Montana health officials are proposing to oversee and set standards for the charitable contributions that nonprofit hospitals make of their communities annually to justify their access to thousands and thousands of dollars in tax exemptions.

The proposal is an element of a package of laws that the state Department of Public Health and Human Services will ask lawmakers to approve after they convene in January. It comes two years after a state audit called on the department to play more of a watchdog role and nine months after a KHN investigation found a few of Montana’s wealthiest hospitals lag behind state and national averages in community giving.

Montana state Sen. Bob Keenan, a Republican who has questioned whether nonprofit hospitals deserve their charity status, said the proposal is a start that could possibly be expanded on later.

“Transparency is the secret here,” Keenan said.

The IRS requires nonprofit hospitals to tally what they spend to “promote health” to learn “the community as a complete.” How hospitals count such contributions to justify their tax exemptions is opaque and varies widely. National researchers who study community advantages have called for tightening standards for what counts toward the requirement.

Montana is some of the recent states to think about imposing latest rules or increasing oversight of nonprofit hospitals amid questions on whether or not they pay their fair proportion. Dr. Vikas Saini, president of the national health care think tank Lown Institute, said that each at a state and native level, people in California are exploring whether to observe hospital community advantages and implement latest standards. Last yr, Oregon initiated a minimum amount that nonprofit hospitals must spend on community advantages. And Massachusetts updated its community advantages guidelines lately, pushing hospitals to provide more detailed assessments of how the spending lines up with identified health needs.

Montana hospital industry officials said they need to work with the state to shape the proposed laws, which they said the industry would support if it doesn’t conflict with federal rules. Saini said that to have an effect, any laws would must transcend federal requirements.

Lately, more people, like Keenan and Saini, have questioned whether nonprofit hospitals are contributing enough to their communities to deserve the most important tax breaks they get while becoming a few of the largest businesses on the town.

“The hospitals are type of the pillars of communities, but individuals are beginning to ask these questions,” Saini said.

Saini’s institute reviews hospitals’ giving annually and has found that the vast majority of nonprofit systems nationwide spend less on what the institute calls “meaningful” advantages than the estimated value of their tax breaks. Actions the institute counts include patient financial aid and community investments comparable to food assistance, health education, or services offered at a loss, including addiction treatment.

The 2020 Montana audit found that hospitals within the state report advantages vaguely and inconsistently, making it difficult to find out whether their charity status is justified. Nonetheless, state lawmakers didn’t address the problem of their 2021 biennial legislative session, and a Legislative Audit Division memorandum issued in June found the state health department had “made no meaningful progress” toward developing oversight of nonprofit hospitals’ charitable giving since then.

KHN found that Montana’s nearly 50 nonprofit hospitals directed roughly 8% of their total annual expenses, on average, toward community advantages within the tax yr that resulted in 2019. The national average was 10%.

In some cases, hospitals’ giving percentages have declined since then. For instance, within the tax yr that resulted in 2019, Logan Health-Whitefish — a small hospital that is a part of the larger Flathead Valley health system — reported that lower than 2% of its overall spending went toward community advantages. In its latest available documents, for the period ending in 2021, the hospital reported spending lower than 1% of its expenses on community advantages while it made $15 million greater than it spent.

Logan Health spokesperson Mellody Sharpton said the medical system’s overall community profit is equal to just about 9% of its spending, reaching across its six hospitals. It also has clinics throughout the valley. “It is vital to think about our organization’s community profit as a complete as our facilities collaborate to make sure the suitable care is provided at the suitable facility to fulfill our patients’ health needs,” Sharpton said.

State health officials asked lawmakers to permit the agency to draft a bill that will give the health department clear authority to require hospitals to submit annual reports that include community profit and charity care data. The measure also would allow the department to develop standards for that community profit spending, in response to the department’s description of its proposal.

“We see an amazing need here to maneuver the ball forward,” state health department leader Charlie Brereton told lawmakers in August.

Montana Hospital Association President Wealthy Rasmussen said his organization desires to work with the health department in honing the laws but said the definition of what counts as advantages should remain broad so hospitals can reply to their area’s most pressing needs.

Moreover, he said, hospitals are already working on their very own reporting standards. This yr, the association created a handbook for members and set a 2023 goal for hospitals to uniformly report their community advantages, Rasmussen said. The association declined to offer a replica of the handbook, saying it will be available to the general public once hospitals are trained on how you can use it later this fall.

The association also plans to create a web site that may function a one-stop shop for individuals who need to know the way hospitals are reporting community advantages and addressing local health concerns, amongst other things.

Republican state Rep. Jane Gillette said she supports increased health department oversight and the thought behind the association’s website but doesn’t think the hospital industry should produce that public resource alone. Gillette said she plans to introduce laws to require hospitals to report community advantages data to a bunch outside the industry — comparable to the state — which might then post the data online.

Prior to now, hospitals have resisted attempts to impose latest rules on community profit spending. In an interview with KHN last yr, Jason Smith, then Bozeman Health’s chief advancement officer, said the system supported efforts to enhance reporting contributions “outside of latest laws,” adding that hospitals can do higher work without “state oversight bodies being placed in the sector with us.”

Asked whether the health system still stands by that statement, Denise Juneau, Bozeman Health’s chief government and community affairs officer, said hospital officials hope any latest laws will align with existing federal guidelines. She said Bozeman Health will proceed to work with the Montana Hospital Association to define and supply higher community profit information, with or without latest laws.

A lawmaker would must back the state’s proposal by mid-December to maintain it alive.