Vail Health says it’s in a strong financial position despite report detailing headwinds for rural hospitals

Vail Health officials said the hospital is not in danger of closing despite showing up in a new report from a national health care policy center detailing financial troubles for rural hospitals.

This month, the Center for Healthcare Quality and Payment Reform published a report containing the names of hospitals that have been consistently losing revenue both overall and on patient care from 2021 through 2023. Vail Health is on both lists.

Based in Pittsburgh, the Center for Healthcare Quality and Payment Reform is a national health care payment and delivery systems policy center.

---

---

Sally Welsh, the public relations director for Vail Health, said that Vail Health is in a strong financial position and “not at risk for closure.”

This year, Vail Health received an “A- (A minus) S&P bond rating with a stable outlook,” Welsh said. “Also, Vail Health has a very strong balance sheet and cash position.”

---

---

According to the report, on average, Vail Health Hospital lost 10% in its patient services margin, and 7.2% in its overall margin, from 2021 to 2023. Of the 43 rural hospitals in Colorado evaluated by the report, 17 joined Vail Health in the red in one or both categories. 

How the center reached its conclusion

“All across the country, there have been rural hospitals closing, and they are continuing to close and they are closing at more rapid rates. You should make sure you know how your local hospital is doing,” said Harold Miller, president and chief executive officer of the Center for Healthcare Quality and Payment Reform. “If your hospital is not getting paid adequately by health insurance plans to cover its costs, you should be asking why.”

The center collects its data from Medicare cost reports, compiled by the Centers for Medicare and Medicaid Services from financial information that hospitals report at the end of each fiscal year. The data in the most recent version of the report was released in July but comes from 2023.

The center assesses hospitals on two main criteria. First, the hospital’s expenditures, including a hospital’s patient services margin, or the difference between the cost of delivering patient services and how much the hospitals are paid for that care by health insurance plans or individual patients. Coupled with the patient services margin is the total margin, determined by assessing the hospitals’ overall revenues and losses.

“Hospitals that are losing money year after year in terms of their patient services have to either find some way to make up those losses or sooner or later, they’re going to go out of business,” Miller said. “And hospitals that have been able to cover these losses may not always be able to do that in the future.”

The report includes a table that says six rural hospitals in Colorado are at risk of “immediate” closure — meaning within the next two to three years. As a policy, Miller does not release the list of identified “at risk” hospitals to the media. “We don’t label any individual hospital as anything,” he said.

Labeling a hospital at risk of closure is complicated by the information the center does not collect from individual hospitals, like long-term plans and predicted funding. The report “doesn’t take into account the myriad of actions a hospital takes when dealing with unsustainable finances to stay open and continue providing services for the communities they serve,” said Cara Welch, senior director of communications for the Colorado Hospital Association.

While the center’s report focuses on hospitals’ losses, Miller recognized the multitude of additional factors that impact a hospital’s ability to support losses, including money from outside sources and the hospital’s existing fund balance.

Moreover, the financial data the report uses is often lagged by a year due to when the data is released to the public. In small hospitals, a lot can change in that time.

Miller was, however, able to say that Vail Health Hospital is not on the list of six hospitals at immediate risk of closure.

“What we’re looking at is places that are losing money and don’t have assets to cover it, so Vail Health wouldn’t be in that category. The net asset number is a big part of who we call in ‘immediate risk,'” he said.

Vail Health Hospital is the second largest rural hospital on the list in Colorado, which bodes well for its ability to sustain losses over an extended period, Miller said. According to the center’s report, Vail Health’s total expenses amounted to over $300 million in 2023. Most rural hospitals that have closed recently have budgets under $40 million, Miller explained.

Many Colorado hospitals are struggling

Hospitals can be funded in several ways outside of patient payments. Larger hospitals sometimes have investments, and many hospitals receive grants. Nonprofit hospitals, like Vail Health, can also receive donations. Some smaller rural hospitals in Colorado, like Aspen Valley Hospital, utilize local tax dollars to help them cover their operating expenses.

In 2020 and 2021, many rural hospitals received rural pandemic grants “and so lots of hospitals looked profitable in 2020 and 2021” before going back into the red in 2022 and 2023, Miller said.

Part of the reason Vail Health’s balance sheet skews toward the negatives, Welsh said, is due to the number of community-focused initiatives it has put into action over the last few years.

“In recent years Vail Health has made significant strategic investments in our community to increase both access and affordability of needed services. Most of these community investments are maturing, providing exceptional care, and now running at a positive margin,” Welsh said.

Some projects, however, are still in the works, and have yet to lead to profit. This includes the Precourt Healing Center, which will treat behavioral health in an inpatient setting when it opens in May 2025.

In addition, the cost of providing care has increased significantly recently due to inflation and labor costs, with reimbursement rates trailing behind.

“Often what we are paid does not cover what it costs to provide the health care service,” Welsh said.

Though not a perfect way to predict whether a hospital will close, Welsh reaffirmed Miller’s assessment of the state of the rural hospital industry.

“Reports like this, despite being based upon limited data, can provide general insights into the trends occurring in rural health care today,” Welsh said.

Welsh cited the Colorado Hospital Association’s statistic that 70% of Colorado hospitals have unstable operating margins as an indicator that Vail Health is not alone in facing financial challenges.

Despite the instability, Colorado has not had a hospital close “in recent history,” said Welch with the Colorado Hospital Association. 

Welch reiterated the challenges Colorado hospitals have faced since the Covid-19 pandemic, adding the impacts have been “staggering.”

Hospitals face “an intense combination of growing expenses, changing patient utilization, new state and federal regulatory requirements, and increasing administrative and reimbursement challenges from health insurance companies,” Welch said.

What’s ahead for small, rural hospitals

Miller said that while it is difficult not to get caught up in the “immediate risk” terminology, he wants the public to focus on the overall message of the report. “It’s based on individual hospitals, but it’s intended to represent the characteristic of the overall rural hospital population,” he said.

“What we’ve seen around the country is, in most cases, small rural hospitals are not getting paid adequately, because they’re small and they need to be paid more to be able to maintain services for the community, and a lot of big national health insurance plans aren’t paying them adequately,” Miller said.

Community members should take this into account when they sign up for a health insurance plan, Miller said. The explosion of Medicare Advantage subscribers has taken a toll on rural hospitals, according to Miller. The private nature of Medicare Advantage plans means they can deny payments or reject services at certain hospitals that original Medicare would have covered.

Many smaller, rural hospitals rely on standard Medicare and Medicaid payments to cover their costs. “Everybody believes that private health plans pay hospitals more than Medicare and Medicaid do. That is true for large hospitals. It is not true for small, rural hospitals, and nobody knows that,” Miller said.

Miller said he hopes that those who interact with the center’s report examine their local hospital for early warning signs of closure, and ask, “‘What should be done now to try to prevent them from closing?'”

“Don’t assume that the rural hospital closures are unlikely or never happen, because they do,” Miller said. “And don’t assume that because your hospital is open it isn’t facing the challenge of closing services because of the amount of money that it’s losing.” 

The Center for Healthcare Quality and Payment Reform’s study of the state of rural hospitals can be found at RuralHospitals.org.