Deeper dive: Analysis finds Colorado hospitals shifted more costs to commercial insurers

Colorado hospitals have increasingly shifted healthcare costs to commercial payers, despite receiving increased Medicaid payments and a reduction in the number of uninsured state residents, according to a draft analysis from the Colorado Department of Health Care Policy and Financing.

The analysis — prepared for the Colorado Healthcare Affordability & Sustainability Enterprise — examines various resources, including research from the Colorado Health Institute, the Center for Improving Value in Health Care and the Kaiser Family Foundation, along with initial findings from the department. It also relies heavily on data from the Colorado Hospital Association.

Six findings:

1. Colorado's uninsured rate fell by more than half due to the ACA and the 2009 Colorado Health Care Affordability Act, which was replaced by the 2017 Colorado Healthcare Affordability and Sustainability Enterprise Act. This led to hospitals losing about $400 million less annually from bad debt and charity care write-offs.

2. Commercial insurance premiums have increased as a result of rising hospital costs and margins. According to the draft analysis, hospital costs grew about 59 percent between 2009 and 2017, while hospital margins for all payers, including commercial, Medicaid and Medicare, climbed more than 250 percent to $1,359 per adjusted discharge during the same period.

3. Contributing factors to Colorado hospital costs include capital improvements and infrastructure improvements, construction, mergers and acquisitions of hospitals, physician group practice acquisitions and investments in new technology and practice tools, according to the department.

4. The department also noted that Colorado hospital cost growth and margins are greater drivers of commercial cost shift and hospital overcompensation compared to Medicaid and Medicare undercompensation.

5. Colorado hospital operating expenses per adjusted discharge were 3.2 percent higher than the national average in 2009 compared to 14 percent in 2017.

6. Payment-to-cost ratios across all payers rose from 1.05 to 1.08 between 2009 and 2017.

The Colorado Hospital Association attributed the cost shift to declining Medicaid and Medicare reimbursement rates, as well as other uncertainties at the state and federal levels, such as political instability and threatened repeal of the ACA.

Katherine Mulready, senior vice president and chief strategy officer at the association, said all of this "created chaos in the market. This, in turn, fueled healthcare providers to 'save for a rainy day' and manage limited resources conservatively."

Moving forward, the association said it is working with hospitals and lawmakers to address high healthcare costs and believes that "comprehensive analysis can help educate policymakers about the ever-changing healthcare market in ways that will lead to meaningful and collaborative solutions."

The Colorado Healthcare Affordability & Sustainability Enterprise will review the draft analysis Feb. 26.


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