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A sign outside Saint Joseph Hospital in Denver, photographed on Oct. 22, 2019. (John Ingold, The Colorado Sun)

When the coronavirus shut down Colorado last spring, fears mounted that the state’s hospitals were about to get hammered financially.

In rapidly shifting to focus on caring for sick COVID-19 patients, hospitals paused lucrative elective procedures. Patients skipped usual visits. Hospitals pumped money into buying protective equipment and turning floors into coronavirus units. Estimates for lost revenue stretched into the billions of dollars.

But a new report released by a state agency on Wednesday concludes that Colorado’s large hospital systems ultimately turned a profit in 2020, despite the challenges. The better-than-expected performance was partly due to revenue that rebounded once more normal operations resumed in the summer, partly due to investment income from a revving stock market, and partly due to federal stimulus dollars.

Looking at the national operating margins for six different systems that operate hospitals in Colorado, the state Department of Health Care Policy and Financing found that four of them — UCHealth, HealthONE, Banner Health and AdventHealth, which makes up part of Centura Health — turned a profit or broke even before accounting for stimulus money. When including the boost from those stimulus dollars, two more systems — SCL Health and CommonSpirit, which forms the other half of Centura Health — rose to profitability as well.

“All major Colorado hospital systems recorded operating profits in 2020 with no need to utilize reserves, which is a significant finding,” the report states.

The situation is different, though, for Colorado’s rural and independent hospitals. Often holding enough cash at any given time to cover only three months into the future, these smaller hospitals needed the lifeline that stimulus money offered. Even then, some of them — like Boulder Community Health or Colorado Canyons Hospital and Medical Center in Fruita — lost money last year, according to the report.

Highest profit margins in the nation

The analysis was one of two released Wednesday that highlight the strong profits and high prices of some of Colorado’s largest hospitals.

The other analysis, drawn from annual financial reports that hospitals are required to file with the federal government, found that Colorado hospitals had the highest profit margins in the country and the sixth-highest prices in the country in 2018, the most recent year for which data is available. That confirms an analysis presented earlier this year to a Colorado health care advocacy organization. And it comes after years of reports about increasing profit margins for the state’s biggest hospitals and systems.

The new report found that Colorado hospitals saw $2.9 billion in profits in 2018 — a 15.6% profit margin, compared with the national median profit margin of 6.5%. Prices charged to patients in 2018 were 22.8% higher than the national median, a substantial increase from 2009, when prices were 9.2% higher than the national median, according to the report.

“Our hospitals got worse when it came to prices,” said Kim Bimestefer, the Department of Health Care Policy and Financing’s executive director.

In a statement, the Colorado Hospital Association said the 2018 numbers are “a reminder of why Colorado hospitals have worked diligently to improve the affordability of health care for Coloradans.” The association pointed to years of work at the legislature to lower insurance prices, work that hospitals have often been at the negotiating table for. The result is that, while hospital prices may be high, insurance premium prices for some purchasers are among the lowest in the nation.

“Colorado hospitals are committed to their employees, patients and communities, and they will continue to work as partners on innovative and effective ways to improve affordability and access to high-quality care,” the association said in its statement.

Praising the work of hospitals

The reports are the latest salvos in Gov. Jared Polis’ battle against large hospital systems that Polis has said are ripping off Colorado patients. And they showcase how HCPF, the state agency that oversees Medicaid in Colorado, has been transformed under Polis from a wonky administrator of health coverage into an all-purpose price-fighter. Medicaid spending at hospitals accounts for about 9% of the entire state budget.

But the reports also land at a delicate moment. As much as state officials want to take on hospital prices and profits, they are also cautious about overplaying their hand against hospitals, which have worked closely with the state to respond to the pandemic and have been lauded as among its heroes.

Bimestefer on Wednesday made sure to praise the work of hospitals.

“Ultimately, we are extraordinarily thankful,” Bimestefer said. “We need those hospitals. They took care of our folks. They saved lives.”

But she said the reports highlight lessons needing to be learned and changes needing to be implemented. Future stimulus money, for instance, could take into account the amount of reserves a hospital has to draw from. Large hospitals could rethink their pricing and where they are investing their money, focusing on providing great community benefit and reducing disparities in care.

“Sometimes when you go through the hardest times, those are the times for the most transformational change,” Bimestefer said. “We know we need to transform.”

John Ingold is a co-founder of The Colorado Sun and a reporter currently specializing in health care coverage. Born and raised in Colorado Springs, John spent 18 years working at The Denver Post. Prior to that, he held internships at...