Colorado hospitals, insurers turned profits in 2016

Colorado hospitals and health insurers both turned overall profits in 2016, a sign of the state health care system’s general stability despite ongoing political debate around health care funding.

Denver-area hospitals last year reported combined pretax net income of more than $1.3 billion — about 15 percent of net patient revenue — according to a new report by a nationally recognized health care business consultant. Many of the larger hospitals outside the metro area also reported profits.

The consultant, Allan Baumgarten, called the hospital profits “a very strong margin.”

Colorado insurers, meanwhile, posted smaller but still significant combined gains. After losses in 2015, insurers rebounded to report a net income of $78.1 million in 2016, or slightly more than 1 percent of underwriting revenues, according to Baumgarten’s report.

Baumgarten, based in Minnesota, publishes annual reports on the health care markets in several states, and he has reported on Colorado since 1994. The reports are based on complex government filings by the hospitals and insurers.

For hospitals, 2016 was the 10th straight year they posted profits in Baumgarten’s analysis. Hospitals in the HealthOne system — such as Swedish Medical Center and the Medical Center of Aurora — led the way in the metro area with combined net income of more than $800 million, according to Baumgarten’s analysis. UCHealth hospitals had net income of more than $400 million, while the SCL Health and Centura systems each had net incomes above $190 million.

For metro-area hospital networks, only Denver Health saw a loss in net income in 2016, according to the report.

Baumgarten said the Affordable Care Act — which helped drop the uninsured rate in Colorado to record lows, meaning hospitals were less likely to be stiffed for treatment — plays a role in hospitals’ profitability run. But he said ongoing consolidation might play a bigger role, with Colorado’s hospital industry increasingly dominated by only a handful of large players.

“A lot of the hospitals, one by one, are falling into somebody’s orbit,” Baumgarten said. “They can’t make it on their own.”

That consolidation often creates an imbalance of power favoring hospitals in price negotiations with insurers, Baumgarten said.

Insurers, though, have still turned a combined profit every year out of the last decade, except for 2015, in Baumgarten’s analysis. Kaiser Permanente, the largest health insurer in the state, broke even in 2016, Baumgarten found.