UCHealth provided more than half a billion dollars’ worth of uncompensated care in fiscal year 2023, and representatives for the health care system on Tuesday said they expect to spend even more this year.
Three factors increased uncompensated care: increased migration to the Denver area, Medicaid unwinding following the COVID-19 public health emergency, and a new state law that allows people with incomes less than 250% of the poverty line to apply for financial aid, said Tom Gronow, president and CEO of the health system’s University of Colorado Hospital. Coloradans had some right to apply for financial assistance before the 2021 law passed, but hospitals varied in how they handled discounted care.
The hospital in Aurora provided the largest share of UCHealth’s uncompensated care, accounting for about $237 million of the $580 million total between July 2022 and June 2023. Uncompensated care increased systemwide by about $24 million compared to the previous fiscal year, UCHealth said.
The health system’s fiscal year 2023 budget was about $6.9 billion.
Uncompensated care includes charity care, where the hospital never expected the patient to pay; bad debt, where the patient is theoretically responsible for the bill, but unlikely to ever pay; and the difference between the cost of the care and what Medicare or Medicaid reimburses.
Last spring, states started to disenroll people who had health insurance through Medicaid during the COVID-19 public health emergency, Gronow said. Some patients are showing up without insurance even though they would qualify for Medicaid because they haven’t been able to get through the re-enrollment process, and hospitals have to offer them discounted care under the new law even if they could have insurance, he said.
“It created this perfect storm,” Gronow said.
So far, UCHealth has remained financially stable even with the increase in uncompensated care. In the first half of the current fiscal year, which ran from July to December, UCHealth reported a $185 million profit, or a roughly 5% margin, on its patient care and related operations. It made an additional $301 million on investments as financial markets rebounded after difficult years, according to disclosures filed for investors.
“I wouldn’t say it’s a crisis. It is concerning to see this trend” of rising uncompensated care, Gronow said.
Other Colorado hospitals also have seen significant increases in uncompensated care, with Denver Health raising alarms about the rising need for health care among newly arrived migrants. Disclosures filed for investors showed total charity care at the city’s safety net hospital reached $270 million, with another $138 million classified as bad debt.
Denver Health ended 2023 with a roughly $18.7 million profit on operations, for a 1% margin. It also made about $12.3 million on investments.
Uncompensated care made up the largest segment of UCHealth’s total 2023 community benefit, which it estimated at about $1.2 billion. The other major categories were expanding primary care and behavioral health services, which cost about $497 million, and other research and community partnership programs, which cost $92 million.
The Internal Revenue Service requires nonprofit hospitals to show they benefit their communities through some combination of charity care, health education programs, medical research and other items. It doesn’t set a minimum threshold for that benefit.
Hospital charity care and other community benefits are a flashpoint in the debate about how much Americans should pay for health care, and how providers should use that money. A 2022 report by the Lown Institute alleged that Colorado hospitals received about $229 million more in tax breaks than they provided in community benefits. Hospitals pushed back on the report’s methodology, which didn’t include categories of community spending like medical research and staff training.
The Colorado Department of Health Care Policy and Financing estimated that hospitals spent about $1.1 billion on community benefits in 2021, not counting Medicaid underpayments, compared to about $861 million in foregone taxes.
Gronow said he expects uncompensated care demand at University of Colorado Hospital will continue to increase this year. UCHealth is seeking permission from the Department of Health Care Policy and Financing to handle Medicaid enrollment in-house, so that patients don’t have to wait for the state to process their coverage, and is asking lawmakers to allow hospitals to steer patients toward Medicaid instead of requiring discounted care in certain circumstances, he said.
“Access to care is our No. 1 priority,” Gronow said. “Without a path forward, we’ve created more access bottlenecks.”
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