the provision of health care in Montana and throughout the U.S. is experiencing significant changes. With many of the 2010 Affordable Care Act’s provisions still in early stages of implementation, and some yet to be implemented, it is too soon to predict with accuracy whether the cost of charity care will increase or decrease in the years ahead.

Montana’s hospitals invest considerable time and resources into providing vital services in communities large and small across our state, and charity care is a fundamental part of that service. Now more than ever – as the delivery and financing of health care continue to undergo dramatic changes – it is important that our hospitals continue to provide these services to Montanans.


Attorney General Tim Fox

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