Denver Health, St. Vincent, Delta hospitals rebounding after cash crunches

10/02/2023

Three Colorado hospitals that faced severe cash crunches in the last year are getting closer to financial recovery, but still need to make changes to be sustainable in the long term.

Two of the hospitals are small rural facilities: St. Vincent Health in Leadville and Delta Health on the Western Slope. The third, Denver Health, is the city’s urban safety-net facility treating large numbers of uninsured people. All three received significant cash infusions to tide them over.

The state legislature made a $5 million emergency appropriation in February to help stabilize Denver Health, which had seen its uncompensated care costs double since 2020 and lost more than $31 million on patient care in 2022. CEO Donna Lynne said the hospital was down to about 75 days’ worth of cash on hand, when a comfortable cushion would be about six months’ worth.

Days cash on hand essentially refers to how long a hospital could cover its normal expenses if no reimbursement came in. While it’s not likely that specific scenario will ever happen, it’s a way of measuring how much capacity a hospital has to deal with unexpected expenses, such as a leaky roof or equipment that stops working.

Denver Health wasn’t the first Colorado hospital to find itself cash-poor in the last year. In December 2022, St. Vincent Health was so short on funds that it wasn’t clear if the hospital would make payroll, with about 8.4 days’ worth of cash in the bank. Lake County gave the hospital about $480,000 to help tide it over, and the Colorado Department of Health Care Policy and Financing advanced it about $1 million.

St. Vincent Health is now up to about 21 days’ cash on hand.

And in March, Delta Health also discovered it had almost no available cash. At the worst point, Delta Health was down to about six or seven days’ worth of cash on hand that it could actually use, with the rest already committed to repaying loans, said Kelly Johnston, a consultant who is working with both of the rural hospitals.

Now, Delta Health has roughly 17 days’ worth of cash on hand — still tight, but a significant improvement, she said.

2022 was a tough year for hospitals, with the majority of facilities in Colorado reporting they lost money as costs rose and the stock market tanked, making their investments temporarily less valuable.

Delta Health and St. Vincent Health both dealt with some of the same problems: They weren’t prepared to repay large pandemic loans from Medicare and struggled to get paid by insurers, while their boards operated with an incomplete picture of just how bad their finances had gotten, Johnston said. No one has been accused of intentional wrongdoing in either case, though both have new chief executives.

The two rural hospitals also have suffered from insurance companies delaying or denying reimbursement for care, Johnston said. Large health systems have teams of employees focused solely on working — or fighting — with insurance companies, but that’s not an option for smaller rural facilities, she said.

“It’s the story of health care in Colorado,” Johnston said.

The Colorado Association of Health Plans said it couldn’t comment without additional information about what the hospitals were alleging, but insurers follow their contracts with hospitals, and state law already requires prompt payment.

In Denver Health’s case, the problem was that the cost of uncompensated care has kept rising, as have other costs, while the city of Denver’s contribution has remained flat at about $30.8 million per year, Lynne told City Council members at a budget hearing last month. In contrast, it cost Denver Health about $100.8 million to serve patients who are uninsured and unable to pay, she said.

“I have a $70 million problem,” Lynne said.

Council members acknowledged the gap, but said they didn’t have the funds to increase Denver’s contribution by anywhere near that much. It wasn’t clear if they would consider a smaller budget increase.

Denver Health limits raises, keeps beds mothballed

Without one-time funds like the legislature’s appropriation, Denver Health likely would have lost about $18 million this year, Lynne said. Kaiser Permanente committed an additional $10 million to Denver Health to cover uncompensated care and other expenses.

As is, the health system could still lose $3 million to $4 million this year, depending on what happens over the next three months, spokeswoman Jacque Montgomery said.

Denver Health reduced its cost-of-living raises to employees to between 2% and 3% this year, depending on employees’ salaries, and didn’t give executives bonuses, Lynne said. Of course, limiting raises runs the risk of pushing employees to work at other health systems, she said.

“The work that we do at Denver Health is stressful, risky and, quite frankly, our employees could go to other health care institutions and have a much easier life,” Lynne said.

Without new revenue sources, Denver Health likely will have to cut back on some services, Lynne said, though she didn’t specify which ones.

In the past year, the health system stopped seeing new uninsured patients who don’t live in Denver, and it leaves about one-third of its beds to treat mental health and addiction empty because it’s too expensive to hire people to open them, she said.

“Time and time again, we are expected to serve the city,” Lynne said. “But mission only goes so far.”

St. Vincent cuts back after quick expansion

St. Vincent Health opened a new hospital in 2021 in Leadville and quickly added services, such as behavioral health care and genetic testing. At the time, the hospital appeared flush with temporary money to ride out the worst of the COVID-19 pandemic, but when the time came to repay federal loans, it found itself short of cash and had to scale back or end those new services.

Andy Dreesen, who took over as administrator of St. Vincent Health last month, said the hospital is “going back to basics” with an emphasis on its outpatient clinic. Rather than bring on whole new service lines, it’s in talks with larger hospitals to have specialists visit weekly or monthly, so patients don’t have to drive for routine cardiology or orthopedic care, he said.

“Those bigger facilities like to do outreach clinics, which is pretty much what I’m describing,” he said.

It also cut costs, saving about $20,000 per month by having its clinic move into the old hospital building rather than paying rent on a separate facility, and reduced payroll expenses by roughly 21% by not filling positions as they came open. Dreesen said he doesn’t anticipate much need to continue leaving jobs unfilled as additional employees retire or move.

“It looks like we’re pretty much there, if not there,” he said.

St. Vincent is a critical access hospital, a designation for the smallest rural facilities, which allows it to get by Medicare at higher rates, Johnston said. For a while, though, it wasn’t submitting full information about the cost of providing care to Medicare, and was leaving money on the table, she said.

Now “we’re actually getting paid for the work we’re doing,” she said.

St. Vincent also faced another challenge, because Bright Health and Friday Health Plans had a larger share of the insurance market in Lake County than in much of the state, Johnston said. Bright pulled out of the individual market nationwide and Friday shut down altogether, and it’s been a struggle to get reimbursed for care to their customers, she said.

The budgeting process is ongoing, and it will be clearer in a few months how the financial picture will look in 2024, Johnston said. Typically, a turnaround takes three years, and St. Vincent is just starting the second year, she said. The hospital didn’t rule out seeking additional advances from the state if it were to get into a tight spot with cash again next year.

“The ship is turning, and it’s super exciting to see,” she said.

Medicare loan overwhelmed Delta Health

Delta Health had lost money on patient care for years, but things came to a head when its chief financial officer unexpectedly resigned in March. The board of directors then discovered that nearly all of its cash was already committed to paying off debts — meaning the hospital had money in the bank, but couldn’t use it.

The biggest factor in the cash crunch was the need to repay about $11 million in pandemic loans from the Centers for Medicare and Medicaid Services. The loans were the equivalent of about 12% of the hospital’s annual revenue, Johnston said.

The board thought there was a possibility that the federal agency would forgive the pandemic loans, and was surprised that all of the money had to be repaid within 18 months before Medicare started charging interest, interim CEO Julie Huffman said.

Later that month, the Colorado Department of Health Care Policy and Financing advanced Delta Health about $1.4 million to get it through the immediate cash crunch. While the health system didn’t have to pay that money back, it didn’t receive its normally scheduled payments for the next two months.

In June, Huffman said in an interview with radio station KVNF that the hospital needed to consider all options, including affiliating with a larger health system. By September, however, she told The Denver Post that she felt the hospital’s position had improved enough that it was unlikely to need to merge.

“Today, I feel like we are in a much stronger place,” she said.

The hospital has made several changes, including being more aggressive in pursuing insurance companies for payment, Huffman said.

“I have told my people we’re fighting everything,” she said.

Department leaders have had to make a shift to think about costs, since Delta Health can’t afford a team to look at whether there are more efficient ways to use supplies and labor, Huffman said. It’s a shift for people who got into those jobs because of their clinical skills, she said.

“They haven’t been asked to think with a business lens before,” she said.

For now, there are no plans to add or eliminate services at Delta Health, though they will try to better promote what they offer so local people won’t think they have to drive for care, Huffman said.

Potential legislative action

Huffman said she’s been meeting with state lawmakers and Congressional staff to urge them to do something about insurance payments. She also asked them to consider how any new regulations would affect rural hospitals, because hiring people to ensure compliance increases overhead costs.

Rep. Matt Soper, a Republican representing Delta County and a member of the Delta Health board, said he expects multiple bills this session focused on rural hospitals.

One idea is to require the state’s Medicaid program to pay for the staff time used to sign up uninsured people, he said. Others include increasing Medicaid payments to rural hospitals or coming up with ways to pay for results, rather than by the procedure.

There’s some “chatter” among lawmakers about passing something to require speedier insurance reimbursements, but no one’s taken the lead on figuring out how to do that yet, Soper said.

“That would probably help (rural hospitals) the most,” he said.

If nothing changes, Delta Health should break even or turn a small profit in 2024, Johnston said. Ultimately, keeping the hospital open was the top priority, she said.

“There are these little small towns that otherwise would have no care,” she said.

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Denver Health, St. Vincent, Delta hospitals rebounding after cash crunches

Denver Health limits raises, keeps beds mothballed

St. Vincent cuts back after quick expansion

Medicare loan overwhelmed Delta Health

Potential legislative action

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