DENVER (KDVR) — Profits at Colorado hospitals were among the nation’s highest for the third year in a row.
A report titled “Hospital Insights,” released by the Colorado Department of Health Care Policy and Financing, found Denver metro-area hospitals posted combined profits of nearly $1.4 billion in 2020.
What was good news for the bottom line of Colorado hospitals was often bad news for patients, because Colorado also ranks as one of the most expensive states for hospital care.
“There are some Colorado hospitals, largely the systems, that are making too much in profits. That means they are charging more than they need to, to their commercial insured clients,” said Kim Bimestefer, the executive director for the Colorado Department of Health Care Policy and Financing.
Bimestefer’s department wrote the report that found insurance carriers reimburse hospitals $1.66 for every $1 a hospital spends on care, which meant an average profit margin of 9.3% in 2020.
The report indicates rural hospitals would’ve been in big trouble if not for COVID relief funds. But for major hospital systems like UCHealth, Banner Health, HCA HealthOne, Centura and SCL Health, Bimestefer said there is little doubt those hospitals could lower their costs and still maintain a decent profit.
“Hospitals can have a very reasonable profit. They’re sitting on enormous reserves. Those reserves are making profits equal to the patient services profits that they’re getting,” Bimestefer said. “They can lower their profits, still sit on those reserves, make a very good tomorrow to be able to invest in, and lower prices for families and employers in this state who have to save money.”
Which for-profit hospitals have the largest profits?
HCA HealthOne, the largest for-profit system in Colorado, has the largest 2020 profit margin when it came to patient services: 20.5%.
But UCHealth, a nonprofit system that is tax-exempt, could double its profits in just two years. It earned $540 million in 2019, and the report found it’s on track to earn more than $1 billion in 2021.
“For us, it’s really concerning because they are technically a nonprofit hospital. I think there’s a really legitimate question, are they functioning like a non-profit hospital?” asked Adam Fox, deputy director with the Colorado Consumer Health Initiative.
Fox told the Problem Solvers nonprofit hospitals are supposed to make community investments in lieu of taxes, but the hospitals largely decide for themselves what that community investment is.
“I think what we have seen in some cases is hospitals will invest in new programs or facilities or units to provide services that may or may not be necessary but ultimately pad their bottom line even further,” Fox said.
Colorado hospitals invested $863.3 million in community benefits in 2020, but in a press release about the Hospital Insights report, the Department of Health Care Policy and Financing wrote, “These community investments equal 6% of hospital patient revenue received. Unfortunately, the Department does not have enough detailed information to identify where and how the state’s nonprofit, tax-exempt hospitals spend their community benefit dollars, nor can it properly determine if those community benefit investments match each community’s identified needs.”
The report found hospital consolidation has also led to higher patient prices. It notes just a few hospital systems now control a big slice of the marketplace and private physician offices have increasingly been bought up.
Only 30% of physicians are now independent, according to the report, and 70% are now owned by hospital systems or private equity firms.
“Every credible report says that mergers and acquisitions at the hospital level increases prices,” Bimestefer said.
Are hospital profits going to employees?
While stories of hospital employee fatigue and burnout were common during the pandemic, Fox said there’s no reason to believe hospitals used their growing revenues to pay their doctors and nurses better.
“It seems like they’re at least under-investing in their personnel, but even at the end of the day, even if they were to invest more in that, they’re still over-charging consumers,” Fox said.
In a statement, the Colorado Hospital Association told FOX31, “This report seems to pivot between thanking hospitals for all that they did while at the same time criticizing hospitals for their fiscal responsibility, including having savings that were critical to hospitals’ ability to serve Colorado communities during the COVID-19 pandemic.”
The CHA also said, “There should be no conversation about health care affordability that does not also consider the quality and accessibility of care provided.”
But the hospital insights report found hospitals’ profits and consolidations have not led to better patient outcomes. Colorado and Alaska were the only two states to rank in the top 10 for all four measures of hospital cost, price and profit.