The Colorado Department of Health Care Policy & Financing released its latest hospital financial transparency report, showing hospital operating income year-over-year was cut in half in 2022 — reflecting a sharp contrast over the previous seven years when patient revenue outpaced expenses.

Operating income for Colorado hospitals in 2022 dropped to $981 million from $2 billion in 2021.

The report blamed the operating income drop on increasing costs associated with the COVID-19 pandemic, explaining operating expenses grew faster than patient revenues. These increased costs include labor expenses, inflation and supply chain issues.

Despite the pandemic-related shutdowns, Colorado’s hospitals bounced back in 2021 from the $1.3 billion taken in the previous year 2020, according to the report.

Kim Bimestefer, executive director of the Colorado Department of Health Care Policy & Financing, called 2022 an “aberration” with the downturn in hospital investment returns.

“Hospitals are critical pillars within the communities they serve,” Bimestefer said in a statement. “They also represent the largest component of insurance premiums paid by Coloradans and employers.”

The department, Bimestefer said, is asking hospitals to continue to “moderate their price increases.”

The Colorado Department of Health Care Policy & Financing is responsible for administering the state’s Medicaid program, Health First Colorado, as well as those that serve low-income families, the elderly and individuals with disabilities.

Among the report’s findings:

• Labor costs have risen about 248% since 2019.

• Between 2021 and 2022, uncompensated care rose 12.5%, or $60.5 million, costing hospitals $544 million. Uncompensated care, which includes charity care, arises from patients not having health insurance who are therefore unable to afford the cost of care.

• Charity care accounted for roughly 60% of uncompensated care costs in 2022, or $325.8 million. This marked a 10.8% year-over-year increase.

Also of interest is hospital cash reserves.

The number of days of cash-on-hand is a way to measure financial health by evaluating how long an organization can continue paying its operating expenses — such as paying employees or buying supplies — when not receiving revenue.

In short, the number of days with cash-on-hand suggests how long a hospital could remain open.

While the median number of days of cash-on-hand has risen since 2019 from 149 to 183 in 2022, it is markedly lower than during the pandemic. This is because, the state report noted, cash reserves in 2021 and 2022 were buoyed by federal COVID-19 stimulus aid.

In 2022, Children’s Hospital Colorado, UCHealth and Intermountain Healthcare systems had significantly more days of cash reserves than the state median: 299, 325 and 343, respectively.

In the Denver region, Denver Health Medical Center had the fewest number of days with cash-on-hand in 2022 with 87 days.

St. Vincent General Hospital in Leadville had the fewest days in the state of cash-on-hand in 2022 with just six days.

Located about 100 miles southwest of Denver, Leadville is a former silver mining town of fewer than 3,000 people. The city annually hosts the infamous Leadville Trial 100 Run, an ultramarathon on its rugged trails and dirt roads through the Colorado mountains.

A Colorado Special District and quasi-municipal corporation, St. Vincent officials disclosed roughly 14 months ago that the hospital was cash strapped and unable to pay staff — raising concerns at the time of possible closure.

“The reports released today will help the state, employers and communities collaborate with hospitals to save people money on health care, prioritize ‘in-lieu-of-tax dollar’ community investments, address outlier hospital financials, and the immediate and lingering impacts of the COVID-19 pandemic,” Bettina Schneider, chief financial officer for the Colorado Department of Health Care Policy & Financing, said in a statement.

“It also helps tackle industry challenges like the health care workforce shortage or mitigating unfunded care.”

The Colorado Hospital Association, which represents more than 100 hospitals and health systems across the state, said the report validated what the organization has been saying for the past 18 months: Operators are facing unprecedented financial challenges.

Tom Rennell, senior vice president of financial policy and data analytics for the association, disagrees that 2022 was an anomaly.

“2023 is not improving,” Rennell said. “So, I wouldn’t say 2022 was an aberration.”

The state’s hospitals, Rennell said, are still facing many of the same challenges — supplies and staffing and flat federal reimbursements, among other things — they confronted in the pandemic. But hospitals now also face new headwinds with inflation and Medicaid disenrollment.

Before the unwinding began last year, the state had estimated 325,000 Coloradans would be disenrolled from Medicaid with the end of the federal government’s COVID-19 public health emergency last May.

That’s nearly the number of Coloradans who enrolled in the first two years of the state’s Medicaid expansion in 2014.

To be eligible for Medicaid, the annual household income before taxes for a single person must be below $18,075, and $36,908 for a family of four.

The state is expected to take up to 14 months to review Medicaid eligibility for the roughly 1.7 million Coloradans enrolled in the program.

While the report concluded the state’s hospital industry remains healthy, the Colorado Hospital Association estimated more than 70% of hospitals have “unsustainable operating margins.”

“That means patient revenue is not covering the cost of patient care, which requires additional support (like local tax resources), or it could jeopardize the ability of that hospital to provide care for its community in the future,” Cara Welch, a spokesperson for the association, said in an email to The Denver Gazette.

Other stressors on Colorado’s health systems, Welch said, include the influx of new immigrant arrivals who do not have health insurance, but may have underlining medical conditions.

For example, Denver Health — the city’s hospital safety net — over the past 14 months saw a 700% increase across its health system in patients from South and Central America. The health system saw its uncompensated care increase $10 million year-over-year, which Denver Health officials have said is largely attributed to new immigrants.

“The cost of supplies, pharmaceuticals and labor have all skyrocketed following the pandemic,” Denver Health officials said Wednesday in a statement.

“Unfortunately, reimbursement has not kept pace and Denver Health consistently sees a disproportionate share of underinsured and uninsured patients,” according to the statement. “Visits from these patients have continued to increase in 2023, leading to drastically increasing uncompensated care costs.”

About half of the patients Children’s Hospital Colorado serves rely on Medicaid for their health insurance coverage.

Gov. Jared Polis and lawmakers should prioritize the “financial sustainability of safety-net providers in our state” to keep insurance premiums low and ensure equitable health care access, said Leila Roche, a hospital spokesperson.

“As this report reflects, Children’s Hospital Colorado has experienced far greater losses than other health systems; however, our care teams and our organization are resilient, and we remain committed to providing the very best care to all children who need us,” Roche said in an email.