Colorado lawmakers want hospitals to reveal more about salaries, mergers

Four years ago, Colorado lawmakers passed a bipartisan bill requiring hospitals to provide insight into their finances. It was the product of three years of work, the bill’s sponsor said, and the reports the legislation has produced have illuminated hospitals’ books and helped guide policymaking for state leaders focused on cutting the costs of care.

But legislators still have some questions. In a bill introduced earlier this month, they’re proposing hospitals turn over more information about salaries, mergers and whether money spent on care in Colorado is being moved out of state and away from local facilities. The measure — HB23-1226 — would also require hospitals to provide more detail on patients’ bills.

The goal is to fill in gaps from the 2019 law, said bill sponsors Reps. Matt Soper, a Delta Republican, and Chris deGruy Kennedy, a Lakewood Democrat. The hospital and provider industry has continued to consolidate in the past four years, raising concerns about who’s benefitting from those mergers and acquisitions and where money spent at Colorado hospitals is going. According to research presented by the state Department of Health Care Policy and Financing, or HCPF, nearly 70% of physician practices are now owned by larger entities, like hospitals or private-equity firms. That, in turn, has driven up prices, experts say.

“The reason why the state has an interest in knowing is because hospitals have received the precious nonprofit status,” said Soper, who sits on his local hospital’s governing board. “Which means they’re not paying property taxes, they’re not paying business personal property taxes … and they’re not paying sales tax, which is also a major benefit when you’re buying millions of dollars worth of products.”

He wants hospitals to report cash and investment transfers within their systems and why they transferred the money, as well as any changes to hospital services. Major capital investments of more than $25 million — like a hospital buying an independent physician practice — also must be reported.

If the bill is passed as written, the state wouldn’t be able to step in and stop any of those acquisitions, nor would it be able to stop big systems from moving money. But it would give policymakers a chance to warn hospitals if they’re making risky financial moves, Soper said, while also giving insight into what’s driving up costs, an issue that Gov. Jared Polis and top legislators have repeatedly said is a priority. Colorado’s hospital prices are top 10 in the nation and its profits are top four, said Kim Bimestefer, the executive director of HCPF.

“The transparency bill gives us insight and history to allow us to better analyze the impact of those mergers and acquisitions,” she said. “We also want to be able to see the transfers of cash, which may be leaving the state. So if you look at big systems … we don’t want those monies that were paid for by our employers, our Colorado families, taxpayers — we don’t want those monies leaving the state.”

Tom Rennell, the Colorado Hospital Association’s senior vice president of financial policy, said the group is broadly supportive of transparency. But, he continued, hospitals are already reporting a significant amount of financial information. He said hospitals move money around their systems on a daily basis, and he questioned why state policymakers would want more information if they weren’t capable of taking action to intervene.

Soper pointed to St. Vincent Health, a small Leadville hospital that required a bailout to avoid shuttering late last year, as an example of why hospitals needed to be more open with their financials. Rennell countered that St. Vincent’s decisions — like expanding its services — had been vetted by its board and community. He didn’t see how involving HCPF into those decisions would’ve helped.

“I actually really struggle with whether that would provide any value,” he said.

Dr. Ge Bai, a professor of health policy and management at Johns Hopkins University, meanwhile, said she saw plenty of value in the bill’s approach. Overall, she said, its added transparency would give the public a better understanding of the “black box” of hospital finances.

“Because at this point, neither the government nor the public have yet fully understood the dynamics,” she said. “So I think it’s premature to design some aggressive intervention. It’s better to use a disclosure as a mechanism to gather information, understand the situation and also give the public the opportunity to scrutinize.”

That’s also why Soper and deGruy Kennedy want hospitals to report salary information. Under their bill, nonprofit facilities here would have to detail the compensation packages of their five highest-paid administrators, though the data would be generalized when presented to the public. HCPF could, for instance, report the average pay for a hospital CEO in metro Denver, Soper said, without calling out a specific executive or system.

Rennell again questioned the value of reporting that information (some of which is already required under federal tax disclosures) and said he worried about making Colorado an outlier at a time when hospital CEO turnover is already high.

But Soper cast it as a way to check hospitals’ values.

“If you want to be nonprofit, a charity hospital, then act like a charity hospital,” he said. “Don’t act like a Fortune 500 company.”

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