Some Colorado hospitals struggled to pay back pandemic advances

While two Colorado hospitals faced debilitating cash crunches when they had to repay interest-free loans from Medicare, others said the cash advances from the federal government were a lifeline at the beginning of the pandemic.

The $25.2 million that Denver Health received in early 2020 helped cover daily expenses after revenues plummeted during the COVID-19 stay-at-home order, treasurer Matt Watford said. It would have been difficult to repay all at once, but Medicare collected the money over about 18 months, and by then revenues had recovered and other federal relief funds had arrived, he said.

“It allowed us to close that gap,” he said. “It kind of took care of itself, because, eventually, we were able to do elective surgeries again.”

The budget shortfall Denver Health faced in 2022 was a separate problem, Watford said. The hospital lost about $34 million last year, mostly because of increasing uncompensated care and labor costs, causing the legislature to fast-track $5 million in relief funds.

In Colorado, 67 hospitals and health systems received a combined $1.2 billion in advance Medicare payments during the pandemic, according to the Centers for Medicare and Medicaid Services. Six psychiatric and specialty hospitals received less than $1 million each, while University of Colorado Hospital got more than $217 million. Outpatient providers also were eligible for advance payments.

Hospitals could request up to three months’ of their average Medicare payments in advance, which they would repay over time, like an interest-free loan, said Tom Rennell, senior vice president of financial policy and data analytics at the Colorado Hospital Association. That was a lifeline in mid-2020, when the volume of patients and procedures dropped significantly, he said.

“Everyone was thinking, ‘We’ll use this and we’ll get through this, and we’ll get back on track,’” he said.

Delta Health on the Western Slope and St. Vincent Hospital in Leadville both ran short of cash in recent months, with the need to repay Medicare as one factor. St. Vincent came close to closing before receiving state and county funds in December, and Delta Health announced nearly all of its cash was already committed to paying off debts at the end of March.

On Wednesday, Delta Health announced it was “on the right track” following a $653,060 advance from the Colorado Department of Health Care Policy and Financing. Interim CEO Julie Huffman said the advance allowed it to pay off another loan, freeing up cash for day-to-day needs. The hospital won’t need to pay the state back, but since it received that payment early, it won’t get one at the regularly scheduled time later this spring.

Not all rural hospitals reported difficulty repaying Medicare, and two said they didn’t end up using their advances. Angela Kobel, chief financial officer at Lincoln Health in Hugo, said the money offered a “cushion,” but the hospital didn’t need to use it as revenues started to rise again.

Sheli Steele, spokeswoman for Memorial Regional Health in Craig, said the hospital’s advances also stayed in the bank. Memorial Regional actually hosted more surgeries than usual at some points, when larger hospitals couldn’t perform nonemergency procedures, and also benefited from other stimulus funding and paycheck protection loans, she said.

“When it came time to repay the Medicare accelerated payment money, we had the funds,” she said.

The Centers for Medicare and Medicaid Services could issue advance payments before the pandemic, but only for natural disasters or other unusual circumstances. The agency also would normally start recouping that money immediately, but congressional acts in March and October 2020 gave hospitals a year before it could collect.

For the first 11 months after payment came due, the federal agency could withhold 25% of what Medicare would normally pay each month, until it recouped the amount of the advance. If that didn’t pay off the debt, it could take 50% of Medicare payments for another six months. If that still wasn’t enough, and the hospital didn’t send money to pay off its remaining advance, the agency could start charging 4% interest.

All of the Colorado recipients repaid their advances, and as of Nov. 30, so had about 99% of recipients nationwide. The repayment schedule was set by law, so it wasn’t possible to delay collections when costs started rising, a Centers for Medicare and Medicaid Services representative said.

The payments were successful in helping hospitals get through the immediate crunch, but when they came due in 2021 and 2022, hospitals were facing different financial hurdles, said Rennell, of the Colorado Hospital Association. Costs started rising, especially for short-term staffing, and some facilities hadn’t rebounded to their pre-pandemic patient volumes, he said.

“The revenue came back, but the expenses came back more,” he said. “I wouldn’t say this one thing is making it hard for hospitals on their cash flow. It’s a combination of things.”

Estes Park Health’s experience showed both the benefits and difficulties that came with the payments. The Medicare advances were important early in the pandemic, when the number of people visiting the hospital dropped precipitously, CEO Vern Carda said. They allowed the hospital to keep paying employees and cover routine expenses until patient volume rebounded, he said.

“Those payments were extremely helpful,” he said. “Estes Park Health would have struggled without them.”

While the hospital was able to plan for the repayments to be deducted from future Medicare reimbursements, they were one factor in its decision to stop offering obstetric and pediatric inpatient care, Carda said. Those units likely would have closed at some point because of relatively low patient volumes, insufficient reimbursements and rising costs for labor and supplies, but the need to repay the advances may have hastened that day, he said.

“We made a lot of tough choices as an organization,” he said.

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