Denver Health says 2Q sales-tax revenue eased operating strain but warns Medicaid cuts could bite in 2027

Denver — Denver Health told the Health and Safety Committee of the Denver City Council on April 1 that roughly $65 million raised by the 0.34-cent “2Q” sales tax in 2025 helped avert deeper service cuts but did not eliminate a large uncompensated-care shortfall.

"It resulted in about a $65,000,000 increase in the revenue that comes to Denver Health," Donna Lynn, CEO of Denver Health, said during the presentation. Lynn and hospital finance staff explained that city MI payments (about $30.7 million) plus the 2Q tax together represent about 6% of Denver Health’s overall budget but that most of the hospital’s revenue still comes from Medicare, Medicaid and commercial insurers.

Why it matters: Denver Health serves patients from 61 of Colorado’s 64 counties and carries a large share of Medicaid patients, which the hospital says makes it unusually vulnerable to federal and state reimbursement changes. Lynn told council members the hospital used Medicare cost-report methodology to attribute 2Q spending and that most 2Q-funded items are ongoing personnel expenses, not one-time purchases.

The spending plan and results

Hospital leaders presented a five-bucket allocation of 2Q revenue. Emergency medicine and trauma received the largest share (about $34–35 million), primary care about $14 million, mental-health services roughly $12–13 million, pediatrics $2 million and substance-use services about $2 million. Lynn said the money supported staff retention, expanded clinic hours and program expansions such as additional dental hours, a Saturday clinic at Lowry, school-based services at the Sandoval campus and a foster-care medical-records program.

On clinical capacity, Lynn highlighted a new integrated medical–psychiatric unit (IMAP) on the main campus. "We opened in December ... and we've served over 70 patients in that program," she said. For trauma care, Denver Health described a hybrid operating room designed to reduce intra-hospital transfers and improve efficiency.

Methodology and reporting

Elise Matatol, Denver Health’s sales-tax administrator embedded in the city’s Department of Public Health and Environment, explained the contract allows up to 1% of the fund for city administrative costs; Denver used less than the full 1% in 2025 and reconciled unspent administrative funds back to Denver Health. Lynn said the hospital uses the federal Medicare cost report method to measure and attribute spending, and staff committed to including a short set of quality and access metrics (time to first appointment, average wait time, selected clinical indicators and CAHPS survey results) in upcoming 2Q reporting.

Risks ahead: Medicaid, HR 1 and reimbursement changes

Lynn warned the committee of looming reimbursement risks tied to federal and state changes. "We estimate that about 20,000 people ... will lose their Medicaid coverage," she said, referring to provisions in HR 1 and related state actions that introduce work requirements and more frequent recertification. Lynn said shortened state processing windows and reductions to provider taxes would reduce revenue available to hospitals and that Denver Health could face materially higher uncompensated-care costs beginning in 2027 if those policies proceed.

Council questions and next steps

Councilmembers pressed hospital leaders on which 2Q expenditures are one-time versus ongoing. Finance staff said the overwhelming share of 2Q spending is salary, wages and benefits and therefore recurring; a smaller portion covered discrete program expansions or equipment. Councilmember Sarah Paradis asked for clearer quality metrics; Lynn and staff said they collect wait-time and clinical indicators and will include a concise metrics chapter in the city-facing report and the August spending-plan update.

On accounting, the committee discussed a roughly $1.8 million positive variance in 2025 sales-tax revenue; Denver and city staff said they were confirming whether the extra amount would remain in 2025 accounts or be applied to 2026 reconciliation.

The hospital also previewed capital plans unrelated to 2Q: a new clinic at Evans and Monaco, with capital costs estimated at roughly $100 million–$115 million and $20 million pledged from Vibrant Denver; Lynn emphasized 2Q may cover operating staff for expanded services but cannot be used for capital construction.

The committee asked for an August update on first-half 2026 spending and for a brief, standardized set of metrics to track access and quality over time. The meeting adjourned after committee business; two consent items were sent forward.

Next procedural step: Denver Health and city staff will return to the committee with an August spending-plan update and an end-of-year reconciliation report.