Colorado won’t have to claw back nearly $60 million it paid to public hospitals, including Denver Health and more than two dozen rural facilities, under a deal announced Tuesday to end the state’s court battles with UCHealth.
“We thank UCHealth for working with us to resolve this issue in a manner that protects all Colorado hospitals,” Kim Bimestefer, executive director of the Colorado Department of Health Care Policy and Financing, said in a news release.
UCHealth sued the department, alleging it had incorrectly labeled two of its hospitals as public, rather than private nonprofits. A Denver District Court judge agreed, and ordered the state to reclassify Memorial Hospital in Colorado Springs and Poudre Valley Hospital in Fort Collins. The department filed an appeal in July.
Their classification matters because of the state’s provider tax.
Hospitals pay about $1.3 billion each year, gaining about $500 million in federal matching funds. Most come out ahead, though those with relatively few patients covered by Medicaid lose out. In future years, the state will have to reduce its tax rate under provisions of H.R. 1, colloquially known as President Donald Trump’s “big beautiful bill.”
The state pools the money by hospital type, and distributes it based on how each facility’s Medicaid share compares to the others in their group.
Moving Memorial and Poudre Valley from the public to the private bucket means that less money remains for all public hospitals to divide up, and that Memorial and Poudre Valley likely will get more back from the provider tax, because they’re being compared against hospitals that generally see fewer Medicaid patients.
The state said that to retrospectively reclassify the UCHealth hospitals and distribute the funds accordingly, it would have to take back $59.7 million paid last year to 29 publicly owned hospitals.
Denver Health didn’t comment on the possibility, but a group representing 13 Eastern Plains hospitals said some wouldn’t be able to hand over a significant chunk of cash, because they already used their share of the provider tax to pay employees and cover other expenses.
Under the agreement, the Department of Health Care Policy and Financing will drop its appeal, and UCHealth won’t demand redistribution of provider taxes it paid in previous years.
UCHealth president and CEO Elizabeth Concordia said the system supports the provider tax program, and thanked the state for working together on a solution.
“The greatest successes for patients and our state happen when hospitals, HCPF and the administration work together collaboratively,” she said in a news release.
The hospital system also agreed to donate $5.7 million to compensate public hospitals that may lose out with less money coming into their bucket. The Colorado Hospital Association will help determine how to divide up the donation.
“Instability or uncertainty in the fee could have pushed vulnerable hospitals past the breaking point,” Jeff Tieman, president and CEO of the Colorado Hospital Association, said in a news release. “UCHealth’s approach to waive changes for last year and invest millions this year demonstrates a real commitment to protecting access to care in rural Colorado. We are deeply grateful for their partnership.”
Sign up for our weekly newsletter to get health news sent straight to your inbox.