Despite overseeing a state with one of the nation’s strongest economies, Gov. John Hickenlooper’s recently released 2017-18 budget proposal includes a $500 million shortfall that, in theory, will be balanced by cuts to Medicaid funding through the state’s Hospital Provider Fee. The fee, paid for by hospitals, is matched with federal dollars and helps provide health care services for vulnerable Coloradans.

It’s been the center of debate since it passed, with many claiming it is a tax and should be included in state revenue caps. Others argue the fee should be moved to enterprise status, exempting it from Taxpayer’s Bill of Rights caps, and freeing up much-needed revenue for infrastructure improvements and education.

BACK FROM THE DEAD?

The hospital provider fee, created by the Colorado Health Care Affordability Act, is overseen by the Department of Health Care Policy and Financing. It was enacted in 2009 and is charged to hospitals participating in Medicaid. The fee is based on patient revenue, and the state uses the money to obtain matching funds from the federal government to subsidize provider costs in caring for uninsured patients.

Colorado Senate Republicans, via the GOP-led Senate Finance Committee, voted 3-2 in May to kill a bill that would have shifted the fee to an enterprise fund, a measure that would have freed millions of dollars from TABOR restrictions.

Currently the fee triggers TABOR revenue caps — which means the state must refund money to the taxpayers, forcing cuts elsewhere in the budget. According to the 2016 economic outlook compiled by Colorado’s Office of State Planning and Budgeting, TABOR revenue is projected to exceed the cap by $398 million in FY 2016-17 and $474.5 million in FY 2017-18.

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A TABOR-mandated refund would amount to about $50 per taxpayer.

DOUBLE JEOPARDY

This year’s budget proposal includes a $195 million reduction to the Colorado Hospital Provider Fee, which would result in a $390 million net reduction in state and federal health care funds. The cuts would be compounded in 2017 because Colorado hospitals will begin paying the state’s portion ($90 million) of Medicaid expansion authorized under the Affordable Care Act and state law.

A big question in the coming year, however, will be how the new Donald Trump administration handles health care legislation — and especially the ACA.

The Colorado Hospital Association is one organization that has been vocal about what it perceives as damaging cuts to the state’s health care system.

“On a macro level, this will impact hospitals’ ability to provide a high level of service and ensure access to health care,” said Katherine Mulready, CHA chief strategy officer and vice president of legislative policy. Cuts to the budget would not be necessary if the provider fee were moved to enterprise fund status, Mulready said.

“The Colorado Hospital Association and 320 other organizations supported [the move] last year, and we’ll be advocating for that and other solutions during the 2017 legislative session,” she said. Among the local organizations supporting the move to an enterprise fund are the Colorado Springs Regional Business Alliance and the nonprofit political group Colorado Springs Forward.

“Although CHA understands the state’s budget challenges, there are other options,” according to a statement provided by CHA President and CEO Steven J. Summer. “These cuts are untenable and will threaten access to crucial hospital services to those most in need of help. Of equal importance, these cuts are unnecessary; when the legislature reconvenes in January, leadership should act quickly to establish the Hospital Provider Fee enterprise and prevent these cuts from ever taking effect.”

Hospitals providing uncompensated care and serving larger Medicaid populations and will see the greatest impact, Mulready said. Those tend to be rural, she said, but even larger systems will likely feel the pinch.

“Every health system will have to determine what those budget cuts mean to them,” she said. “Generally in health care, our workforce is often our greatest asset, but also the greatest line item cost. With significant cuts to revenue, look for hospitals to make some cuts to their workforce.”

Workforce cuts may not be immediate, Mulready said, “but [hospitals] certainly aren’t filling open positions or they’ll be discontinuing plans to expand access to health care in the coming year.”

Dr. Bill Neff, UCHealth Memorial Hospital interim CEO and UCHealth chief medical officer, said cutting funding to the state’s most vulnerable populations is not the way to go.

“UCHealth believes strongly in providing excellent care to uninsured and underinsured patients in our state,” Neff said. “In [fiscal year] 2016, UCHealth invested $584 million on financial assistance, subsidized care and other areas to directly benefit our patients and communities, including $223 million in uncompensated care for the uninsured and underinsured.”

Neff said UCHealth supports CHA’s opposition to the governor’s proposed budget cuts “and also [is] urging the state General Assembly to adopt the plan to create the provider fee enterprise.

“The provider fee is essential to our hospitals and to ensuring Medicaid patients in our state are able to receive the care they need,” he said.

Penrose-St. Francis Health Services was also asked to comment, but the system deferred to the CHA’s position.

Nearly one year ago, Tony Gagliardi, director of Colorado’s branch of the National Federation of Independent Business, said the fee is a tax and should be subject to TABOR stipulations.

Today, Gagliardi said the NFIB’s stance remains the same.

“If the governor would like to convert the HPF to an enterprise, [then] the matter should go to a vote of the people of Colorado as required by TABOR,” he said. “We do not believe it is up to the legislature to make the change.”