Denver Health tells council Medicaid cuts and flat city payment will tighten safety‑net budget

Denver Health officials told the City and County of Denver’s council health and safety committee on Oct. 29 that the hospital system faces mounting financial pressure from an increase in uninsured patients, recent state Medicaid payment reductions and prospective federal changes they say could further shrink reimbursement.

John Lynn, chief executive officer of Denver Health, told the committee the system provided about $146 million in uncompensated care in 2024 and that the city’s medically indigent (MI) payment — $30.7 million — “has not increased in any way in the last 27 years.” He said the health system will absorb a $5 million reduction in its 2026 operating budget while continuing services required under its operating agreement with the city.

Why it matters: Denver Health is the primary safety‑net hospital for the city and county of Denver. Committee members pressed leaders about the effects on jail medical services, detox and outreach programs, school‑based clinics, and electronic medical record work tied to jail health. Council members and Denver Health staff also discussed capital needs and policy risks that could raise the uninsured population or reduce funding flows.

Lynn described three drivers behind the fiscal stress: population growth and higher patient volumes, an increase in uninsured Denver residents, and lower Medicaid reimbursement. “We’re about a $1,500,000,000 entity,” Lynn said, adding that Denver Health treated about 280,000 patients last year and that roughly 60,000 Denver residents were uninsured in the most recent reporting period. He told council members the system has limited means to recover those costs because many uninsured patients “rarely pay anything when they come to Denver Health.”

Federal and state policy risks: Lynn and other Denver Health leaders flagged a pending federal proposal referred to in the hearing as “HR 1,” which they said would reduce Medicaid enrollment and take effect mostly in 2027–28. Lynn said the package would drive an estimated $880 billion in Medicaid reductions over 10 years and that Denver Health will begin mitigation planning in 2026. The presentation also noted a recent statewide 1.6% reduction in Medicaid payments enacted after a special legislative session and gubernatorial action; Denver Health said that cut already reduced revenue this year.

City payments and the operating agreement: The operating agreement and annual city payments were a recurring theme. Lynn said total city payments to Denver Health are about $73 million and reiterated that the MI payment has not been adjusted for inflation in nearly three decades. To offset uncompensated care growth, he said Denver Health intends to use a combination of revenue strategies and proposed city‑linked funding (referred to in the presentation as an item in the 2Q package) that would give Denver Health roughly $64 million toward uncompensated care, while still absorbing some costs internally.

Jail medical services and indirect costs: Committee members repeatedly raised concerns about Denver Health’s provision of jail health services. Lynn said about $20 million of the city’s purchase‑of‑service contracts go to jail medical staffing (about 200 staff across two jails). He said Denver Health has not received indirect‑cost support from the city for that work and estimated administrative overhead for jail care at “anywhere between $2 to $3 million a year” that Denver Health currently subsidizes. Lynn said Denver Health and the mayor’s office agreed two weeks earlier to address the issue quickly and that he has a meeting scheduled with the sheriff and mayoral staff to seek a solution.

Electronic health record integration: Council members asked about the transition to an electronic health record (EHR) for jail patients and who carries the implementation cost. Megan Perizzo, director of shared services and business operations at the Denver Department of Public Health and Environment (DDPHE), said a final budget allocation from the city’s I Fund had recently been agreed and staff were working on the contractual mechanism to transfer funds to Denver Health before the end of 2025 and into 2026. Perizzo clarified that there was no city directive to stop EHR work, but Denver Health had raised concerns about being paid for 2025 work.

Denver Cares, billing rules and capital needs: Council members pressed Denver Health about Denver Cares, the nonmedical detox facility. Dr. Steve Federico, Denver Health’s chief of government and community affairs, said state and federal rule changes affecting reimbursement were paused for a year and will not be implemented until July 2027. He said the program will need physical capital changes to the dormitory‑style facility (bathroom and layout work) to meet the funding rules; Denver Health and city partners have one year to make structural changes or risk losing that funding stream.

STAR contract, staffing and psych beds: Council members asked about underspending on the STAR emergency‑medical contract; Lynn said underspending stemmed in part from using EMTs instead of paramedics on some vans and that Denver Health plans to pursue efficiencies during the STAR rebid. On inpatient psychiatric capacity, Lynn said Denver Health has 78 inpatient psych beds (57 adult, 21 child), currently has 63 open, and will open the remaining retrofitted “medical‑psych” beds with a Nov. 17 ribbon cutting funded in part by the 2Q package.

Access and outreach: Lynn outlined existing outreach programs: Denver Health operates 34 transitional housing apartments (costing about $1 million annually), partners with Colorado Coalition for the Homeless for 20 recuperative beds, and provides 14 apartments at 655 Broadway for up to three months of post‑acute housing. He said Denver Health will open a Southeast Denver clinic in a leased Walgreens/VillageMD site on Evans and Monaco and is exploring a mobile dental van for school‑based services. Lynn said expansion projects such as a clinic at Clayton Early Learning would rely on philanthropy.

What was directed or decided: Denver Health said it will not reduce core or contracted services for 2026 despite the budget reductions; instead it will absorb some costs and seek city and philanthropic offsets. The health system and city staff agreed to pursue (1) a negotiated approach to indirect costs for jail medical services with the sheriff and mayoral staff, (2) a contractual mechanism to fund EHR integration, and (3) planning and possible capital investments to keep Denver Cares compliant with future billing rules.

Council reaction and next steps: Committee members urged the city and Denver Health to establish clearer policy guidance for the MI payment and to track metrics on uncompensated care and service levels. Mayor Mike Johnston (introduced at the end of the hearing) thanked staff and council members and said the administration would continue to balance citywide priorities while protecting core services.

Ending: Denver Health will return to council with follow‑up information, including updated uninsured counts for 2025, more precise headcounts and costs for jail indirects, and progress on EHR contracting and Denver Cares capital planning.