UCHealth sued the agency overseeing Medicaid in Colorado on Friday, alleging it mislabeled two of the health network’s hospitals, costing it the fair share of a fee to offset uncompensated care.

The lawsuit, filed in Denver District Court, alleges the Colorado Department of Health Care Policy and Financing mislabeled two UCHealth facilities as publicly owned, rather than private nonprofit hospitals.

UCHealth said the alleged misclassification had reduced the amount that Memorial Hospital in Colorado Springs and Poudre Valley Hospital in Fort Collins received from the state’s health care affordability and sustainability fee.

Neither the lawsuit nor a UCHealth spokesman said how much money the health system believes it is owed.

The state collects the fee from most hospitals and uses it to draw down matching federal funds. It then distributes the collected money and the matching funds based on a formula, to offset the cost of uncompensated care and quality improvement efforts.

It wasn’t clear why the state classified the two hospitals as publicly owned or when that happened. The Department of Health Care Policy and Financing on Friday said its officials are reviewing the lawsuit and couldn’t yet comment.

While the two hospitals lease their buildings from local governments, they don’t receive funding from them, and the private entity UCHealth manages them, said Dan Weaver, a spokesman for the health system. The department declined to change the hospitals’ classifications after UCHealth pointed out in December that they didn’t line up with federal rules about what counts as a public hospital, he said.

If UCHealth wins and increases the share going to two of its hospitals, some other hospitals’ shares would decrease. A broader ruling that made the department change how it classifies hospitals could create even more winners and losers.

“As the state’s largest provider of Medicaid services, UCHealth and our hospitals are dedicated to serving low-income residents of our state and those who may live in a rural area. HCPF’s misclassification of our hospitals puts Medicaid patients at risk by potentially denying funds needed for their care,” he said in a statement.

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Originally Published: August 3, 2024 at 6:00 a.m.