Colorado’s hospitals are among the most profitable in the country, a new state analysis found, and the largest systems and facilities posted hundreds of millions of dollars in profit and most padded their reserves in 2020, despite the emergence of COVID-19.

The state is only one of two to be ranked in the top-10 on four different profitability metrics, according to the Department of Health Care Policy and Financing.

Hospitals here posted the sixth-highest total profits in the United States in 2020, from fifth last year and the highest in the country in 2018. Facilities in the Denver metro brought in more than $1.4 billion in profits in 2020, and profit margins statewide were 9.3% – down from 2019, but still near double-digits despite the disruptions caused by the pandemic.

When the COVID-19 crisis began two years ago, policymakers and hospital officials across the country expressed alarm about facilities’ financial footing: Patient volume fell off a cliff, elective surgeries were canceled, and hospitals were scrambling to shift gears and prepare for COVID. Congress ultimately pushed billions of dollars in stimulus to hospitals, and more than a billion dollars found their way to Colorado’s facilities.

That proved to be a lifeline for smaller facilities that kept them from “barely” breaking even, the agency found. But the federal stimulus was more than sufficient – roughly $330 million more – to account for larger hospitals’ losses.

Ge Bai, a professor of health policy and management at Johns Hopkins Bloomberg School of Public Health, said that in the early days of the pandemic, policymakers were operating with little information and responded quickly. But she called Colorado’s report evidence that hospitals were not financially weakened by COVID-19; indeed, she said, they were strengthened by it.

“Overall, I think the picture is there’s nothing to worry about in terms of the hospital financial risks,” she said Friday after reviewing the report, which she said was the first of its kind that she’d seen in the United States. “COVID-19 definitely made a dent in operating margins. That’s one factor – it’s not dramatic … but still you see some drop in the margins. But it’s not devastating, not lethal. Relief, for many hospitals – that’s more than enough to offset or counter their loss.”

In a statement sent by a spokeswoman, the Colorado Hospital Association said it couldn’t fully comment on the report as it had not received a prior copy.

“However, this report seems to pivot between thanking hospitals for all that they did while at the same time criticizing hospitals for their fiscal responsibility,” the organization wrote, “including having savings that were critical to hospitals’ ability to serve Colorado communities during the COVID-19 pandemic.”

The association noted a recent ranking by the Commonwealth Fund, a national health care think tank, that ranked Colorado’s health system as the sixth best in the nation. The state’s lowest score on the report was for access and affordability, where it ranked 24th in the United States.

The hospital association stressed that facilities’ financial reserves were critical to helping hospitals weather the beginning of the pandemic and to continue staffing their facilities despite rising costs for traveling providers and the impact of the “Great Resignation” on the health system.

According to the report, all of Colorado’s hospital systems posted positive profit margins in 2020. For-profit HealthONE, the state’s largest system, had an 18.5% profit margin in 2020; Centura’s was 13.1% – better than pre-pandemic – and UCHealth’s was just over 10%.

Kim Bimestefer, the executive director of the policy and finance department, specifically put a “spotlight” on UCHealth’s financial health. She noted the nonprofit system had $6.6 billion in reserves and a 17.4% profit margin through the first three quarters of 2021.

With those figures in mind, Bimestefer asked, “what does it mean to be a not-for-profit at this point in time?”

Bai said that hospitals should have strong financial reserves to weather any financial hardships that come their way.

“But the problem in Colorado,” she continued, “is they have so much.”

The hospital association, in its statement, said those savings were crucial to enabling hospitals to provide “such a robust COVID response” while also “saying Coloradans money on health care, a fact often cited by state officials.”

Banner Health, which made $587 million in total profit nationally in 2020, has $9.8 billion in reserves. SCL Health, which Bimestefer noted was about to be “gobbled up” by another system, made $349 million in national profit in 2020 with $3.1 billion in reserves.

In a specific contrast to UCHealth she gave a positive nod to Denver Health, the capital city’s safety net hospital. Denver Health – which, unlike the other systems pulled out of the report, is not part of a national chain – has enough cash on hand to operate for 123 days, and its reserves total under $400 million; Bimestefer called those figures “efficient” and “appropriate.”

The report found that Colorado hospitals spent $836.3 million in community benefits in 2020; they’re federally required to provide a community benefit to justify not paying taxes. But the report notes that it’s unclear “where and how the state’s nonprofit, tax exempt hospitals spend their community benefit dollars, nor can we properly determine if the community benefit investments match each community’s identified needs.”

2020 played out differently for smaller hospitals, the agency’s analysis found. While larger hospitals posted 5% profit margins from patient services, rural facilities’ margins were 0.8%, according to the report.

“While urban hospitals profited regardless of federal stimulus dollars,” according to the report, “rural hospitals would have been financially devastated without economic stimulus funding.”

Those findings, Bai and the state officials said, are evidence that any future aid needs to be more targeted to hospitals who will need that money to stay above water.

But the report has use outside of the parameters of the pandemic. The analysis found that pre-pandemic hospital profits “largely went toward market share growth, vertical integration, capital investments and further building reserves”; meanwhile, “costs and hospital prices continued to increase.”

It speaks to the state of the health system generally, Bai said, which has become increasingly consolidated. Hospitals merge with and acquire each other, and they pick up independent physicians groups along the way, too. Bimestefer said Thursday that in 2009, 26 hospitals in Colorado were part of a broader system. In 2022, that’s shot up to 46, out of 84 statewide. Those mergers and acquisitions, she continued, increase costs and prices because there’s less competition.

The state’s report identifies a handful of potential solutions and next steps, including “improving the impact” of nonprofit hospitals’ community benefits; increasing investment in rural facilities; and partner, in a variety of ways, to address and improve affordable and accessible patient care.