Ballot Issue 2Q: A Denver sales tax increase that could provide a lifeline for Denver Health 

Denver voters this year will decide whether to toss a financial lifeline to the city’s safety net hospital and health system, Denver Health.

The system serves a disproportionately low-income population both in its hospital and through a network of community and school-based clinics. But it has been struggling with higher amounts of what is known as uncompensated care — care that a hospital provides but does not receive payment for. That has placed the hospital in a more precarious financial position.

Ballot Issue 2Q, which appears only on the ballots of voters in Denver, would raise the city’s sales tax rate by 0.34% — 3.4 cents on a $10 purchase — to provide funding for Denver Health. It is estimated to raise $70 million a year to start.

Here’s what else you need to know about Ballot Issue 2Q.

Why does Denver Health need the money?

For decades, the annual balance sheets for Denver Health have looked like a child’s drawing of the Rocky Mountains.

Up, down, up, down through jagged peaks and steep valleys.

“Our finances over multiple years have been a little like a roller coaster, one year is OK, another year’s bad,” Denver Health CEO Donna Lynne said.

But then came the COVID-19 pandemic. Emergency funding in 2020 pushed the hospital’s profit margin from operations to record heights. But in 2022, inflation, higher staffing costs and fundamental shifts in the insurance market smushed Denver Health’s margins into the deepest hole in over two decades.

The hospital lost around $32 million on operations in 2022. It turned a roughly $9 million profit in 2023, but one-time boosts from the state legislature and Kaiser Permanente contributed to that. This year, Denver Health expects to lose about $8.5 million, and as of June, the hospital had just a little over two months’ worth of cash-on-hand. (Best-practice standards usually call for around six months or more.)

If passed, Ballot Issue 2Q would help Denver Health build up a cushion. But it still wouldn’t be enough to wipe out one of the hospital’s biggest reasons for struggling — the amount of care it provides but doesn’t get paid for as a safety net hospital.

Also known as uncompensated care, the figure is estimated to hit $155 million for 2024, Lynne said, compared with $60 million in 2020.

Why is uncompensated care increasing?

About half of what Denver Health counts as uncompensated care is tied to Medicare and Medicaid patients — both programs pay less than what it costs Denver Health to provide care, so the hospital includes the shortfall in its total for uncompensated care.

More than two-thirds of Denver Health’s patients are covered by Medicare or Medicaid. In talking about how this impacts the hospital’s finances, Lynne specifically mentioned Medicaid payment rates, which she said are increasing by only 2% next year.

“That’s not consistent with inflation; it’s certainly not consistent with medical inflation,” Lynne said. “And it’s not what we can pay our employees in terms of their salary because other systems are able to pay much more.”

The other half of Denver Health’s uncompensated care is tied to uninsured patients.

Lynne said the hospital has been seeing more uninsured patients since the state began doing eligibility renewals for members. During the pandemic, federal rules prohibited state Medicaid programs from disenrolling anyone, leading to huge numbers of people on Colorado’s Medicaid rolls. But that changed when the federal COVID-19 public health emergency expired and states again began doing annual checks to see if Medicaid members still qualified to be enrolled.

The process — known as “the unwind” — has led to hundreds of thousands of people in Colorado dropping from Medicaid coverage. Many of those may have been eligible to transition to health insurance offered through their work, or they may have been able to buy coverage on their own. But a certain, as-yet-unknown number likely remained uninsured, leading to higher rates of uninsured patients at Denver Health and other safety net medical and mental health care providers.

Lynne said the elimination of the tax penalty for not having insurance under the Affordable Care Act may have some role in the rising number of uninsured people. Broad changes in the economy — more gig workers, for example, or more people working at jobs that either don’t offer insurance or do but the insurance is unaffordable — may also contribute to the issue.

“The wages are so low, or the workers are working part-time, that being able to buy health insurance from their employer or in the private market is just untenable,” she said.

These circumstances — more uninsured patients and rising losses from treating Medicare and Medicaid patients — are something being felt across the health care system. But unlike other hospitals, Denver Health doesn’t have a big pool of privately insured patients it can charge more to in order to offset those losses.

Lynne said about 14% of the hospital’s patients are privately insured. For other health systems in the Denver metro area, that percentage is typically closer to 30%.

On top of that, Lynne said it is common for medical providers to refer uninsured patients to Denver Health for follow-up care, meaning the hospital, while proud of its commitment to treating anyone and everyone, sits at the bottom of a large funnel of patients it won’t get paid to treat — and not just from Denver. Lynne said the hospital sees patients from 62 of Colorado’s 64 counties.

“We provide care across the state, and it’s one of my arguments with the state as to why they ought to support us financially,” Lynne said.

Are migrants to blame for Denver Health’s struggles?

The cost of caring for newly arrived immigrants at Denver Health has received a lot of attention. Much of that care is uncompensated, though some of it could be covered by emergency Medicaid or other programs.

But Lynne said the attention the issue has received is disproportionate to the impact on Denver Health’s finances.

Lynne said uncompensated care for newcomers accounts for about $10 million of this year’s $155 million in uncompensated care. Denver Health saw about 1.3 million total patient visits in 2023. Newcomers accounted for about 20,000 of those, or about 1.5%.

What will Denver Health do if the measure doesn’t pass?

If the measure fails, Lynne said Denver Health will look at making cuts to its services, including the main hospital, but also a number of community and school-based clinics, focused especially on underserved neighborhoods and communities in Denver.

The health system has also launched a housing initiative — 34 apartments available on a 90-day basis — to provide people who are homeless with a place to live while seeking treatment and stability.

“Thirty-four is not a lot, but it does help and it gets people into a place where they can perhaps be productive,” Lynne said. “No one gives us money for that. We are doing it because it’s the right thing to do.”

Lynne said these types of programs may not be sustainable without more funding. The hospital has also historically delayed maintenance or been slow to raise employee pay.

But Lynne said that needs to stop. If the extra funding from Ballot Issue 2Q doesn’t come through, Lynne said she would prefer to cut some services and close some locations — she didn’t offer specifics — than to limp along.

“If it doesn’t pass, we will shrink services. We will cut services,” Lynne said. “We’ll have to get smaller to get better.”

“I’d rather be a little smaller and pay our employees what they deserve. … I would rather be smaller and better than do what we do now.”

Who is supporting or opposing the measure?

One committee, called Healing Denver, has been established to support the measure. Lynne and Denver Mayor Mike Johnston spoke at the committee’s launch event earlier this year.

So far, Healing Denver has raised nearly $1.9 million, according to city records. An organization called Heart of Denver, a 501(c)(4) nonprofit established to educate the public about Denver Health, has contributed about $258,000. Jacque Montgomery, a spokeswoman for Denver Health, said the organization is independent from Denver Health, has its own board and receives no funding from the hospital.

Other large donors include a trust connected to former DaVita CEO Kent Thiry and his wife; an arm of Gary Community Ventures; the health care advocacy organization Healthier Colorado; and the human services organization Servicios de La Raza. Lynne is also one of the campaign’s top contributors, having given $80,000 to Healing Denver.

No committees have registered with the city in opposition to the measure. In various meetings and forums, criticism of the ballot measure has focused on the rising number of property-tax increases being put upon voters, as well as statements that the city’s approach to immigration is unsustainable.

The Thiry-O’Leary Foundation, which is run by the family of Kent Thiry and his wife, Denise O’Leary, is a financial supporter of The Colorado Sun, but has no say in editorial decisions.