Report: Most Colorado hospitals spent more on community benefits than they received in tax breaks

Most hospital systems in Colorado spent more to benefit their communities than they received in tax breaks in 2022, but state officials aren’t sure if that will be the case in more recent years.

Nonprofit hospitals have to provide community benefits in exchange for their tax exemptions, but the Internal Revenue Service doesn’t require a specific spending threshold. The definition of community benefit is broad, and can include uncompensated care; assisting patients with their economic and social needs; promoting healthy behavior; the difference between the cost of care and what Medicaid pays; and other needs communities identified.

Banner Health, Children’s Hospital Colorado, Denver Health, Intermountain Health and UCHealth spent more on community benefit than they received through foregone taxes in Colorado. AdventHealth and CommonSpirit Health spent less than the value of their tax breaks, according to a new report from the Colorado Department of Health Care Policy and Financing.

That year may be an outlier, because investment markets performed poorly that year, meaning that hospitals didn’t benefit from foregone taxes on their earnings to the extent that they likely did when the market recovered in 2023, the report said. Still, the data suggests hospitals are fulfilling their mission to provide community benefit, Kim Bimestefer, the department’s executive director, said Thursday.

“They’re spending almost double” the value of the tax exemptions, she said.

Nonprofit hospitals in the state spent about $1.2 billion, or 7.2% of their revenues, on community benefits in 2022, while receiving about $326 million in tax exemptions. If they count the amount that Medicaid pays below the cost of providing care as part of their community benefit, the total would rise to almost 15% of their revenues.

When counting Medicaid shortfall, which the IRS allows, AdventHealth and CommonSpirit Health also exceeded the value of their tax exemptions, said Tom Rennell, senior vice president of financial policy and data analytics at the Colorado Hospital Association. The data don’t account for hospitals continuing to offer unprofitable services that their patients need, such as maternity care, he said.

“Their benefit to the community is keeping their services open,” he said.

About $722 million went to “provider recruitment, education, research and training,” while the 46 nonprofit hospitals spent about $284 million on charity care. Almost one-third of the charity care expenses came from Denver Health, and three-quarters of the education and research spending happened at UCHealth hospitals.

Box: Value of hospital systems’ tax exemptions in 2022:

• AdventHealth: $39.0 million
• Banner Health: $8.3 million
• Children’s Hospital Colorado: $43.8 million
• CommonSpirit Health: $107.6 million
• Denver Health: $16 million
• Intermountain Health: $33.7 million
• UCHealth: $54.9 million

Source: Colorado Department of Health Care Policy and Financing Hospital Community Benefit report

Box: Nonprofit systems’ community benefit in 2022, as a percentage of the expense of operating their hospitals

Without Medicaid underpayments:

• AdventHealth: 1.4%
• Banner Health: 4.7%
• Children’s Hospital Colorado: 5.8%
• CommonSpirit Health: 2.0%
• Denver Health: 7.7%
• Intermountain Health: 6.2%
• UCHealth: 12.3%

With Medicaid underpayments included:

• AdventHealth: 8.9%
• Banner Health: 12.4%
• Children’s Hospital Colorado: 22%
• CommonSpirit Health: 9.9%
• Denver Health: 10%
• Intermountain Health: 12.6%
• UCHealth: 18.8%

Source: Colorado Department of Health Care Policy and Financing Hospital Community Benefit report

To keep their tax exemptions, nonprofit hospitals also have to assess their communities’ needs every three years. Of the 46 that submitted data to the state, 39 said behavioral health care was a top need; 27 listed access to care; and 18 said chronic conditions were a major problem.

Priorities didn’t always clearly match spending, though: 15 hospitals said behavioral health was a top concern, but didn’t report any community benefit spending on it. Only about 3% of all community benefit spending went toward behavioral health, said Nancy Dolson, the department’s special financing division director.