Pagosa Springs Medical Center (PSMC) could see cuts in funding of more than $2.4 million next year due to multiple factors, and thousands in Archuleta County could be affected by cuts to Medicaid, according to projections by PSMC staff.
PSMC’s chief financial officer, Chelle Keplinger outlined the 2026 potential effects for the Upper San Juan Health Service District Board of Directors, which oversees PSMC, at its July 22 meeting.
Those reductions relate to the One Big Beautiful Bill Act and the state seeking to collect funds from hospitals to cover an error uncovered by a lawsuit.
Before discussing those impacts, the board also heard about potential future consideration of a ballot issue to seek to retain current property tax funding levels.
Possible future ballot questions
As part of the presentation of the Strategic Planning Committee’s written report, PSMC Chief Administrative Officer Ann Bruzzese spoke to the board about possible future ballot questions, alerting the board members to the fact that the issue will come up again.
“The Strategic Planning Committee felt it would be prudent for the Board to fully understand the potential ballot questions including retaining a company to gather and provide relevant data to the Board. This means that if the Board approves to proceed with ballot questions the questions would likely appear on the ballot for the November 2026 election,” the written report from the committee states.
The written report and Bruzzese also provided background information for the board about why the issue will come up and why the district would have a ballot question relating to the Taxpayer’s Bill of Rights (TABOR).
Bruzzese began by explaining PSMC operates as an enterprise, or a government-run business, unlike other districts that operate only on tax funds.
“PSMC has continuously operated as an ‘enterprise’ which generally means PSMC provides services in exchange for fees and receives less than ten percent (10%) of its total revenues from taxes or State of Colorado sources (such as DOLA grants),” the written report explains. “So long as PSMC continues to meet the requirements of an enterprise, the growth restrictions imposed by TABOR and other Colorado statutes apply only to tax revenues; however, if PSMC no longer meets the enterprise requirements, the growth restrictions apply to all revenues even growth resulting from fees for services.”
“Sometimes when things are difficult,”Bruzzese said, pointing toward the report the board would later hear from Keplinger, “one of the ways in dealing with that is you can pull back with expenses, and another way of dealing with that is pushing forward with more services.”
Falling under TABOR’s growth restrictions would take the latter option off the table, she indicated, explaining TABOR limits growth to inflation and population, there is another 5.5 percent annual tax increase limit in statute, and a new law set to go into effect next year will impose additional limitations.
“There is a new law (CRS Sec. 29-1-1702) that will be effective for tax collections beginning January 1, 2026 which imposes additional restrictions on revenue growth and spending to 10.5% biennially, although it excludes certain revenues, including from new construction,” the written report states. “The law is intended to subject PSMC to this restriction unless and until the Board approves to ask the voters for an override of this new law. The language of the new statute is very convoluted and the actual mechanics of the law are unclear; further legislative fixes and court interpretations may be needed.”
Bruzzese noted there is a lot to be worked out with the new law.
She then began addressing the district’s mill levy and voter-approved override of the TABOR revenue limits.
“In 2001, the voters approved a perpetual mill levy at a maximum rate of 3.884 mills to assist with the expenses for emergency medical and hospital services,” the report states, adding, “The voters of this community have continuously approved a PSMC override of TABOR limits (also known as ‘De-Brucing’) and the 5.5% annual tax increase limit under CRS Sec. 29-1-301. The voters approved the overrides for the periods 2002-2006, 2007-2016, and 2017 to the end of 2026. To continue these overrides, the Board would need to approve proceeding with a ballot question for voter approval. In short, the TABOR override ballot question does not change the mill levy – instead, it allows PSMC to retain and spend all of the 3.884 mills approved by the voters 24 years ago.”
“It’s always been important to our bottom line,” Bruzzese said of the additional revenue. “If you look at our budget for this year, we hope to do much better, but we had budgeted a bottom line this year of $40,000.”
Next year, it will be up to the board to decide if it wants to ask voters to de-Bruce again, Bruzzese indicated.
One Big Beautiful Bill Act
As part of her monthly financial report, Keplinger explained to the board the expected effect of the One Big Beautiful Bill Act is more than $1 million in 2026 for PSMC.
“Based on the timing of the steps in which they’re doing some of these cuts, I think the two biggest things that we’re gonna see next year — and it is really dependent on what the state does — the supplemental payments are gonna start going away, so they’re not going to have matching funds for that. The [Hospital Transformation Program], which we were getting funded at $521,000 a year to put that into place, that goes away next year.”
Keplinger explained PSMC is anticipating an effect of $795,766.22 from the loss of Medicaid supplemental payments.
Keplinger also addressed the expected reduction in population covered by Medicaid.
According to the Colorado Department of Health Care Policy and Financing (HCPF), one in four Coloradans is covered by Medicaid and 26.44 percent of Archuleta County residents were enrolled in Health First Colorado — Colorado’s Medicaid program — for the 2024 fiscal year.
HCPF’s Archuleta County fact sheet for the 2024 fiscal year states that an average of 3,771 were enrolled in Health First Colorado per month, with 1,399 of those Affordable Care Act Expansion adults and parents. In addition, an average of 208 children were enrolled per month in the Child Health Plan Plus, also known as CHP+.
Keplinger noted she believes those enrolled in the expanded Medicaid program will be the ones affected in the worst-case scenario.
That, she explained, is projected to have a net effect of $265,364 on PSMC, for a total estimated reduction in revenue of $1,061,130.22 in 2026.
Keplinger later noted the state has “a lot of opportunity” with the expanded Medicaid.
Keplinger later noted that provider taxes will start to reduce by 0.5 percent per year beginning in 2028.
“By the time it’s done I think we’re going to lose about $1.6 million by 2034,” Keplinger said. “So, we just have to prepare for that. That’s a big chunk of money for us.”
She noted PSMC nets about $3.2 million each year.
“We have some time to think about that,” she said.
Keplinger noted PSMC can grow some things, such as growing its pain management service line and physical therapy to better meet the community’s need, but that if revenue growth is capped, “we can do the math.”
“H.R.1 – the One Big Beautiful Bill Act (OBBB), was signed into law July 4 and represents the largest cuts to Medicaid since the program began in the 1960s,” a July 15 statement by HCPF Executive Director Kim Bimestefer reads. “The Department of Health Care Policy and Financing (HCPF) anticipates that the bill will ultimately result in the large-scale loss of health coverage for Coloradans and an extraordinary, longer term funding shift from the federal government to our state that Colorado’s state budget cannot absorb.”
State lawsuit
Keplinger also explained that, on top of the anticipated revenue cuts related to the federal act, the state is requesting $1.4 million.
“UC Health sued HCPF for misclassifying some of its hospitals,” the Finance Committee report explains. “UC Health prevailed – meaning HCPF incorrectly collected $60 million from UC Health. As a result, HCPF seeks to collect its $60 million error from other hospitals including PSMC.”
Keplinger noted PSMC’s portion of that that has been published is $1.4 million.
Keplinger noted the Colorado Hospital Association has stated the requests won’t happen.
“I want to believe them,” she said, adding HCPF wants to make up for its mistakes by putting it on the backs of other hospitals, but that they will watch.
She also indicated PSMC’s future funding will change due to the classification error being corrected.
randi@pagosasun.com
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