Legislators are pushing forward on a bill to cap hospital prices for about 260,000 state residents — a move one supporter called the “best bad option” — despite a warning from one doctor that the bill “will kill patients”
The heightened rhetoric around House Bill 1174 speaks to the stakes for hospitals, community health centers and low-income residents at a time when the rolls of uninsured patients are growing, leaving both health systems and nonprofit clinics struggling. Both backers and detractors painted doom scenarios if the outcome on the proposal does not go their way, with clinics predicting layoffs and closures and hospital leaders warning of price hikes and the cessation of current specialty services.
HB 1174, sponsored by Democratic Reps. Kyle Brown of Louisville and Emily Sirota of Denver, would bar hospitals from charging more than 165% of Medicare reimbursement rates to the 60,000 people covered by the state employees’ health plan and the 200,000 insured in the small-group market. Private-sector employers with less than 100 workers comprise the small-group market, and the two groups together make up slightly more than 6% of insured Coloradans.
State fiscal analysts estimate that HB 1174 would save the state some $65 million annually beginning in the 2027-28 fiscal year, and the bill, after being amended during its first committee hearing on Wednesday, would parse that out three ways. Sixty percent of the savings would go to a primary care fund that would seek federal match money and benefit the state’s federally qualified health centers, while 20% would go to a fund for community behavioral-health centers and the other 20% to reducing insurance costs for state workers.
Impacts on cost and care
There are two primary reasons that the bill is needed, Brown and Sirota said. One is to help the nonprofit health centers, which care for about 857,000 of Colorado’s poorest residents annually, some 40% of whom are uninsured and 33% of whom are on Medicaid. And the second is because the state needs to step in and do something to lower the cost of hospital care.
While the Colorado Department of Health Care Policy and Financing states that Medicare reimburses at 73% of healthcare costs, Brown cited a Medicare Payment Advisory Commission report that said reasonably efficient hospitals can break even on those rates. And while nonprofit health centers have cut staff and services due to the onslaught of uninsured patients and face uncertain federal funding, the National Academy of State Health Policy estimates Colorado hospitals have operating margins averaging 15%, he said.
Primary supporters of the bill, which exempts 33 small and rural “essential-care hospitals” from the reimbursement limits, included many of the clinics that will benefit from the new revenues. In submitted written testimony, Simon Smith, the president/CEO of Clinica Family Health & Wellness, said he has cut 15% of his positions and is turning away new patients and needs a lifeline through the bill.
“Colorado is at risk of losing critical infrastructure that provides primary care to so many communities,” Brown told the House Health & Human Services Committee. “This bill allows hospitals to make a comfortable margin while lowering costs for employees and helping those providers that need it the most.”
Hospital leaders could face tough choice
Hospitals, however, scoffed at the notion that they can continue to operate comfortably — or particularly, continue to operate all existing services — if the state cuts their ability to make money from private payers when uninsured and publicly insured patients are rising. Nearly 70% of state facilities are operating with unsustainable margins below 4%, and the bill would “deplete one part of the safety net to support another,” argued Rep. Dusty Johnson, R-Fort Morgan.
Of the 64 hospitals that would not be exempt from the price caps in HB 1174, more than half have negative operating margins and another 15% are under 4%, said Katherine Mulready, chief strategy officer for the Colorado Hospital Association. With state-imposed reimbursement caps costing those facilities millions of dollars each, they’ll be left with two “unacceptable” choices, she said — cutting staff and services or raising prices for other payers to offset these losses.
The current financial condition of hospitals was not the only thing over which proponents and opponents disagreed. While Brown University Assistant Professor of Health Policy Roslyn Murray said the caps will cost facilities just $90 million of the $11 billion that they made from commercially insured patients in 2023, Mulready pegged the impact at $200 million at a time when 700,000 patients have moved from being on Medicaid to being uninsured.
Benson Pulikkottil, medical director for HCA HealthONE Swedish Burn and Reconstructive Center in Englewood, said loss of critical revenues means his hospital would have to cut funding for services like dieticians, nurses and specialty doctors that treat burn victims. Because 70% of his patients are on Medicaid or are uninsured, that means that the very population legislators say they are trying to help will lose services that are critical to their recovery and survival.
Is bill a “best bad option”?
“Really think about this bill, because it’s not about primary care; it’s about all of medicine. And this bill, if passed, will deflate surgeons like myself and will affect you,” Pulikkottil said. “So, I say kill this bill, because it will kill patients.”
Committee members passed HB 1174 onto the House Appropriations Committee on a Democrat-led party line vote of 8-4, with Republicans like Rep. Brandi Bradley of Roxborough Park saying that it will cause doctors to leave the state. Democrats, while supportive, seemed more conflicted.
Rep. Katie Stewart, D-Durango, referred to it as the “best bad option” to try to boost a health-care system that is difficult to access, while Democratic Rep. Karen McCormick of Longmont said she was convinced finally to back it based on hospitals’ revenue data. Rep. Sheila Lieder, D-Jefferson County, acknowledged it is not a perfect policy but does accomplish several key aims.
“We absolutely need to bring down the cost of health care for our employees. We absolutely need to bring down the cost of health care for everybody,” Lieder said.