Pagosa Springs Medical Center (PSMC) anticipates increases in both patient volumes and costs in 2026, according to the approved budget for the facility.
The organization is also expecting the highest gross revenues in its history.
The Upper San Juan Health Service District Board of Directors, which oversees PSMC, approved the budget, appropriated funds and set mill levies at its Oct. 28 meeting.
In presenting the budget to the board, Chief Financial Officer Chelle Keplinger explained there’s not a lot of room for capital in the budget, but 2026 is anticipated to be the district’s first time going over $100 million in gross revenue.
“In 2026, Pagosa Springs Medical Center (“PSMC”) will continue to offer hospital services, outpatient clinic services and EMS/ambulance services and an expansion of physical therapy, occupational therapy and pain management,” the budget’s overview states. “PSMC’s goals for 2026 are set forth in PSMC’s Strategic Plan last approved by the Board of Directors in January 2024. The proposed budget positions PSMC to carry out the Strategic Plan and to pivot to meet unplanned demands.”
The budget overview also looks at challenges and successes the district has and will face, including staffing, housing in the community and federal legislation.
“Preparing the budget for PSMC always requires addressing a number of unknown variables,” it states. “In planning the 2026 budget, we are finally seeing some trending happening to revenue since the pandemic. As we look back at 2025, PSMC spent a significant amount of money on contract labor due to the lack of staff; we continue to work diligently to hire full‐time employees to replace the contract labor. We have had some hiring success in 2025 and we look forward to additional successes in 2026. We know PSMC will face many challenges in 2026, but we anticipate the greatest challenges will continue to be the cost of staffing resulting from both a nationwide shortage of healthcare workers, a lack of economical housing in Archuleta County and the recently passed ‘Big Beautiful Bill’.”
During the meeting, Keplinger explained that due to the passage of the federal bill, they moved all of the expanded Medicare population to self-pay, noting there is belief those people will continue to seek care.
Board member Erik Foss noted he wants to be sure PSMC has the ability to adjust, stating he doesn’t believe people will seek care until they need the Emergency Department and PSMC will see its bad debt increase.
“I just want us to be prepared,” he said.
Keplinger responded that she didn’t disagree, adding she believes they will seek care through the Emergency Department or not and when they come in it could be bad.
She noted she figured in the budget PSMC would collect 10 percent of the gross charges on those patients.
During discussion on the budget, board member Wayne Hooper also noted the importance of the property tax revenue the district receives, suggesting it moves them from floundering to being a productive hospital.
The district anticipates receiving $2,326,268 in property tax revenue on 3.884 mills in 2026.
Budget assumptions
PSMC’s budget states several assumptions relating to revenue and expenses.
With respect to revenues, the budget lists the following 2026 budget assumptions:
• A foundation transfer to PSMC of $300,000 which represents funds raised for the remodel of the Emergency Department, as well as additional capital requests.
• An average 13.59 percent increase in patient volume and an average 4 percent increase in prices.
• Anticipated increases in revenues in the Infusion Center due to steady growth, pain management due to expansion of the service line, surgery due the increased staffing of an additional orthopedic surgeon and pain management, respiratory due to the addition pulmonary function test equipment and a full‐time pulmonologist, cardiology due to having on-site cardiology twice a month, and expansion of therapy services due to the Medical Wellness Building being open.
With respect to expenses, the budget lists the following assumptions:
• PSMC’s largest expense continues to be labor. The budget assumes a 3 percent increase in wages to employees without an employment agreement, including the primary care providers. The budget includes a net increase of 9.03 full-time equivalents.
• Increase (inflation) in costs for the following: 5 percent in medications, 4 percent for insurance, 4 percent for employee health insurance plan and 4 percent for utilities.
• PSMC will continue to see increased costs needed to enhance its facilities.
• Other expense increases are department specific based on what projects are expected to be completed in 2026.
By the numbers
The budget predicts a bottom line of $65,401 for the district in 2026.
PSMC’s budget anticipates the organization receiving $49,399,566 in net patient revenues, $1,472,900 in other operating income and $229,594 in operating grants for total net revenues of $51,102,060.
The budget anticipates $54,262,927 in total expenses, leaving an operating loss of $3,160,867.
Nonoperating revenues — including property taxes, investment income and capital grants and contributions — are anticipated to total $3,226,268, helping the district to its bottom line of $65,401.
randi@pagosasun.com
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