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A state board wouldn’t approve a major report accusing Colorado hospitals of shifting costs onto people with private insurance

Executives from the state’s hospital systems criticized the report at a meeting of the Colorado Healthcare Affordability and Sustainability Enterprise board

The logo for the Colorado Department of Health Care Policy and Financing, which administers Medicaid in the state, is seen on a sign in the department's offices on Feb. 26, 2019. (John Ingold, The Colorado Sun)
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Hospital representatives on a little-known state Medicaid board revolted Tuesday and refused to endorse a government report that argues Colorado hospitals have reaped billions of dollars in extra revenues by ratcheting up prices on people with private insurance.

The report, released in draft form last month by the state’s Department of Health Care Policy and Financing, examined what is known as the cost shift — the practice of hospitals making up for low-ball payments from Medicare and Medicaid by charging people with private insurance more.

In Colorado, Medicare and Medicaid each pay hospitals 69 cents on the dollar for what a service actually costs. But the report found that hospitals now charge privately insured patients $1.66 for every dollar of services provided, a rate that has increased 7 percent in the last decade, even as hospital revenues have increased and the number of people without insurance in Colorado has dropped.

MORE: As their revenues grew, Colorado hospitals pushed costs onto privately insured patients and reaped billions, according to a new state report

Those prices get passed on to patients in the form of higher insurance premiums and out-of-pocket costs. As a result, the report argues, hospitals in Colorado could have saved consumers as much as $11.5 billion over a nine-year period if they had better controlled their costs and lowered their profit margins.  

This table shows what various types of coverage paid Colorado hospitals relative to what the services actually cost. Medicare and Medicaid paid hospitals less than what they needed to cover their costs. Private insurers paid more. (From the Colorado Department of Health Care Policy and Financing’s draft Cost Shift Analysis Report, page 12.)

But, when the report came before the Colorado Healthcare Affordability and Sustainability Enterprise board on Tuesday for its official approval, the board deadlocked. A hospital representative accused state officials of misleading data analysis, and two hospital officials who sit on the CHASE board said they believe the report is biased.

“This is too biased of a report,” Dan Rieber, a senior vice president and the chief financial officer of UCHealth, said. “I don’t feel comfortable putting my name on this report.”

“I felt like the report was a bit one-sided,” added Centura Health CFO Dan Enderson.

Chris Tholen of the Colorado Hospital Association told the board that he believed state officials left out relevant data points for understanding rising hospital costs in the state — such as the cost of living in Colorado and the local rate of inflation.

“Conclusions were forced to get a result that was predetermined,” he said.

(Tholen does not sit on the CHASE board, but another representative from the hospital association does.)

No one specified what motive they believe state officials have to be biased against hospitals. But, when it came time to vote on the report, five representatives from the hospital industry voted no. That meant there were too few votes to approve the report under the board’s bylaws — even though the final tally was six in favor to five against, with one abstention.

The vote, though, appears to have little practical effect. The CHASE board is an advisory group that ordinarily makes recommendations to the state on the implementation of the hospital provider fee. Had the report been approved, it would have been included in a bigger CHASE report sent to lawmakers.

But Kim Bimestefer, the executive director of the Department of Health Care Policy and Financing, said her department will go through the report again to double-check all the figures and then likely just release it as a report from the department — and not as something to be endorsed by the CHASE board. HCPF administers Medicaid in Colorado.

Bimestefer said adding in a cost-of-living analysis would not have changed the report’s conclusions. She also said her department will press forward with building support for the report’s recommendations, like creating greater transparency in hospital pricing and identifying best practices for hospitals to operate efficiently.

“I think we need to focus on the solutions without asking all of our partners to agree with a report,” she said.

“This is difficult,” she added. “This is a tense item. This is driving change. Change is going to take time, so let’s just keep providing facts.”

The hospital representatives on the CHASE board said the report pinned the blame solely on them for rising health care spending in the state and left out insurers or other players in the system. They also expressed dismay that the report was labeled as a draft CHASE report but was made public before they had a chance to vote on it.

“It has to be everybody working together,” Enderson said. “It’s not going to be hospitals fixing this. It’s not going to be consumer groups. We have to work with insurance companies on this.”

The sole hospital representative on the board to vote in favor of the report was Peg Burnette, the CFO at Denver Health. In comments, Burnette defended the necessity of shifting some costs to privately insured patients.

“For many providers, the cost shift is needed. For Denver Health, it’s needed,” she said. “You have to pay the bills.”

But she said hospitals also have to be at the forefront of trying to reduce health care costs for consumers.

“I feel like, as professionals, by saying we need to look at this more … we look like we’re trying not to address it,” she said. “And I’m concerned about that.”


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