The mere fact a private corporation receives aid from the state in the way of exemption from taxation and by state appropriation toward its support does not render a hospital a state institution. So when is a state liable for damages in a hospital? In determining the liability of a governmental unit or agency for torts committed in connection with the operation of a hospital, most courts, in the absence of a statute abrogating immunity, make the question depend upon a distinction between whether the operation of the hospital was governmental, in which case there is immunity, or proprietary, in which case there is no immunity. This is the same analysis discussed above in connection with state and municipal tort liability.

There is no uniform standard for determining whether a hospital is operated in performance of a governmental or proprietary function. The maintenance of a hospital by a municipality for the purpose of conserving public health and treating indigent patients is generally held to be a governmental rather than a proprietary function.

Most courts seem also to agree on the proposition that operating a hospital for the purpose of making a financial profit is the performance of a proprietary function. Yet most courts also hold that a hospital is not operated for profit merely because it accepts paying patients, especially where the charges do not exceed the cost of maintenance. Beyond these general rules of thumb, no useful criteria can be gathered from the cases.