Straight talk on health care reform: Hospital provider fee working, aiding Coloradans

A few years ago, many Colorado hospitals faced a common problem: how to cover the cost of patients without insurance.

Hospitals can't turn away the sick, and if uninsured patients couldn't pay for their care, or public programs did not cover the hospital's cost, the bill for that "uncompensated care" was passed on, or shifted, to individuals and businesses with health care coverage.

In 2009, lawmakers passed the Colorado Health Care Affordability Act to help address this problem. The Colorado Hospital Association and doctors and consumer groups supported the law.

Now, there is an effort in the General Assembly to repeal this law, after little more than a year -- and after the law is producing documented benefits.

The key feature of the law is a "provider fee" assessed on 83 hospitals. The fee and matching federal funds help reimburse hospitals for uncompensated care, and over time the money will expand Medicaid coverage for many uninsured Coloradans. Thirty other states have adopted similar programs.

Through December, 31,625 Coloradans have been enrolled in Medicaid (27,596 adults in Medicaid, 3,759 CHP+ kids and 270 CHP+ prenatal) thanks to the Health Care Affordability Act.(1) When fully implemented in 2012, the program will have added 100,000 previously uninsured Coloradans. The provider fee covers the state's full share of Medicaid expansion created in the law.(2)

Uncompensated or under-compensated care does not result solely from patients who cannot pay bills. It includes charity care and underpayment from Medicare and Medicaid. Prior to the law, hospitals were paid approximately 56 cents of every dollar of care provided to a Medicaid patient. Under the new law, those payments increased to just over 70 cents. Thus, the cost of uncompensated care is not eliminated, but it is greatly reduced.(3)

This law has clearly helped hospitals across the state with their bottom line. Nearly one-third of hospitals that had losses in 2009 were able to generate operating income in 2010. That income can be used to expand staff, enhance electronic record keeping and make other improvements.

According to the Colorado Hospital Association, operating losses for thirteen hospitals in 2010 would have been nearly 40% greater if not for the revenue from the hospital provider fee. According to Peg Burnett, the chief financial officer for Denver Health, "Without this funding, we believe that we would have had to significantly cut staffing and care to the uninsured. I don't know where we would have been without this."(4)

All of these benefits are paid without a single dollar from Colorado taxpayers. In addition, insured Coloradans benefit from reduced cost-shifting.

But House Bill 1025 would undo the Colorado Healthcare Affordability Act. Supporters of repeal maintain that the hospital provider fee will be passed on to insured patients, even though the law specifically prevents this,(5) and again, the data shows that cost-shifting is significantly reduced. Also, keep in mind that cost-shifting was greater without the provider fee, and repealing the law would only return Colorado to the original system.

Supporters of the repeal suggest that those hospitals that treat very few Medicaid patients will lose money. This is true, but it's important to look at the broad picture. While 13 of 83 hospitals in the provider fee assessment program incurred a loss (totaling about $7 million), 70 experienced a gain. We think it's worth noting that the Colorado Hospital Association continues to strongly support the law.

Supporters of repeal also suggest that expansion of the Medicaid program is unsustainable. In fact, the Medicaid expansions in the Colorado law are lower than those required by the national health care reform law, and over the long term, the hospital provider fee will also significantly reduce the costs to the state of those federal expansions.

According to the staff of the Colorado General Assembly's Joint Budget Committee, the hospital provider fee will contribute $236.1 million to the expansion of Medicaid when full costs are reached in 2020.

Without the Colorado Health Care Affordability Act, state funds would be required to cover the entire amount. We think simple math tells the story. The new law is working, and it should be allowed to continue.

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1) Steven Summer, President and CEO, Colorado Hospital Association, Presentation to House Health and Environment Committee, June 18, 2010
2) Steven Summer, June 18, 2010
3) Steven Summer, June 18, 2010
4) Peg Burnett, CFO Denver Health, Presentation to House Health and Environment Committee, June 18, 2010
5) HB09-1293. Page 6, Section (e) (III) (f)
6) Tom Nash, VP of Financial Policy, Colorado Hospital Association, Presentation to House Health and Environment Committee, June 18, 2010
7) Beck, Melodie and JBC Staff, FY2011-12 Staff Budget Briefing Department of Health Care Policy and Financing, Dec. 9, 2010