Report: Medicaid, Medicare payments can't sustain Colorado's rural hospitals

(The Center Square) – One in four rural Colorado hospitals are at risk of closing unless private insurance reimbursement for care increases, according to an organization focused on payment reform.

While none of Colorado’s 43 rural hospitals have closed since 2015, a report from the Center for Healthcare Quality and Payment Reform found 10 or 23% are at risk of closing. The report stated six or 14% are at immediate risk of closure.

There are 88 acute care hospitals in Colorado, six trauma centers and 12 specialty hospitals, according to the Colorado Hospital Association. The organization reported hospital costs in Colorado average $692 less than the U.S. average.

“A confluence of issues are plaguing the finances of rural hospitals in Colorado,” according to an association report on new hospital models. “These include, but are not limited to, the financial challenges created by the COVID-19 pandemic, low-reimbursement from public payers like Medicare and Medicaid, workforce shortages, increased regulatory burden from state and federal policymakers, and dramatic increases in expenses for labor, drugs and supplies.”

The General Assembly addressed some financial challenges for rural hospitals during the last few years. During a special session last November dealing with the rising cost of property taxes, the state attempted to assist rural hospitals and ambulance districts from losses in revenue.

“Twenty-six rural county and special district hospitals are dependent on property tax revenue and 92% of those hospitals have patient service margins below sustainable levels,” according to the association.

The Rural Emergency Hospital model was established through the Consolidated Appropriations Act in 2021 and allows small rural hospitals to convert to the model. It would provide an option for rural hospitals to maintain emergency services in communities where a full range of inpatient services is no longer financially viable and still meet all regulatory and licensing requirements.

The Center for Healthcare Quality and Payment Reform reported more than 100 rural hospitals closed throughout the nation during the last 10 years and there are hospitals at risk of closing in almost every state. It estimated 31% or 703 rural hospitals are at risk of closing and 16% or 360 are at immediate risk.

“In over half the states, 25% or more of the rural hospitals are at risk of closing, and in nine states the majority of rural hospitals are at risk,” according to the report . “…. although the at-risk hospitals are losing money on uninsured patients and Medicaid patients, losses on private insurance patients are the biggest cause of overall losses.”

The center stated increasing reimbursements from government health insurance—Medicaid and Medicare—have been a focus for rural hospitals but aren’t a solution for achieving solvency.

“In reality, about half of the services at the average rural hospital are delivered to patients with private insurance (both employer-sponsored insurance and Medicare Advantage plans),” according to the report. “In most cases, the amounts these private plans pay, not Medicare or Medicaid payments, determine whether a rural hospital loses money.”