Colorado hospitals had lowest patient care profits in over a decade

More than a third of hospitals in Colorado lost money in 2023, and the industry reported its narrowest margins on patient care since the end of the Great Recession.

The Colorado Department of Health Care Policy and Financing recently released its annual reports on hospital finances, which showed that rising costs outpaced increases in payment for patient care. The drop in profits was less dramatic when the department also counted investment income and support services, such as parking and cafeteria meals.

“This has been a really hard time for hospitals because of the increased cost of labor,” said Kim Bimestefer, the department’s executive director.

Hospitals in the state earned a combined $8.5 million on patient care, $750.4 million on all operations and $1.5 billion in total profits, including investments, Bettina Schneider, the department’s chief financial officer, said in a webinar Thursday morning. All three types of profit margin are lower than in 2019, and profits on patient care hit their lowest levels since at least 2009, according to the Colorado Healthcare Affordability and Sustainability Enterprise report. (CHASE collects a fee from general hospitals and uses it to claim matching funds from the federal government, increasing health care funding overall.)

Small hospitals that don’t have significant savings to invest haven’t benefited from the stock market rebound in the way that large systems have, Schneider said. Even with investments included, 32 out of 84 hospitals lost money, and profit margins ranged from a low of -18.1% at Pioneers Medical Center in Meeker to a high of 32.9% at OrthoColorado Hospital in Lakewood. (Lutheran Medical Center had the largest loss, on paper, but that mostly reflected the accounting cost as its old building shut down.)

Overall hospital revenues grew 4.8% in 2023, while expenses grew 6.5%, according to the separate Hospital Financial Transparency report. Most of the increase in expenses came from growth in wages and benefits. Spending on contract labor dropped in 2023, when the worst of the pandemic was over, though it remained above 2019 levels.

While labor costs started to level in 2024, supply costs and uncompensated care went up, said Tom Rennell, senior vice president of financial policy and data analytics at the Colorado Hospital Association. Revenues rose slightly, as hospitals and insurers negotiated new contracts reflecting the increased costs, but margins are still tight, he said.

“Expenses are continuing to run really high,” he said.

The reports arrived as lawmakers consider a bill to limit urban hospitals’ reimbursements from the state employee health plan and plans covering employers with fewer than 50 workers to 165% of what Medicare would pay for the same services. Oregon and Montana adopted similar caps – though at higher thresholds than Colorado is contemplating – saving about $108 million in two years and $48 million in three years, respectively.

Given uncertainty about what Congress and the Trump administration will attempt to do, now isn’t the right time to make major changes, Rennell said.

“We’ve got some potentially really sizeable challenges ahead of us,” he said.

Pre-pandemic, Colorado hospitals had some of the highest prices and costs per patients in the country, and some of the highest profits, Bimestefer said. As of 2023, it had the 10th-highest prices, 11th-highest costs and 19th-highest total hospital profits, she said.

“Every single metric we’re tracking is going the right way,” she said. “They’re managing things more effectively.”

As a cohort, hospitals with at least 25 beds still made money on patient care in 2023, while smaller hospitals fell deeper into the red, losing a combined $163 million on care.

The reports included more recent data on hospital systems’ finances, as of June 2024. At that point, only Denver Health and CommonSpirit Health were operating in the red, while HCA HealthOne had a profit margin on patient care and other operations of 12.9%. The data for multistate systems includes hospitals outside Colorado, which Rennell said skewed the numbers.

A national report on hospital finances in December found costs were no longer rising faster than revenues, but raised concerns that the cost of care that hospitals didn’t get paid for was starting to grow because fewer patients have Medicaid insurance.

The effects of an increase in migration that started in late 2022 and of Coloradans losing Medicaid coverage after the COVID-19 public health emergency ended aren’t fully captured in the most recent report, said Nancy Dolson, the department’s special financing division director.

“We expect we’ll see that in next year’s data,” she said.

Overall uncompensated care costs increased by about $866,000, or less than 1%, from 2022 to 2023, according to the CHASE report. The category includes both charity care, where a hospital doesn’t expect to get paid, and bad debt, where it expected the patient to pay but eventually determined it was unlikely to collect.

The largest hospitals, with more than 90 beds, spent about 0.5% less on uncompensated care than in 2022, while the cost went up for smaller hospitals. Bad debt dropped overall, while charity care rose, perhaps because of a change in state law directing hospitals to assess if patients qualify for financial assistance.

The median number of days’ cash on hand that hospitals statewide had dropped from 183 in 2022 to 164 in 2023, but remained higher than in 2019, according to the financial transparency report. Cash on hand refers to how long a hospital could operate if it didn’t receive any new revenue. While that scenario is unlikely to ever happen, a higher number of days indicates that a hospital could better handle an unexpected expense, such as a damaged roof or a broken boiler.

The average obscures significant variation, though. St. Vincent General Hospital in Leadville had only 11 days cash on hand in 2023, while Intermountain Health’s Colorado hospitals averaged 348 days’ worth. Bimestefer said hospitals can feel comfortable with about 150 days’ cash on hand, while Rennell said the correct level depends on each hospital’s circumstances.

Hospitals would like the state to simplify its data requests, because the information is delayed and doesn’t lend itself to immediate action, Rennell said.

“Is (collecting data) the best way to spend our time and energy?” he said.

Operating profit margins

January-June 2024 (includes hospitals outside Colorado)

• HCA HealthOne: 12.9%
• UCHealth: 9.3%
• AdventHealth: 8.7%
• Intermountain Health: 3.8%
• Children’s Hospital Colorado: 2.8%
• Banner Health: 2.4%
• Denver Health: -0.9%
• CommonSpirit Health: -2.8%
Source: Colorado Department of Health Care Policy and Financing Hospital Transparency Report

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