Hospitals’ costs, spending under fire from Colorado Legislature

Colorado legislators are questioning how Colorado hospitals charge fees to patients and how they spend their money, putting health-care facilities in a defensive position this session as they look to justify their business models at a time when expenses are outpacing revenue growth.

On Friday, the House Health and Insurance Committee passed on a fully partisan vote a bill that would bar hospitals from charging certain facility fees, would require providers to give patient notice and itemized bills when such fees are assessed and would fund a study on the fees. And on Wednesday, another House committee will debate a proposal to require nonprofit hospitals invest a minimum of 3% of their net patient revenues into community benefits while imposing a definition of benefits that would prevent them from including charity care and Medicaid underpayment as benefits.

Hospitals have faced several tough years, first experiencing widespread labor shortages as many professionals burned out during the first year of the pandemic and then recording decreases in operating margins last year due to rising costs of goods and services. Still, Gov. Jared Polis, who has focused on reducing health-care costs since 2019, accused them of “overcharging” patients in his State of the State Address this year and signaled a desire to find new ways to limit costs.

Facility Fees

House Bill 1215 — a bill that the Democratic governor has not specifically endorsed but that is embraced by much of his party — would seek to bar hospitals from charging some facility fees that are tacked onto patient bills and used to fund the operations and staffing of off-site clinics. The bill underwent big changes during its first committee hearing, but hospital officials still warned it could lead to closing of clinics and to layoffs — including 100 closures predicted by David Mafe, chief diversity officer and vice president of human resources for UCHealth.

While it originally barred collection of any facility fees — a change that the Colorado Hospital Association forecast would cost $9 billion and shutter 69% of the state’s rural hospitals — the bill now would bar such fees just for telehealth, primary-care and preventive-health services. It also would exempt critical-access and sole-community hospitals in rural and frontier areas from the new rules, as well as Denver Health, which lost $32 million last year.

Co-sponsoring Rep. Emily Sirota, D-Denver, referred to the fees as a new form of “surprise billing” — a practice that the Legislature worked to outlaw in recent years — and a host of patients told the committee about receiving unexpected bills weeks after getting services. A Centennial man described a $503 facility fee added onto his daughter’s behavioral-health treatment, a Denver mother talked of paying a $1,500 fee with her son’s visit to a cardiologist and a retired Denver doctor said the fees are scaring people from seeking health care.

But hospital leaders explained that the fees pay for staffing at facilities outside of the hospital setting, including nurses, technicians, administrative staff and even janitorial workers. While independent facilities may lump all those costs into one fee, the Centers for Medicare & Medicaid Services requires hospitals and hospital-owned facilities break them out separately, and eliminating their revenue would make it very difficult to offer the services they fund, said Bryan Johnson, president of St. Mary’s Medical Center in Grand Junction.

A change in how care is provided

The proliferation of such fees is the result of two trends that have played out over the past 20 years — the desire to move treatment from acute-care settings like hospitals into more localized and general-care settings, and the buying of local physicians’ practices by large health systems. Fee skeptics say that hospitals add them to stand-alone clinics they acquire without adding any services — Loren Adler, a fellow with the Brookings Institution, argued they offer incentive for health systems to buy independent practices — while CHA vice president of government affairs Josh Ewing said they enable integrated care in which multiple providers can work together.

While there was broad support for the bill’s transparency requirements and the newly added study to examine the effect these fees are having on the health-care system, even hospitals exempted from the fee limitations criticized HB 1215 on Friday. Jennifer Riley, CEO of Memorial Regional Health in Craig, noted she pays everyone from nurses to therapists with the fees and questioned why urban hospitals should suffer without reimbursement even for telehealth equipment, saying the carveout for rural facilities showed how misguided the proposal is.

Several hospital leaders and Republican legislators also argued it was premature to put restrictions on the fees until the study is completed and can inform officials whether those fees are vital to facilities or are harming state residents.

“This is more of a ready-fire-aim approach than a ready-aim-fire approach,” said Nico Brown, chief strategy officer for Vail Health. “If a study is being proposed, then it makes no sense to add penalties to hospitals that are serving Coloradans every day.”

But co-sponsoring Rep. Andy Boesenecker, D-Fort Collins, noted that Connecticut limited facility fees for telehealth without creating “a dystopian world for health care” and said the minimal immediate protections of the bill will help patients now suffering financial harm from fees.

“This is not an anti-health-care-worker bill. This is not an anti-nurse bill. This is not an anti-behavioral-health bill,” Boesenecker said, trying to answer criticism that HB 1215 will reverse the availability of telehealth care for mental health that has grown since 2020. “The conflict here is not between the bill and the folks who provide these services. The misunderstanding — or, perhaps, the disagreement — is with folks who continue to charge facility fees in places where it’s inequitable.”

Community benefits

And hospitals next will be asked to defend their community-benefit practices.

Nonprofit hospitals now must offer community benefits to maintain their nonprofit status, and those benefits can include charity care, Medicaid underpayments, physician recruitment, support for training and research. However, under HB 1243, sponsored by Boulder Democratic Rep. Judy Amabile, none of those would be counted toward a new minimum-benefit standard, noted Dan Weaver, UCHealth vice president of communications.

The bill — scheduled for a 1:30 p.m. hearing Wednesday in the House Public and Behavioral Health and Human Services Committee — would require spending 3% of net patient revenues on other benefits over the next three years, increasing that number to 5% by seven years out. Those hospitals also must complete community-benefit implementation plans that assess and focus on the needs of the surrounding community.

Polis, who included HB 1243 in his priority health-care bills for this session, said in his State of the State Address that he expects benefits to include mental health, maternity care, healthcare workforce growth and support for social determinants of health like housing and food.

“Some large hospital systems are making record profits, paying zero taxes and sitting on enormous reserves while overcharging customers. Meanwhile, they are consolidating providers, which drives up costs and leaves fewer options for Coloradans,” the governor said. “It’s time that we hold them accountable.”

Broader implications?

But Weaver noted that with Medicaid paying somewhere around 70% of the costs of care, hospitals need to be able to count its underpayments toward their community benefits for them to help fund the lack of reimbursements. Were the state to remove that option, hospitals would have to redirect resources, and that could lead to less access to providers for Medicaid recipients — which, in conjunction with the revenue losses from the limitations on facility fees, could have economic-development implications for this area, he said.

“Colorado as a whole — our economy and our businesses in this state — wants and needs a very strong health-care system in Colorado,” Weaver said. “Health care that is high quality, I think, helps people from across the nation want to move to Colorado and helps attract businesses that are more innovative.”