Colorado hospitals to blame for state's high healthcare costs, report says

Alia Paavola - Print  | 

The high cost of healthcare in Colorado is not due to shortfalls in public insurance, but instead a result of "strategic hospital decisions," a new report from the state suggests. 

The report, published last week, was from the Colorado Department of Health Care Policy and Financing. Its release comes as Colorado Gov. Jared Polis and his administration work to rein in healthcare costs in the state.

The purpose of the report is to help the state understand if cost-shifting drove healthcare costs higher in Colorado and the effect that increasing Medicaid reimbursement rates had on commercial payment rates.

Cost-shifting is often used by hospitals to offset uncompensated care. It happens when hospitals increase costs for commercially insured populations to cover shortfalls from public payers. 

To help lower costs in the private market and prevent cost-shifting, Colorado implemented several changes in 2009, such as expanding Medicaid to include a broader population and increasing its payment rate to hospitals each year.

As a result, uncompensated care fell to a historic low in 2018, and hospitals saw the losses attributed to charity care and bad debt fall by more than $385 million per year. 

Yet in spite of these changes, Colorado hospitals continued to increase the rate commercial insurance consumers and employers paid, the report states.

"Colorado hospital undercompensation has decreased, but the savings were not passed on to commercial consumers, employers and union trusts. Instead, commercial insurance payments rose with hospital costs and margins," the report states.

In addition, the state report contends that charging commercial consumers more resulted in higher care costs for Coloradans. 

The report found that hospital operating expenses in Colorado in 2018 were 14 percent higher than the national average. In 2009, Colorado hospitals were just 3.2 percent above the national average. 

Additionally, the report found that the profit Colorado hospitals make per adjusted discharge has nearly tripled from 2009 to 2018. Hospitals across the state made an average profit of $1,518 per patient in 2018, an increase of 280 percent from 2009, when the profit was $538 per patient.

The report states that the increase in profit can't be explained by just inflation or an increase in hospital expenses.

In its response to the state report, the Colorado Hospital Association argued that the profitability numbers are highly inflated and that Medicare "under-reimburses hospitals by 30 cents for every dollar spent on care."

"Cost shift exists because of chronic underfunding of state and federal public healthcare programs —  namely Medicare and Medicaid," the association said. "This report is distracting from the unintended, yet predicted, consequences of the state’s own policies."

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