Colorado has successfully negotiated an agreement with UCHealth, preventing a potential clawback of nearly $60 million previously allocated to public hospitals, including Denver Health and over two dozen rural facilities. The announcement, made on October 3, 2023, resolves ongoing legal disputes between the state and UCHealth, a major healthcare provider in the region.
The conflict arose when UCHealth challenged the classification of two of its hospitals—Memorial Hospital in Colorado Springs and Poudre Valley Hospital in Fort Collins—as public rather than private nonprofit institutions. A ruling from a Denver District Court supported UCHealth’s position, prompting the state to consider reclassifying these hospitals. This reclassification was significant due to its implications for Colorado’s provider tax, which generates approximately $1.3 billion annually, yielding around $500 million in federal matching funds.
The provider tax system is designed to pool funds based on hospital types, redistributing them according to the proportion of Medicaid patients each facility serves. By reclassifying Memorial and Poudre Valley as private hospitals, state officials indicated that public hospitals would receive less funding, as the two hospitals would likely gain more from the tax pool due to their comparatively lower Medicaid patient ratios.
In the event of a retroactive reclassification, the state estimated that it would need to reclaim $59.7 million already distributed to 29 publicly owned hospitals. Concerns were raised by hospital representatives regarding the financial impact of such a clawback, with some indicating they had already allocated funds to cover employee wages and operational expenses.
Under the terms of the new agreement, the Colorado Department of Health Care Policy and Financing will withdraw its appeal against UCHealth, and in return, UCHealth will not pursue any redistribution of provider taxes from previous years. Elizabeth Concordia, president and CEO of UCHealth, expressed appreciation for the collaborative resolution, stating, “The greatest successes for patients and our state happen when hospitals, HCPF and the administration work together collaboratively.”
To further support public hospitals that might be negatively affected by the funding changes, UCHealth has committed to donating $5.7 million. The Colorado Hospital Association will oversee the distribution of these funds to ensure equitable compensation for those facing potential revenue losses.
Jeff Tieman, president and CEO of the Colorado Hospital Association, emphasized the importance of stability in hospital funding. He remarked, “Instability or uncertainty in the fee could have pushed vulnerable hospitals past the breaking point. UCHealth’s approach to waive changes for last year and invest millions this year demonstrates a real commitment to protecting access to care in rural Colorado.”
This agreement marks a significant step towards fostering collaboration between state healthcare officials and hospital systems, ultimately aiming to ensure continued access to essential medical services for Colorado residents. As negotiations conclude, the focus now shifts to the effective implementation of this agreement and its long-term implications for public hospitals across the state.
