Colorado rural hospitals face financial strain as Medicaid costs climb, speaker says
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Summary
Michelle Mills, CEO of the Colorado Rural Health Center, told a League of Women Voters task force that nearly half of Colorado’s rural hospitals operate in the red, workforce shortages and long travel distances compound access problems, and a new federal grant will be guided by an advisory committee she is expected to chair.
Michelle Mills, chief executive officer of the Colorado Rural Health Center, told the League of Women Voters of Colorado’s health care task force in January that rural hospitals and clinics across the state are under growing financial strain and face deeper risks if planned Medicaid reductions proceed.
At the virtual meeting, Mills said Colorado has 43 rural hospitals, of which 32 are classified as critical access hospitals, and that those facilities together generate more than $6 billion in annual economic value to their communities. "I believe the future of rural health in Colorado can be summed up in 1 word, which is community," Mills said, describing the role hospitals play as local employers and service hubs.
Mills said about 49% of the state’s rural hospitals — roughly 21 facilities — are operating with negative margins, with an average operating margin around negative 3.4 percent. She also highlighted other fragilities: many facilities have low days cash on hand (23% reported fewer than 80 days), uncompensated care is common among critical access hospitals, and CEO turnover during the previous year was about 22 percent.
The presentation underscored access challenges. Using a state map, Mills pointed out that average travel distances hide much longer trips for some residents, and noted that 17 counties have no hospital and 19 have no rural health clinic. In a patient-cost example, she said asking a patient to seek care outside their community could cost that person about $700 for a single day away while saving an insurer roughly $600 that day — a disparity she said policymakers sometimes miss.
Workforce shortages and clinician burnout are severe contributors to access gaps, Mills said. She presented estimates that Colorado would need roughly 75 percent more physicians in rural areas to match urban access and described large percentage increases in reported burnout among physicians and nurses, particularly in specialty care.
Mills reviewed state and federal funding pressures. She said Medicaid spending in Colorado has grown roughly 60 percent since 2018 and that the state faces about an $850 million shortfall this budget cycle. As possible responses, she listed proposals under consideration — dipping below the statutory reserve, modest provider rate reductions (she cited a suggested 0.75 percent cut), and expanded audit activity — and warned those changes would deepen financial pressure on small facilities.
On federal funding, Mills described Colorado’s application for the Real Health Transformation grant program and said the state was awarded roughly $200 million to pursue projects aimed at strengthening rural health delivery, workforce and care networks. She said Medicaid and CMS are negotiating contracts and that the state has formed an advisory committee to guide implementation; Mills said she has been told she will chair that committee.
During a question-and-answer period, Mills said obstetrics is the most frequently cut service line in struggling rural hospitals and that some partnerships with larger urban systems can help provide technology (electronic medical records) or services, but that such arrangements are expensive and not always a financial fit. She described an ongoing rural connectivity project with Carina Health that combines all-payer claims and health exchange data into dashboards and noted the remaining challenge is connecting local electronic medical records to those systems.
Mills encouraged local engagement and advocacy: she urged task force members to meet hospital and clinic leaders in their communities and to consider participating in advisory and application processes for state and federal funds. The meeting ended with the moderator noting the recording and chat would be shared with participants.
Next steps: state Medicaid is expected to release the advisory-committee application and related memos in the near term, and implementation of the federal grant will proceed under the advisory committee's guidance.
