Colorado has successfully reached an agreement with UCHealth, preventing the state from having to reclaim nearly $60 million distributed to public hospitals, including Denver Health and numerous rural facilities. The resolution, announced on October 3, 2023, puts an end to ongoing legal battles regarding the classification of two UCHealth hospitals as public entities.
The conflict arose when UCHealth filed a lawsuit against the Colorado Department of Health Care Policy and Financing. The health system argued that the state had misclassified its hospitals, specifically Memorial Hospital in Colorado Springs and Poudre Valley Hospital in Fort Collins, as public rather than private nonprofit institutions. A judge in the Denver District Court agreed with UCHealth, prompting the state to change the hospitals’ classifications.
The implications of these classifications are significant due to the state’s provider tax system. Colorado hospitals collectively contribute approximately $1.3 billion annually to this tax, receiving around $500 million in federal matching funds. The distribution of these funds is contingent on the hospitals’ Medicaid patient ratios. By moving Memorial and Poudre Valley into the private category, the overall pool of funds available for public hospitals decreases, while the two UCHealth facilities stand to gain more from the provider tax due to their new classification.
Had the state proceeded with reclassification, it would have needed to recover $59.7 million that had already been allocated to 29 publicly owned hospitals last year. This potential clawback raised concerns, particularly among rural hospitals that relied on these funds for operational expenses, including employee salaries.
Under the terms of the new agreement, the Department of Health Care Policy and Financing will abandon its appeal against the court’s decision, and UCHealth has agreed not to pursue a redistribution of provider taxes paid in previous years. Elizabeth Concordia, president and CEO of UCHealth, expressed gratitude for the collaborative effort, stating that successful outcomes for patients depend on cooperation among hospitals, the department, and state administration.
To further support public hospitals that may be adversely affected by the reclassification, UCHealth has committed to donating $5.7 million. The Colorado Hospital Association has been tasked with determining the allocation of these funds to ensure those facilities most in need are compensated fairly.
Jeff Tieman, president and CEO of the Colorado Hospital Association, emphasized the importance of this partnership, stating that uncertainty regarding the provider tax could have jeopardized the stability of vulnerable hospitals. He commended UCHealth’s decision to waive past changes and invest in the future of healthcare access in rural Colorado.
This agreement marks a significant step in maintaining financial stability for public hospitals in Colorado, ensuring that they can continue to provide essential services to their communities while fostering a collaborative environment among healthcare institutions in the state.
