Montana hospitals push back on lawmakers’ push to examine tax-exempt status

Legislature wants more information on how healthcare gives back to Treasure State communities

By: - January 28, 2023 9:24 am

A conversation between Rep. Ed Stafman, D-Bozeman (left) and Duane Preshinger of the Montana Hospital Association over the reporting of community contributions given in exchange for tax-exempt status and House Bill 45 on Jan. 25, 2023 (Photo by Montana Public Affairs Network).

Montana lawmakers on Wednesday asked a seemingly straightforward question of hospitals: What do we get for $146 million?

That’s the amount of tax breaks given to nonprofit hospitals in the state that are granted that status and do not pay many taxes. Within that same year, hospitals reported nearly $250 million of value and services to the communities in which they are located.

But lawmakers are wondering how the hospitals arrive at that number, and if the tax exemption truly justifiable.

A bill being sponsored by Rep. Bob Keenan, R-Bigfork, would add new reporting guidelines to the information that hospitals routinely provide to the state. House Bill 45 would expand the Montana Department of Public Health and Human Service’s oversight so that it could assess whether hospitals are justifying their nonprofit or not-for-profit status, which gives them tax breaks from the state.

Currently, federal tax law requires the nonprofit and not-for-profit hospitals to report their charity care on certain forms of the tax return. However, state officials point out that while they’re responsible for requiring the report, there are no standards, and if a hospital reports less charitable benefit than its tax benefit, nothing is done about it. This change would allow the state to look more carefully and determine if the large tax break was justifiable.

Hospitals say they’re fine with providing the same information that they provide to the federal government, but the problem is that the state looks to create more reporting and that may become burdensome or intrusive. Advocates for the hospital say that the bureaucratic DPHHS would be the agency deciding on the reasonability of the charity care, not the lawmakers.

Employees for the DPPHS, which has requested the bill, say that federal tax returns simply report the total amount of charity care or programming a healthcare organization provides.

“Those give us a high level overview of the aggregate amount, but we may want to look at the detail,” said Brenton Craggs, information and regulatory affairs coordinator with the Montana Department of Public Health and Human Services.

What can be counted as community benefit can also vary. For example, Bob Olsen, interim chief executive at the Montana Hospital Association, said many for-profit hospitals would not consider establishing an emergency department or behavioral health because they operate at a loss. So the losses in those departments often are reported as part of the community benefit.

However, some of the benefit can be outreach events and items such as community gardens, which more indirectly provide health benefits. Some, like St. Peter’s Health in Helena, sponsored and paid for playground equipment.

This issue was first brought up by the interim Legislative Audit Committee, which accepted a report from the Legislative Audit Division that showed that overall, hospitals had reported more in community benefit than they had received in tax breaks. But the audit noted that reporting standards were still inconsistent and not every organization reported giving back more than it took in.

The Montana Hospital Association said it has been working with hospitals to provide guidance and policies for what counts to help make the reporting more uniform.

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Darrell Ehrlick
Darrell Ehrlick

Darrell Ehrlick is the editor-in-chief of the Daily Montanan, after leading his native state’s largest paper, The Billings Gazette. He is an award-winning journalist, author, historian and teacher, whose career has taken him to North Dakota, Minnesota, Wisconsin, Utah, and Wyoming.