Colorado’s top health officials think the prices charged by large hospital systems in the state are too high.
This is not exactly news; Kim Bimestefer, the executive director of the state’s Medicaid department, has been making this argument for years. But a new report and new comments made by Bimestefer during a virtual policy summit in recent weeks show the state is preparing to relaunch its fight against hospital prices, after the battle largely fell silent during the COVID pandemic.
“We still have got a lot of work to do,” Bimestefer said.
The report, released late last month, found that Colorado hospitals have some of the highest prices and profits in the country. In 2020, according to the report, the price per patient in Colorado hospitals ranked sixth highest in the nation, while the profit per patient ranked seventh. Total profit was sixth highest, while the cost per patient — a measure of efficiency, reflecting hospitals’ underlying expenses to actually provide care — was the nation’s 10th highest.
“Colorado is one of only two states (along with Alaska) that ranks in the top 10 for all four measures of hospital cost, price and profit, making us one of the most expensive states for hospital care,” the report, produced by the Colorado Department of Health Care Policy and Financing, states.
According to the report, all the large hospital systems operating in Colorado, with the exception of Denver Health, have billions of dollars in reserves, enough cash on hand in some cases to run their hospitals for up to a year.
State health officials have long alleged that Colorado’s largest hospital systems rack up high profits at the expense of their patients’ pocketbooks. Hospitals have often defended the high prices and profits as necessary in an expensive, competitive market. But the response to the new report from the Colorado Hospital Association showed how this debate will be different as a result of the pandemic.
During COVID, how much is too much?
COVID stressed hospitals like never before, testing their capacity and, at least for a little while, their finances. The hospital association acknowledged both in their statement on the new report. The argument was essentially: See, this kind of emergency is why we needed to build up such big reserves.
“What the report fails to acknowledge is that it is the very fact of Colorado hospitals’ reserves and funding that enabled such a robust COVID response: allowing hospitals to save lives, provide patient care, step up to deliver testing, vaccines, treatments and other supports when the state asked for help,” the Colorado Hospital Association said in its statement.
Hospitals also face ongoing fallout from the pandemic, mainly in the area of staffing. They have raised pay for nurses and other workers crucial to providing health care and also invested in recruiting and retaining staff. Those new staffing costs may start having an impact on prices, hospitals say.
“Hospitals’ workforce challenges will need significant financial commitment over the next several years, which Colorado hospitals have already started, to both retain current health care workers and build the workforce pipeline for the future,” the hospital association wrote in its statement.
Hospitals’ finances ultimately weathered the pandemic just fine
State officials push back on this by noting that the balance sheets of the state’s largest hospital systems — such as UCHealth, Centura, Banner, HealthONE and SCL Health — didn’t end up suffering greatly during the pandemic, despite the staffing challenges and disruptions to lucrative elective surgeries.
“Most hospitals increased their reserves during the pandemic instead of spending down their rainy day funds,” Nancy Dolson, HCPF’s special financing division director, said during the virtual policy summit held last month. “Bottom line: Our hospital systems’ reserves and profits exhibited really few lasting substantial effects from COVID-19, at least financial effects.”
Part of this had to do with a roaring stock market delivering gains on investment revenue for big systems. But hospitals also benefited from federal stimulus money.
The new HCPF report found that Colorado’s hospital systems took in about a billion dollars in federal stimulus money through late 2021. This doesn’t include the stimulus initially received by HealthONE hospitals. HealthONE’s parent company, HCA Healthcare, decided to return its stimulus funds to the federal government.
A report earlier this year by independent health care consultant Allan Baumgarten found that Denver-area hospitals made nearly $1.4 billion in profits in 2020.
Sending help to rural hospitals
Bimestefer and other state officials are keen to note that their campaign against high hospital prices mostly does not apply to the state’s rural hospitals.
Those hospitals — often run independently — typically charge less and also have less in reserves. Federal stimulus money was vital to keeping them afloat during the pandemic.
“Without it,” Dolson said, “our rural hospitals would have barely broken even.”
Bimestefer said, even as the state works to fight high prices in one chunk of the market, it is vital that the state spend money to help smaller hospitals. She pointed to a bipartisan bill introduced in the state legislature last week to create a $10 million grant program to fund advancements in technology and “affordability solutions” at rural health care providers.
A twist: Colorado’s hospital price rankings have been falling
There’s one other thing that gives the debate over hospital prices in Colorado a new thorniness. Even as the state continues to push for lower prices, hospitals have already made progress.
In 2018, total profits in Colorado hospitals were the highest in the nation and the profit per patient was the third-highest, according to the new HCPF report. Price per patient ranked fifth in the country, while the cost per patient was eighth.
Bimestefer noted this in her remarks at the virtual policy summit.
“I want to give a shout-out to the hospitals,” she said. “Each one of these metrics that we have been tracking as a department … all of them are headed in the right direction.”
The Colorado Hospital Association also alluded to it in its statement on the HCPF report, expressing frustration that state officials would return to criticizing hospitals over prices and profits after working so closely with them to care for patients during the pandemic.
“Hospitals did all that while also continuing to save Coloradans money on health care, a fact often cited by state officials,” the statement said. “Colorado hospitals’ focus remains on caring for patients with COVID and those who deferred care during the pandemic, continuing to improve health care affordability for Coloradans, supporting Colorado’s health care heroes, and providing for Colorado’s communities.”
It suggests the renewed fight over hospital prices could be a little less abstract this time around, a little more personal.
Or, as Bimestefer put it: “I know this causes some friction. I get it.”