Denver Health nearly broke even in 2023 with one-time money

Denver Health came close to breaking even last year after receiving millions of dollars in one-time donations, but executives say the safety net hospital needs more support if it’s going to continue operating as it has been — let alone meet the needs of Colorado’s mental health crisis and an influx of migrants.

The health system still is calculating its final 2023 numbers, but it appears Denver Health lost about $2 million last year, said Dr. Steve Federico, chief of government and community affairs.

Denver Health had ended 2022 about $35 million in the red, and the most recent year would have been significantly worse without a cash infusion of about $20 million from the state, Kaiser Permanente Colorado and private donors, he said.

“If we were to have another year like (2022), it would have dire consequences,” Federico said.

In 2023, Denver Health provided about $136 million in care that it didn’t receive compensation for, CEO Donna Lynne told the Denver City Council’s finance and government committee last week. That figure includes care to people covered by Medicaid when the rates the program paid didn’t cover the full costs, she said. About $100 million of that went to people living in Denver.

One-time donations of $5 million from the state and $10 million from Kaiser Permanente Colorado helped to narrow the gap. Typically, hospitals make up their uncompensated care through the higher rates they can charge private insurance, but patients with private coverage account for less than 15% of all those seeking care at Denver Health, which is lower than most hospitals in the area.

Denver Health cut costs last year by closing 15 beds that could be used for patients needing psychiatric or addiction treatment, reducing the raises it had planned as a way to retain employees, and postponing renovations on its oldest clinics, Lynne said.

“What I think is not being said is that Denver Health is at a critical, critical point, and that we need to take this up in 2024,” she said. “Because our costs exceed our revenues, we are turning down patients every day, particularly in the area of mental health and substance abuse.”

Representatives from Ernst & Young, a consulting firm, told committee members that safety net hospitals around the country have seen their expenses rise faster than revenues. Denver Health is comparable to similar hospitals, with payments from patients and their insurance covering about 69% of the cost of all care the system offers, said Rowsha LaBranche, a senior director of Ernst & Young. Denver Health has a roughly $1.4 billion budget.

The Colorado Hospital Association reported that, as of 2022, about 72% of hospitals in the state had “unsustainable” profit margins of less than 4% on the patient care they provided. Those margins don’t include income or losses from investments or services other than patient care.

Denver Health’s financial challenges aren’t over. In the last year, 8,000 migrants who came to Denver from Central America made about 20,000 visits to the health system, for needs including dental emergencies, mental health counseling and childbirth, Lynne said. The state and federal governments aren’t reimbursing the cost of those visits, which runs into the millions, she said.

“While I have tremendous compassion for what’s going on, it’s heartbreaking, it’s going to break Denver Health,” she said.

The city estimated more than 36,000 migrants have arrived since December 2022, and about half have decided to stay. Most are fleeing a humanitarian crisis in Venezuela.

Denver Health sent the Federal Emergency Management Agency a letter asking it to commit funds to support asylum seekers’ medical care, Federico said. It also is seeking support from the state and the city of Denver to offset the increasing costs of caring for unhoused people and the increasing number of Coloradans who need mental health or addiction care, he said.

“There’s this expectation that Denver Health will figure it out and continue to step up,” he said. “We continue to do that, but there is a limit to our capacity.”

A bill introduced in the state House of Representatives would commit the state to supporting Denver Health each year, though it doesn’t specify how much the state should contribute. Rep. Judy Amabile, a Boulder Democrat who is one of the bill’s sponsors, said she’s hoping her colleagues will agree to offer $5 million annually.

“I think the city of Denver should do more, but the state also has to step in,” she said. “Denver Health is the safety net provider for the whole state. They’re taking patients no one else will take.”

Each year, the city of Denver gives Denver Health about $30.8 million to cover care for people who can’t pay. The city also contracts with the health system for certain services, such as care for jail inmates, spending a total of about $76 million last year. That figure included a $3 million one-time increase to the city’s contribution to pay for uncompensated care.