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Hospital Costs in Montana

Hospital care is one of the most important decisions a consumer makes. It may cost more than a car or even a house.

Approximately one in five Montanans lacks health insurance. Even those fortunate enough to have insurance are confronted with rapidly increasing premiums and increasing costs for uncovered medical services and drugs. Many Montanans in all age groups struggle to pay for the medical care they need. The 2007 Northwest Job Gap Study (PDF, 4MB) found that, while Montana's median wage has increased by 9.1 percent from 2002 to 2006, over that same period, health care costs for a single person have increased by 44.9 percent.

Health care costs more in the United States than in any other industrial society – over $7,000 per year for each person in the country in 2006. Given that, it is not surprising that medical bills cause about half of all personal bankruptcies in Montana. These bankruptcies don't just affect the uninsured – they include people with insurance who can't afford the substantial co-payments, deductibles or uncovered services.

While policy makers disagree on a workable solution to this crisis, there is consensus on at least one point – that providing consumers with cost information in advance is an important element in helping consumers manage the costs of the health care services they need. Consumers have a right to know as much as possible about the costs of medical procedures before they receive them. And when possible, they have a right to compare costs for similar procedures among hospitals.

By law, Montana's tax-exempt hospitals are obligated to provide community benefits in return for their tax-exempt status. Nonprofit hospitals have a charitable duty to help consumers who cannot afford health care on their own. Ideally, both hospitals and consumers could identify who needs help paying for medical procedures, so hospitals can maximize the charitable health care benefits provided to consumers in their communities.

This first Montana Hospitals Report (PDF) provides an important starting point for an informed public policy discussion on hospital pricing, the charity care our nonprofit hospitals provide in return for their tax-exempt status, and their debt collection practices.

Mike McGrath, Attorney General

The Montana Hospitals Survey

The Montana Attorney General's Office is charged with protecting consumers from unfair trade practices. The office is also responsible for supervising nonprofit corporations in the state, including all major Montana hospitals. Under the hospitals' tax-exempt status, they receive millions of dollars in tax benefits from federal, state and local governments in return for the charity care and community benefits they provide.

In September 2006, the Attorney General's Office began surveying hospital policies in three areas:

The wealth of information provided by Montana's 11 major hospitals was analyzed by Lawrence White, a research assistant professor with the School of Public and Community Health Sciences at the University of Montana and former CEO of St. Patrick Hospital in Missoula.

White's report (PDF) provides an independent analysis of the data collected and identifies a series of issues that warrant further discussion.

Summary of Survey Findings

Hospital Pricing – The survey collected cost information for each hospital's 10 most common medical procedures, referred to as diagnosis related groupings or DRGs. This information provides consumers a basis for comparing the cost of common procedures at different Montana hospitals. See Montana Hospitals Report, Attachment 1.

However, without any accompanying data on the quality of the services provided, the information does not help consumers identify the best value for health care services. Once this information is available, the report suggests posting it to a public website, as some other states do.

Hospital Charity Policies – Charity care eligibility is based on income levels that range from 200% to 400% of the federal poverty guidelines.

See Montana Hospitals Report, Table 1.

Uncompensated Care – Hospitals can write off both charity care and bad debts. The combined total of these two amounts, called uncompensated care, was compared to the national average. For 2006, uncompensated care nationwide averaged 5.7% of total hospital expenses. In Montana, only one hospital exceeded this national average. See Montana Hospitals Report, Table 2.

Comparison of Charity Care and Medicaid Costs to Tax Exemption– Under state and federal law, nonprofit hospitals are required to provide a public benefit to the communities they serve in return for their tax-exempt status. The value of the hospitals' tax exemption is considerable, with 2006 estimates ranging from $12.3 million for St. Vincent in Billings to $381,982 for Holy Rosary in Miles City.

Charity care for those unable to pay is the most prominent public benefit a hospital can provide its community. In addition, community benefits provided by nonprofit hospitals also can include:

The report compared the value of each hospital's tax exemption to the cost of charity care and Medicaid in excess of what is reimbursed. In fiscal year 2006, eight of the 11 hospitals contributed more in combined charity care and Medicaid costs than they would have paid in taxes if they were for-profit institutions. Three hospitals — St. Peter's, St. Vincent Healthcare and Bozeman Deaconess — provided less in these two community benefits than the taxes they would have paid had they not been tax exempt. See Montana Hospitals Report, Table 3 (Revised to include Medicaid costs submitted by the hospitals January 24, 2008).

Comparison of Charity Care Costs to Hospital Surpluses – The report also compared the value of each hospital's charity care with its surplus revenues (the income a hospital earned in excess of the cost of providing care). The percentage of charity care to surplus ranged from:

See Montana Hospitals Report, Table 4.

Bad Debt, Collection Practices and Healthcare Bankruptcies – If no payment has been made on an account after 90 to 120 days, the hospitals turn the outstanding balance over to an outside collection agency. For the three-year period from 2004 to 2006, the 11 hospitals:

Once a hospital attempts to collect an outstanding bill, it can no longer be considered charity. The report suggests that it could be to everyone's benefit to identify all individuals who deserve charity care up front, so that unproductive collection efforts and bankruptcies could be avoided and the hospitals would record more in community benefit. Refer to Montana Hospitals Report, Table 5.