How Colorado’s hospital provider fee works

Colorado’s hospitals take patients of all types — even those who can’t pay their bills. The hospital provider fee program is designed to help hospitals reduce the amount of uncompensated care from indigent patients and those paying with Medicaid.

Here’s how it works: The hospitals pay fees to the state based on the number of inpatient days and outpatient hospital charges. The money is pooled and matched nearly dollar for dollar by the federal government. Minus administration costs, the larger pot of money is then redistributed to hospitals based on a formula that redistributes the wealth. The formula gives more to hospitals that serve large populations of Medicaid patients and those in rural areas. Not all hospitals get back the money they put into the system, and Colorado uses some of the fee collections to cover the Medicaid expansion population under the Affordable Care Act.

From October 2015 to September, the most recent data available, hospitals paid $669.5 million in fees but received $1.12 billion in supplemental payments that included the federal matching dollars.

The proposed state budget for the year that begins July 1 would limit the fee collections by $264 million — a cut in returned payments that magnifies to $528 million after being matched by federal dollars.

Colorado’s legislative budget writers said the cut is necessary because the hospital provider fee collections helped push the state above the Taxpayer’s Bill of Rights revenue caps. Without limiting the collections, the state would face the prospect of issuing taxpayer refunds, which would hurt other areas of the budget, such as education, public safety and transportation.

A bipartisan bill is considering a workaround to eliminate the cuts by exempting the hospital fees from TABOR limits. But the measure is one of the most politically divisive at the Capitol, and prospects of a compromise are diminishing after talks halted last week.