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State, hospital association paint different pictures of Colorado nonprofit hospitals' finances

Data from the state's Department of Health Care Policy and Financing backed what Gov. Polis said about hospitals this week. CHA said those numbers aren't current.

DENVER — Nonprofit hospitals do not have to pay taxes.

In return, they are expected to invest money in the communities they serve.

During his State of the State address, Colorado Gov. Jared Polis (D) accused nonprofit hospitals of hoarding money and overcharging patients.

"Some large hospital systems are making record profits, paying zero taxes, and sitting on enormous reserves while overcharging customers," Polis said on Tuesday.

On Wednesday, the Colorado Department of Health Care Policy and Financing (HCPF) released financial reports that show data on hospital finances.

The reports show how many days of reserve hospitals had in 2019, 2020 and 2021.

UCHealth, for instance, had 340 days' worth of cash on hand (reserves) in 2019, 430 in 2020 and 469 in 2021.

"We applaud hospitals that are on solid financial ground. It’s when the reserves are excessive, that represents overcharging of communities, businesses and families who should not be paying excessive prices," said HCPF Executive Director Kim Bimestefer.

A UCHealth spokesman said that as of today, the hospital has 308 days' worth of cash in reserve.

Children’s Hospital Colorado, as another example, had 321 days' worth of cash on hand in 2019, 333 in 2020 and 358 in 2021.

A high cash reserve can help hospitals get a high bond rating and better interest rates to borrow money.

"We would say somewhere in the neighborhood of 300 days is enough to get you an A, AA rating, so that you can borrow at very attractive rates," Bimestefer said.

"We do think a more complete story needs to be told. All hospitals in Colorado, regardless of how stable they might have been in the last few years, are really faced with an uncertain environment," said Colorado Hospital Association (CHA) CEO Jeff Tieman. "High inflation, rising expenses that are growing faster than their revenues and sicker patients."

CHA recently released a report that shows, collectively, hospitals spent $1.6 billion in 2020 for the community's benefit.

Think of community benefit spending as how nonprofit hospitals make good for not paying taxes.

The bulk of the $1.6 billion spent in 2020 was on unreimbursed care and on free and reduced health care.

Hospitals are required to hold meetings to hear how community members want the hospital to spend money in lieu of paying taxes.

The state wants a better accounting of what is being asked for versus how the hospitals decide to spend the money.

"Think of what tax dollars might go towards. They might go towards helping people with housing. They might go towards food insecurity. They might go towards mental health and substance abuse which we often call behavioral health services," Bimestefer said.

"We are really in need of more detailed reporting, so we can really pull together exactly what’s being invested in behavioral health, in food, in housing and so forth. We don’t quite get that granularity in our reporting," said Nancy Dolson, HCPF Special Financing Division Director.

Bimestefer suggested that hospitals spend their money on reducing patient costs.

"The mega systems, University specifically, have been far too focused on expansion, the purchase of physician groups, the building and buying up hospitals, and that does not necessarily benefit communities. Sometimes it benefits for access," Bimestefer said.

In an emailed statement, UCHealth took exception with the state's report:

"As HCPF has done in past reports, it uses old data, picks date ranges when investments increased, and uses methodologies that do not follow Generally Accepted Accounting Principles (GAAP). Stock market ups and downs are not the same as income and do not present an accurate picture of financial health. Like any person or institution that has investments in the market, UCHealth has experienced substantial losses this past year. Nonetheless, every dollar that we make stays in Colorado and is reinvested in our patients, communities, and employees.

HCPF also suggests that Colorado’s nonprofit hospitals do not provide enough community benefit investment or support behavioral health. In fact, the Lown Institute recently ranked UCHealth among the nation’s best in social responsibility, community benefit, value and patient outcomes. In fiscal year 2022, UCHealth spent $1.1 billion on financial assistance, subsidized care, and other areas to directly benefit patients and communities, including $388 million in uncompensated care. UCHealth is the largest provider of Medicaid services in Colorado, as nearly 25% of Colorado Medicaid patients are cared for at UCHealth. UCHealth has also increased its investment in behavioral health services by $150 million, including adding 49 additional inpatient behavioral health beds, and providing tens of thousands of virtual and in-person behavioral health visits."

Bimestefer said the state wants more accounting, more frequently. She would like to see hospitals report financials to the state every quarter.

"We really need to have tax experts go and do the estimation, is what they’re spending back in the community, is that at least equal to what the taxes would be that they would collect?" Dolson said.

"When I hear about increased reporting and transparency requirements, we're open to learning what those might look like, but think there's a lot of that in place now," Tieman said.

He referenced multiple new policies passed by the state legislature that have not been fully implemented yet, so know if more accounting is necessary.

"Seventeen major reforms just in the past few years. And it would be really smart of everyone to take a pause, figure out where we are, what's working and what's not, what gaps still need to be filled before we pile on new policies that may not do a lot of good and may end up actually costing," Tieman said.

Tieman thought that the financials from the state reports released on Tuesday do not reflect the current situation hospitals are facing.

"Today, we are challenged by an inflation situation that hasn’t been this way in decades. We're challenged by enormous workforce problems and shortages. We're challenged by regulatory burden. We're challenged by the need to make sure we're ready for the next pandemic," Tieman said. "Half of Colorado hospitals do not have a sustainable margin, which means that their viability is an ongoing concern."

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