stethoscope on dollars representing the price of hospital care

Fact Check: While Praising Pandemic Response, Polis Administration Is Still Wrong About Hospital Costs

January 12, 2021 / State of Reform
Flatlining ECG line indicating claims are false

As Colorado works hard to overcome COVID-19, the Polis Administration has adopted a friendlier tone when talking about hospitals. But the administration continues to repeat some of the same misinformation that was used against hospital systems before the pandemic.

CLAIM: While healthcare workers and hospitals deserve praise for their lifesaving work during the COVID-19 pandemic, they are paid too much compared to other states, the Colorado Department of Health Care Policy and Financing recently claimed.

FACT: This claim is misleading and disappointing. HCPF officials are repeating the same old arguments from before the pandemic, which blamed hospitals for almost every challenge in the Colorado healthcare sector. Those arguments were untrue then and they are untrue now.

HCPF made these claims during a presentation to the 2020 Colorado State of Reform Virtual Health Policy Conference. At first, comments from HCPF Executive Director Kim Bimestefer struck a grateful tone towards hospital systems and their staff:

I want to send out a special thank you to our healthcare workers. You have gone above and beyond. We know you’re tired, but we are so appreciative of everything that you do every single day to take care of all of us. You are an example of what it means to be a public servant and a servant to the community. Thank you for everything you do.

And a special shout out to our hospitals. Your leadership has been superior across the country, and we owe a debt of gratitude to everything that you’re doing … to save lives. You are the difference maker and we are deeply appreciative.

This stands in stark contrast to before the pandemic. Then, HCPF claimed there were too many healthcare providers in Colorado, who were driving costs up. The state agency even suggested hospitals were overbuilding in what was described as a hospital construction “arms race.” These claims were used to make the case for a so-called public option for Colorado, which targeted hospitals with budget cuts, fines and even threats of closure if they did not support it.

Today, as Colorado hospitals have increased their capacity even further to maintain healthcare access in the middle of a global pandemic, those comments do not sit well with the facts. But later in HCPF’s presentation to State of Reform, the same discredited claims from before the pandemic were repeated:

Our prices in hospitals are higher than the rest of the country. Let’s challenge and negotiate and collaborate with hospitals all across the state to bring those prices down.

The facts tell a different story.

Colorado has the 10th lowest spending on hospitals per capita, according to federal data compiled by the Kaiser Family Foundation. This is remarkably low when you consider the cost of living in Colorado is higher than most states. We have the 14th highest cost of living according to data from the U.S. Bureau of Economic Analysis, in fact.

HCPF officials have dismissed this data, however. Instead, they have relied on a single research paper, published in 2019 by Rand Corp., to make the claim that hospital prices in Colorado are higher than the rest of the country.

Back in 2019, we examined this research paper closely on this blog. Even the authors admitted the numbers were shaky, stating in the “limitations” section of the report: “[I]t is possible that our estimates are not representative of the prices paid by the broader privately insured population.”

An even bigger problem, flagged by the American Hospital Association, was the researchers benchmarked the prices paid by private health insurance plans against what the federal Medicare program pays. But as the AHA noted, Medicare pays hospitals at “below the cost of care.” So measuring prices against a benchmark that is actually below what it costs to treat patients is wrong. Not only that, it would “strip vital resources from already strapped communities, seriously impeding access to care,” AHA has warned

The Rand Corp. study also suffered another severe limitation: It only compared 25 states, thereby excluding half the country. From the 25 states it examined, it claimed Colorado had the 6th largest difference between what Medicare pays and private health insurance pays [highlighting added]:

Graph of relative prices of hospital care, by state

However, since then, the Rand Corp. researchers have updated their findings. They added another 20 states to their analysis, bringing the total to 45. And even though they still admit “it is possible that our estimates are not representative of the prices paid by the broader privately insured population,” the authors found Colorado ranked 22nd in terms of the difference between what Medicare pays – or right in the middle of the pack [highlighting added]:

Therefore, even by the questionable methods used by these researchers, it is wrong to claim that Colorado hospital prices “are higher than the rest of the country,” as HCPF did. Even with Colorado’s relatively high cost of living, which is felt across every sector of the economy, our hospitals provide care to patients at a lower cost than many other states.