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Denver Health medical center, photographed on Thursday, April 4, 2019. (Jesse Paul, The Colorado Sun)

More than three years after the start of the COVID pandemic upended the hospital business nationwide and more than six months after the budgets at hospitals across Colorado really hit the skids, the financial outlook still has yet to stabilize, according to first quarter financial statements filed with federal regulators.

Some large hospital systems, like UCHealth, have returned to profitability, aided in part by a stronger stock market bringing back gains in investment income.

Others, though, such as Denver Health, continue to lose money. The metro area safety net hospital bottomed out with only 75 days cash-on-hand in February of this year, before rebounding slightly in March to end the quarter with 78 days cash-on-hand.

According to the Colorado Hospital Association, nearly half of the state’s hospitals have negative operating margins, meaning that revenue from patient care is not covering what it costs to provide that care. Overall, operating margins are 65% below pre-pandemic levels, according to a financial analysis by the association. Expenses at Colorado hospitals are 30% above pre-pandemic levels, which is higher than the national average.

“It’s important to understand that things have not gotten better,” said Tom Rennell, the hospital association’s senior vice president for financial policy and data analytics.

Supply costs continue rising

Rennell said supply costs — a category that includes medical supplies but also pharmaceuticals — continue to climb, up 12% in the first three months of 2023 compared with the same period a year prior. The increase in labor expenses — which includes both pay to staff as well as money spent on temporary or traveling help — has slowed down to 6% year-over-year growth for the first quarter of 2023, compared with the 18% year-over-year increase seen in the first quarter of 2022.

Some hospitals, mostly large systems, have been able to afford these cost increases because of gains in their investment portfolios, turning an operating loss into a profit when considering all sources of revenue. But Rennell said that’s not an option for all hospitals in the state.

“We have a lot of hospitals that don’t have (a large investment portfolio) and so they don’t get the benefit of that,” Rennell said.

Rural hospitals, especially, continue to struggle. The hospital association’s analysis found that 70% of the state’s rural hospitals don’t have a sustainable margin, meaning they are not able to put away at least 4% in profit to build up reserves for lean times.

And some rural hospitals are teetering on the brink. An audit released earlier this summer into the finances of Delta County Memorial Hospital reported doubts about the hospital’s ability “to continue as a going concern,” according to a report in The Grand Junction Daily Sentinel. St. Vincent Health, in Leadville, scraped through a rough patch last year only because the state agreed to advance it money and county commissioners in Lake County agreed to bail it out.

From big profits to big losses 

A deeper look at some hospitals’ budgets can be found in disclosures filed with the federal Municipal Securities Rulemaking Board, which regulates municipal bonds. Public and nonprofit hospitals in Colorado often file disclosures with the MSRB because they issue bonds either on their own or through the Colorado Health Facilities Authority.

Here are a few highlights:

  • UCHealth reported a $62 million profit for the quarter on operating income and a $298 million profit when factoring in other income like investment gains. When looking at the fiscal year to date, the system has recorded more than $500 million in total profits.
  • CommonSpirit Health, the country’s second-largest nonprofit hospital system, reported a loss for the quarter nationwide of $231 million, with a loss of $45 million for the fiscal year to date. The health system, which operates 20 hospitals in Colorado, Utah and Kansas under the Centura Health banner, did not break out its margins by state. But it did report that its Colorado hospitals saw $1 million in year-over-year growth of operating revenues, and an increase of $42 million in operating revenues for the fiscal year to date, compared with the same period last year.
  • Intermountain Health, which merged with SCL Health in Colorado last year, reported a huge year-over-year growth in revenue nationally, likely due to that merger. Revenues in the first quarter of 2023 were more than $1 billion higher than they were for the system in the first quarter of 2022. But expenses climbed by over $1 billion, as well, and operating profits dropped slightly, though they were still in the black at $104 million. Adding in investment gains, the system’s total quarterly profits topped $500 million, compared with a nearly $300 million loss for the same quarter last year.
  • Children’s Hospital Colorado reported year-over-year growth in operating revenue of about $35 million but year-over-year growth in expenses of double that amount. The system reported a $6 million loss on operating income for the first quarter of 2023. Investment income, though, pulled that loss up to a $30 million quarterly profit.
  • Denver Health reported some financial positives — a higher number of surgeries performed, higher operating revenue and more grant funding (including money appropriated by the legislature and funds from Kaiser Permanente). But the overall picture remains rough. The hospital lost $2 million just in March and recorded a $13 million loss through the first three months of the year. The days of cash-on-hand is roughly half the number of what it was at the end of 2020.

Rennell said the financial struggles are likely to impact the hospital business for years to come, even if they start to turn around soon.

“When you don’t have an operating margin, you don’t feel confident investing for the future,” he said. “None of our hospitals want to be in that position.”

Consumer advocates call for more data

Mannat Singh, the executive director of the Colorado Consumer Health Initiative, was skeptical of the hospital association’s analysis, saying that it doesn’t provide enough data to paint a clear picture.

“I would like to see more disaggregated data, more segmented data,” Singh said. “I would like to see what the costs are.”

Not knowing that information makes it hard to assess what is actually happening in the hospital industry and how these short-term data points fit into historic trends, she said. For instance, Singh pointed to a report by the state Department of Health Care Policy and Financing earlier this year that found large hospital systems in Colorado were in 2021 sitting on billions of dollars in reserves.

And the latest financial wobbles for Colorado hospitals come after the state’s largest systems for years enjoyed record profits and remained profitable during the first year of the COVID pandemic.

To Singh, those trends are important to bring up in case hospitals try to use their current financial situation to push back against laws passed in recent years — and championed by consumer groups like CCHI — to make hospital spending more transparent and accountable.

“I would like to see more evidence that the hospitals are struggling the way they claim they are,” she said.

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...