Montana’s richest nonprofit hospitals receive millions of dollars in tax exemptions each year to operate as charities, but some fall short of other medical facilities in what they give back to their communities to get those breaks.
Overall, Montana’s nearly 50 nonprofit hospitals directed, on average, roughly 8% of their total annual expenses toward community benefits, such as covering the treatment costs of people who can’t afford care. That’s according to a KHN analysis of the hospitals’ IRS filings ending in 2019, which provide a snapshot of hospitals’ financial picture from before the pandemic. The national average as of 2018 was 10%, according to the American Hospital Association.
Hospitals self-report how much they give in community benefits, and their reporting processes are opaque. Even so, KHN’s analysis found that some of Montana’s wealthiest hospitals were spending well below the state and national averages.
Billings Clinic, the state’s largest provider, spent roughly 5% of its operating costs on community benefits, while St. Peter’s Health in Helena and Benefis Health System in Great Falls each reported less than 2%. By contrast, St. Luke Hospital in Ronan reported 22%.
Federal law doesn’t dictate how much nonprofit hospitals must spend on such benefits, and the definition of what counts is vague. How nonprofits record their giving varies, and hospitals say that makes it an unfair measuring stick. However, it’s what hospitals themselves report to the IRS.
Montana nonprofit hospitals face little to no oversight of their community benefit spending ― as is the case for much of the nation’s nonprofit health systems. That can allow nonprofit hospitals to act more like businesses than charities. Meanwhile, hospitals tend to be among the biggest economic engines in their communities, giving large salaries to their executives while Americans are stuck with at least $141 billion in medical bills they can’t afford.
“There are millions of Americans that do not have health insurance, and they need health care,” said Gerard Anderson, a health policy professor at Johns Hopkins University who studies hospital giving. “Hospitals are places that have been given tax advantages to help.”
Sued for Medical Debt at Benefis
Last year, Taruha Kirkaldie, 33, of Havre got a letter from a debt collector — she was being sued over a nearly $19,000 Benefis Health bill.
Kirkaldie didn’t have health insurance in 2018 when a cut on her hand turned into a serious staph infection. She needed to travel to Great Falls for intravenous antibiotics and surgery. She said a hospital staffer helped her apply for Medicaid, the federal-state insurance program for those with low incomes, but her family of five made about $50,000 a year, too much to qualify.
Kirkaldie recalled being told that she wouldn’t qualify for the hospital’s aid program either because she owned a home in Harlem, Montana, that wasn’t her primary residence.
Now Kirkaldie pays about $350 a month to pay off her hospital debt. “We still live paycheck to paycheck,” Kirkaldie said.
Benefis Health reported making $49.6 million more than it spent in 2019. Of the $21.5 million it put toward community benefits, $1.4 million went to financial aid. By contrast, Bozeman Deaconess Hospital, a smaller hospital, spent $4.8 million on its financial aid.
Still, Benefis spends more on community benefits than it gets in tax breaks, spokesperson Kaci Husted said. The biggest chunk, according to the IRS filing, was nearly $17 million the hospital absorbed to offer services such as palliative care. The hospital also spent roughly $106,000 for health professional education.
Husted said she couldn’t provide details about Kirkaldie’s case but added that all the hospital’s standard billing notices say patients can apply for financial assistance. She said its denial rate was low but didn’t provide specifics. Husted attributed the hospital’s limited financial aid to a lack of applications. “Perhaps, at times, people just don’t want to go through the work of completing the application,” Husted said.
She said a big part of the hospital’s financial assistance effort is helping people sign up for public health coverage and that few need financial aid now that many patients qualify for Medicaid as a result of the expansion of the state’s program in 2016.
That doesn’t help people who don’t qualify, like Kirkaldie.
What Counts as a Community Benefit
Montana hospitals use local needs assessments to help them decide how to spend their community benefit money.
Billings’ regional assessments found residents needed better access to healthy foods. Melissa Henderson, a manager for Healthy by Design, a community health coalition, said Billings Clinic, St. Vincent Healthcare and the local health department pay for its two full-time employees, who organize a farmers market and advocate for creating bike paths, among other things.
She said it’s powerful to have the area’s largest employers advocating for improvements like bike lanes even when no money is given.
“What I see is the hospitals are really doing their best to have an impact on their community,” Henderson said.
In the Billings Clinic tax documents that KHN examined, the hospital reported making $73.9 million above its operating costs from July 2018 through June 2019. In that report, the hospital said it doesn’t have the resources to address every community need, including the lack of transportation to health care facilities. However, it paid for rides to help patients who otherwise struggled to get to appointments until 2018. It stopped after it instead backed a successful initiative to increase taxes to bolster local transportation programs, among other services.
Mike Larson, executive director of Billings’ nonprofit Adult Resource Alliance, said he saw the need for medical rides increase after the hospital stopped picking up patients. Larson said that his ride program for older adults had trouble meeting demand, despite receiving some of the new tax proceeds, and that his biggest concern was whether the partnership with the city would have enough staffers and vehicles to keep up.
Larson said Billings Clinic’s business model causes it to act like a for-profit. “They’re very cautious in terms of how they approach community support,” he said.
The clinic’s transportation service was difficult to offer, hospital spokesperson Zach Benoit said, because many patients needed special assistance such as mechanical lift systems to put wheelchairs into a vehicle. The hospital is considering getting an ambulance, but Benoit said that would be costly and require special staffing.
JJ Carmody, Billings Clinic’s director of reimbursement, said the health system spent more than $36 million in 2019 on community benefits, including $12.7 million on financial aid and $3.6 million on programs to train health professionals.
“That’s significant, and I also believe that’s fair,” Carmody said. “That’s a large portion of our profit that’s dedicated to community benefit.”
In 2019, Billings Clinic paid its then-CEO Dr. Randall Gibb more than $1.2 million, according to the tax filing.
‘Very Little Motivation to Change’
Hospitals, industry watchdogs and policymakers alike debate what should count as a charitable benefit. And when questioned, hospitals often point to different categories that change the picture of how they perform.
St. Peter’s Health reported spending $3.1 million on community benefits from July 2018 through June 2019. That’s compared with the estimated $10 million it received in tax exemptions in 2016, according to a state audit presented to lawmakers last year.
Nate Coburn, the hospital’s chief financial officer, said benefits would be much higher if the hospital counted services that bring in less money than they cost, such as running a behavioral health unit. The hospital used to count them: A 2016 tax document shows it spent more than $16 million on community benefits. Coburn said St. Peter’s is considering correcting its forms to add those numbers.
Montana leaders have known hospitals have a transparency problem. The state audit estimated hospitals combined had $146 million in tax exemptions in 2016. That’s money that didn’t go toward local tax bases that help fund schools and repair roads.
In exchange, the audit said, hospitals reported spending $257 million on community benefits. But that number came with a huge caveat: The audit found hospitals report benefits vaguely and inconsistently, making it hard to determine if they can justify their charity status.
Opaque hospital filings are an issue nationwide. Some states have created minimum community benefit standards, with Oregon among the latest. There, health systems rely on a formula that sets a minimum for how much charity care hospitals give. But such hard lines are rare.
“There’s really no enforcement, with very little motivation to change things,” said Dr. Vikas Saini, president of the Lown Institute health care think tank in Massachusetts.
Rich Rasmussen, president of the Montana Hospital Association, said hospitals are working with his organization to come up with more consistent ways to count benefits and plan to share those results online next year. But, he added, tax reports don’t capture everything hospitals offer.
“We have hospitals that are still showing incredible outcomes in their quality, and that’s a benefit to the community,” Rasmussen said. “If we can avoid somebody being readmitted, if we can ensure that somebody can be discharged home, those are pieces that you can tell in the narrative of what you’re doing outside of what you might fill out.”
But hospital pricing experts, including Anderson, said the tax reports can paint hospitals in too good a light for accomplishing goals any business should have. One example, Anderson said, is counting the cost of staff training as a community benefit.
“Walmart trains their employees, for-profit hospitals train their employees, so it makes no sense to me why a nonprofit hospital should be able to call this ‘community benefit,’” Anderson said.
Montana policymakers have voiced frustration, doubting whether all hospitals pay their fair share. But little has changed.
The state audit recommended that lawmakers define how hospitals report their spending, but no such laws made it out of the legislative session this year. A bill proposed by Republican state Sen. Bob Keenan would have required the state’s largest hospitals to jointly hand over $4.3 million for the state to decide how it’s spent on community benefits. Hospital lobbyists called the move a “sick tax” and argued it was the wrong time to burden the systems fighting the pandemic. The bill died in committee.
Many of Montana’s large hospitals did well financially after the state’s expansion of Medicaid, which now provides heavily subsidized health insurance to about 1 in 10 Montanans. And while hospitals have been strained while caring for covid patients, they have also received millions of dollars in federal relief. Nationally, many wealthy hospitals got richer during the pandemic.
The audit recommended the Montana Department of Public Health and Human Services define charity care and create a review process to ensure hospital policies match industry standards. Department spokesperson Jon Ebelt said that the pandemic delayed that work but that it plans to resume it in the coming months.
Saini, of the Lown Institute, said hospitals that are putting a lot toward community benefits have an interest in wanting more transparency — but they’re too busy caring for patients to lobby for change. So holding hospitals accountable will likely have to come from political pressure, he said.
“I don’t think all of it is just this data issue,” Saini said. “There are some hospitals that do more, full stop.”
Hospitals have to report how much they spend to help their communities. But hospitals, industry watchdogs and politicians debate how useful the information is and what spending should count as community assistance.
Nonprofits must report financial information to the IRS each year using Form 990. For hospitals, that form includes a section on community benefit spending where they report the amount they spent on financial assistance for patients with low incomes through reduced or waived bills, broader efforts to improve community health, training and education for medical professionals, and research.
For this story, KHN collected those reports for hospitals across Montana and found the overall average that hospitals spent on community benefits as a percentage of their total expenses and then looked at hospitals whose spending was below average. This story relied on financial documents ending in 2019 to provide a snapshot of each hospital’s financial picture before the pandemic. Some hospitals’ documents cover different time periods — some reports are from July through June, while others are from January through December.
You can find the documents for the largest hospitals here.
This story was produced by KHN (Kaiser Health News), a national newsroom that produces in-depth journalism about health issues. Together with Policy Analysis and Polling, KHN is one of the three major operating programs at KFF (Kaiser Family Foundation). KFF is an endowed nonprofit organization providing information on health issues to the nation.