State of Colorado asks public hospitals to return nearly $60M in response to failed lawsuit against UCHealth

EDITOR’S NOTE:  Please also read the news release from Prowers Medical Center’s CEO Karen Bryant regarding their reaction to the repayment requests from HCPF.  It is a separate post titled “Prowers Medical Center issues statement regarding Colorado Department of Health Care Policy and Financing asking rural hospitals to return provider fee reimbursements”

Author: Marshall Zelinger/9News.com

COLORADO, USA — The state of Colorado has asked for nearly $60 million in funding to be returned from public hospitals in response to a lawsuit the state lost with UCHealth.

Colorado’s Department of Health Care Policy and Financing notified Denver Health and 28 public rural hospitals that they need to pay back $59.7 million that the hospitals received from hospital provider fee reimbursements.

Hospitals pay a fee for the care they provide patients, and it goes to a state administered enterprise fund, which is used to collect a match from the federal government. Then, the state reimburses hospitals part of that fee in a way that helps providers that disproportionately provide care for Medicaid patients.

In a virtual meeting with rural hospitals on Friday, the department detailed how much each hospital would pay back.

UCHealth sued the department over the classification of Memorial Hospital in Colorado Springs and Poudre Valley Hospital in Fort Collins. Those were public hospitals until UCHealth bought them in 2012. UCHealth is a private nonprofit.

In 2023, a spokesperson said UCHealth notified HCPF about how those hospitals were still classified as being public for reimbursement through the state’s hospital provider fee.

UCHealth sued in 2024, and last month, a judge ordered the hospitals to be classified as private, thus changing how the reimbursement would work.

“UCHealth first brought the issue to HCPF in 2023, and this ruling is the result of a lawsuit filed by UCHealth in 2024 after UCHealth tried for months to resolve the issue directly with HCPF,” UCHealth said in a statement. “The department denied our requests to correct the misclassification, which forced us to take legal action.”

“We care deeply about our rural and safety net partners, and UCHealth stands ready to discuss HCPF’s options to correct this while following state and federal law,” the statement continued.

Can HCPF redo the payments for UCHealth and other private hospitals without taking money back from rural hospitals?

“If the courts direct the state to reclassify the two hospitals, and do so retrospectively to FY2023/24, there is nowhere to pull funds to comply with the court order except from the other hospitals,” a department spokesman said, while noting that UCHealth certified the hospitals as private for “about a dozen years.”

“We cannot lose any more hospitals in our system. We already have 25 counties that have maternal health care deserts. We don’t need another 25 counties having maternal health care deserts or not having health care hospitals that they can go to,” State Sen. Barb Kirkmeyer, R-Brighton, said.

Kirkmeyer is a member of the Joint Budget Committee and is upset that committee members were not told about this funding issue when they received a budget update on June 18.

“It impacts every Coloradoan in this state when we have hospitals that fail. There are hospitals like Denver Health, for example, that are going to lose out on $15 million or, you know, smaller rural hospitals that could lose out from anywhere to a million to $5 million. They may end up closing their doors because of this situation,” Kirkmeyer said.

HCPF asked the court for a stay – to delay the judge’s ruling from taking place – but that request was denied.

In their filing, HCPF said this would cause irreparable harm and force some of the rural hospitals to close.

HCPF also noted that UCHealth earned $1.19 billion profit in 2024 and had $7 billion in reserves.

“UCHealth is Colorado’s largest Medicaid provider and is dedicated to serving our state’s most vulnerable patients. UCHealth is a Colorado-based, nonprofit health care system that receives no special taxpayer funding,” UCHealth said in a statement.

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