Polis, state healthcare financing agency trades with hospitals on earnings | governor governor
During his State of the State address on Tuesday, Gov. Jared Polis took direct aim at the state’s largest hospitals, suggesting it was time to hold them accountable for record profits, pay zero taxes and “hold massive reserves while increasing client fees.”
Polis stated: “Coloradians still pay some of the highest costs for health care, especially hospital care. Sadly, we’re in the top 10 states for hospital cost, price, and profit. Let’s change that.”
On Wednesday, the Colorado Department of Health Care Policy and Financing added fuel to that fire, releasing reports covering fiscal years 2014-2021 that it claimed showed those record profits.
The Hospital Trade Association and UCHealth hit back, claiming that the reports use outdated data that does not reflect the current environment.
Hospitals represent the largest component of the healthcare dollar, said a statement from the HCPF, “so advancing the affordability of hospitals is a top priority for Polis-Primavera administration… Overall, the reports highlight Colorado hospital earnings, reserves (days a cash (hand) payment, the impact of the $1.2 billion in federal stimulus received in 2020, the divide between the rural, independent, and mega-financial system and more.”
HCPF Analytics claims that patient revenue in that time period grew faster than operating expenses, which they said drove profits.
From 2018 to 2020, Colorado hospitals ranked in the top 10 nationally for costs, pricing, and earnings. The HCPF statement said that select hospitals, particularly UCHealth and HealthONE, could make “more impactful strategic decisions to lower their prices to improve the communities they serve.” Other hospitals earmarked for high profits include University of Colorado Hospital, Powder Valley, Sentura Common Spirit, and St. Anthony Summit.
The statement claimed that UC Health has a gross profit margin of 26.1% in 2021; University of Colorado gross margin was 31.3% in 2021; Poudre Valley’s margin was 45.1% in 2021, too; St. Anthony Summit’s total earnings for 2021 were 34.5%
By comparison, the release said, Intermountain Healthcare, formerly SCL Health, which has five hospitals in the front range, had a gross profit margin of 5.2%, while St. Mary’s Hospital in Grand Junction, also part of Intermountain, had a gross profit margin. 12.9%.
Hospital mergers have resulted in billions of dollars in reserves, the fund said, averaging 225 days of cash on hand in 2019, which grew to 245 days in 2021. The statement claimed that hospital reserves had increased compared to pre-pandemic levels and that larger systems had not adopted On rainy day money during a pandemic, as might have been expected. These reserves were boosted by federal stimulus dollars that were intended to offset falling profits.
But HCPF claims don’t reflect current realities, particularly the past two years of COVID-19 and amid record inflation, according to the Colorado Hospital Association and UCHealth.
CHA’s response called the HCPF reports an “outdated narrative”. The 2022 Colorado Hospital Industry Update shows that Colorado hospitals “face serious financial losses, with no further relief in sight. Hospitals have suffered unprecedented losses relative to their pre-pandemic level — about $1.8 billion through August 2022. In addition, the The majority of Colorado state hospitals are operating in unsustainable financial conditions, the CHA said in a statement Wednesday.
The CHA statement said hospitals and health systems have recognized concerns about health care affordability, and are working on it. “These efforts are beginning to show progress, as data shows that Colorado residents spend significantly less on health care than others in the United States.”
“Using legacy data, the HCPF does not provide a comprehensive picture and has very few objective recommendations for improving access, affordability, or quality of health care,” said Jeff Teeman, CHA President and CEO. “Instead, they recommend cutting community ties with hospitals and increasing reporting burdens for hospitals—both of which do not improve health care. CHA calls on HCPF to partner with us to make real progress on key priorities such as supporting our health care workforce, and providing sustainable reimbursement for Medicaid and improve affordability by cutting organizational red tape.”
UCHealth has also responded.
Dan Weaver, UCHealth’s vice president of communications, said in a statement that the HCPF information is misleading.
“By distorting the financial environment for hospitals and investments in Colorado’s health care workforce, research and community benefits, HCPF threatens medical care, quality and patient access in the state,” the UCHealth statement said.
According to UCHealth, their hospitals’ financial situation has changed dramatically since 2021, and operating margins have decreased significantly due to inflation and wage increases.
“Making financial or policy decisions based on outdated and misleading HCPF information could be disastrous for our state and lead to reduced access to hospitals, reduced clinical trials, reduced support for education to train future nurses and physicians, and even job losses,” the statement said.
UCHealth disputed the claims in the HCPF report, stating that the operating margin in 2021 was 9.9%. In 2022, it was 5.2% and they expect an operating margin of 3.3% for 2023.
“As HCPF has done in previous reports, it uses historical data, chooses date ranges when scaling investments, and uses non-GAAP methodologies,” the UCHealth statement said.
UCHealth noted CHA report that Colorado hospital expenses are 21% higher than pre-pandemic levels, with staffing expenses increasing more than 26%
“Inflation has also increased costs for the supplies, services, and medicines that hospitals need to care for patients, which has drastically reduced profit margins. The information our policymakers work on must be accurate and up-to-date.”