Despite the recent pandemic, when hospitals had to curtail certain procedures, the larger ones still managed to increase their reserve funds by millions of dollars, continuing to keep Colorado among the top 10 in the nation in costs, prices and profits, according to three new state reports released Wednesday.
Those reports also showed that St. Mary’s Hospital in Grand Junction continued to lead other SCL Health hospitals in the state in record profits, earning a total profit of nearly 13% in 2020 and 2021.
The Broomfield-based SCL Health, which now is owned by the Utah-based Intermountain Healthcare, meanwhile, recorded a more normal 5.2% profit margin during that same period, indicating that St. Mary’s continues to be the cash cow for other hospitals in the SCL system, state officials said.
One of the three reports show that St. Mary’s Hospital saw a net income of nearly $68 million in 2021, while all four other hospitals in the SCL chain had a combined profit of $41.5 million.
“Overall, hospital patient revenues have grown faster than operating expenses leading to growing profits and margins,” according to a hospital expenditure report compiled by the Colorado Department of Health Care Policy & Financing. “This profit growth has occurred even with the recent growth in charity care and the growing number of patients covered by public health insurance.”
Kim Bimestefer, executive director of the department, said the new reports come on the heels of several previous ones in recent years basically showing the same thing, that Colorado hospitals, most of which are nonprofit systems, continue to rake in cash, and continued to rank in the top 10 nationwide on all four measures: prices per patient, costs per patients, profit per patient and total profits.
During that time, they’ve made repeated promises to do their part in lowering the cost of health care to Coloradans, something that continues to rise. Bimestefer said the hospitals are going in the right direction overall when it comes to helping lower costs to patients, they just aren’t doing it fast enough.
“If, given all opportunities, the hospitals have not on their own accord taken the right steps, then it’s time for individuals to step in to do something,” she said. “All Coloradans are struggling right now with grocery bills to energy bills to housing. It may be time to intervene in a more intentional and fruitful manner.”
What that means, however, isn’t known, but in recent years lawmakers have suggested some measures hospitals consider drastic, such as placing price caps on individual medical procedures, something hospitals administrators have strongly fought against.
During his State-of-the-State address to the Colorado Legislature on Tuesday, Gov. Jared Polis mentioned the high profit rate of Colorado hospitals, saying it was time to hold them accountable.
To date, the only issue he has publicly addressed is to strengthen Colorado laws governing hospital reserve funds, saying the state needs to ensure that the profits those nonprofits are amassing stay in the state.
“The governor has been clear that he wants to save people money on health care, and that certain hospitals are failing to drive down costs for patients and communities,” said Polis’ press secretary, Conor Cahill. “With hospitals having significant revenues, as part of their duty to provide community benefits to maintain their tax-exempt status, we want to ensure hospitals are investing these dollars in a way that supports Colorado communities and reduces costs for patients.”
As the law stands now, the state doesn’t have the enforcement powers to ensure that money isn’t sent out of state, where most of the larger hospital systems are based, Bimestefer said.
“The fact that our (hospital) systems are owned by organizations whose headquarters are outside of the state, and due to the fact that our hospitals are in the top 10 for highest prices and profits, we need to take additional steps to make sure that happens,” she said. “In the same way that our hospitals here can use money to subsidize from one hospital to another, they could do the same thing nationally.”
That’s long been the case with St. Mary’s compared to other Colorado hospitals in the SCL system, which made a promise when Intermountain took over last year that its reserves would remain in the state.
One of the reports shows that St. Mary’s went from $395.5 million in net patient revenues in 2014 to $484.5 million in 2021, while their total expenses were $372.5 million in 2014 increasing to $454.5 million in 2021.
St. Mary’s officials say the data in the report doesn’t show the entire picture, such as investments made to physician practices and other health care services.
“It’s important to reiterate that the data is from 2021,” the hospital said in a statement. “In 2022 with the omicron surge, St. Mary’s, along with other hospitals nationally, saw a dramatic surge in labor costs. Throughout 2021 and 2022, St. Mary’s made significant base increases for clinical staff.”
The hospital said other factors also contributed to higher expenses, such as supply chain issues and general inflation.
“Profits from St. Mary’s hospital, like all Intermountain hospitals, are invested in the communities we serve,” said hospital president Bryan Johnson.
“Over the last three years, we have recruited and employed 75 new physicians, nurse practitioners and physician assistants,” he added. “We now employ nearly 200 providers ensuring access to vital services regardless of which insurer covers an individual. None of the costs of the new or previously existing providers are included in the hospital-only data in this report.”
The hospital also said it’s invested money into its pharmacy and lab, replaced clinical equipment, installed new health systems, and offered more uncompensated care.
St. Mary’s isn’t alone in high profits. Some are as high or even higher.
UCHealth, for example, had a total profit margin of about 26%, while the University of Colorado Hospital, which is part of UCHealth, saw a profit margin about 31.3%. Centura-CommonSpirit had a 2021 profit margin of nearly 15%, while St. Anthony Summit, one of its facilities, had a margin of 34.5%.
Poudre Valley Hospital, which also is part of UCHealth, lead the state with a whopping 45.1% margin, the report says.
The expense report also shows that, despite the pandemic, hospitals did not dip into their reserves to cover their costs, but increased prices instead.
“These systems have amassed billions in reserves, the result of higher-than-necessary prices paid by patients and employers year over year,” that report says. “The report illustrates that for many hospitals, reserves are generating profits equal to or great than patient service margins.”
In recent years, Colorado hospitals have spent much more money on reduced-cost health care services, known as charity care, spending about $239 million collectively, which accounts for about 25% of their total investments.
They’ve also spent about $533 million on programs addressing health behaviors, or risks; $76 million on social determinants of health; and $117 million on other investments designed to address specific needs identified in specific communities, all of which are intended to reduce costs overall.
“While these contributions are significant, Colorado nonprofit, tax-exempt hospitals and hospital systems remain profitable and have built significant reserves,” according to another report on hospital community benefit accountability. “Payments received from commercial insurance exceeds hospitals’ Medicaid shortfalls, charity care and other community investments, leading to profits on patient services of $545 million in 2021.”
Overall, the large hospitals still managed to reel in about $2.7 billion in overall profits, the report says.
Bimestefer quickly adds that smaller, rural hospitals aren’t part of the problem, saying they have done their best to keep their heads above water in their attempts to keep prices down, while still trying to serve their communities.
She said overhead costs for rural hospitals is much higher than in urban areas, so helping those hospitals better work together is called for, lest they, too, get taken over by the big systems.
“The rural hospitals are very different than that large systems that we pointed to in the report,” Bimestefer said. “Rural hospitals are ripe for transformative investments, but they’re having trouble battling the headwinds. They don’t have the reserves that the big systems do that have the huge earnings. So, we do need to continue to do those transformative investments in how the hospitals can better work together in those rural communities.”
Because of flaws in its reporting process, the report does not list Community Hospital’s expense and profit numbers for 2021.
The data, however, does show it’s expenses increased in 2020 compared to 2019, to more than $178 million from just less than $168 million, respectively. At the same time, its net patient revenues for 2019 were about $180 million, increasing to nearly $205 million in 2020.
