A history and explanation of Kremmling Memorial Hospital District tax revenues
By Cole White, Chief Financial Officer, KMHD
June 9, 2010
Kremmling Memorial Hospital District (KMHD) has been operating at its current location at 214 South Fourth Street for more than 60 years. During that time, KMHD has seen major changes in both its physical structure and in the scope of services provided at the hospital. Major additions to the hospital and clinic were added throughout the last half a century, the last of which occurred in 1974. Early changes to KMHD were financed in part through Hill-Burton funds, which were appropriated for hospital reconstruction after World War II, and in part through generous community donations.
To assist the hospital in financing the 1974 expansion and the level of care available to residents of Middle Park, a mill-levy was introduced in the early 70s and a taxing district was formed. These funds have helped the hospital pay for not only the addition which was completed in 1974, but also with funding day-to-day operations, equipment purchases, physician recruitment, and countless other organizational improvements.
Throughout the last 45 years, the healthcare landscape has changed dramatically. Costs associated with providing healthcare have grown at double-digit inflation levels, while reimbursement from federal and state programs, commercial insurance companies, and private payers have grown at a much slower pace.
For many small hospitals this has spelled out their demise. Hundreds of rural hospitals failed during the 80’s and 90’s as a result of these changes. Most of the rural hospitals that were able to survive did so with both the support of the State and Federal government through enhanced reimbursement methodology and the unwavering support and patronage of their community. One such survivor is KMHD.
Kremmling Memorial Hospital District qualified as a Critical Access hospital in 2003. Essentially, this means that because of the hospital’s remote location and the need for 24/7 emergency care, the Federal Government allows the hospital to receive cost-based reimbursement from Medicare. This reimbursement is intended to improve financial performance and thereby reduce hospital closures. Among many requirements, the hospital must be 15 miles from another hospital in mountainous terrain. Critical access hospital must maintain a maximum of 25 acute care inpatient beds. They must also provide 24-hour emergency services, with medical staff on-site or on-call and available in 30 minutes or less.
Throughout the years, Kremmling and Grand County has seen numerous changes. Many traditional industries have come and gone, family ranches have all but disappeared, and much of what supports the area is now heavily reliant on tourism and the service industry. What hasn’t changed though is the community’s continued commitment to KMHD and the support of high quality, affordable healthcare for the people of our region.
A major change that occurred at the State level that directly impacted healthcare in our region was the passing of the Tax Payers Bill of Rights (TABOR) in 1992. TABOR, while effective at limiting the growth of government and reducing taxes, inhibited many parts of government from effectively planning for future changes and addressing the needs of the people they serve.
In compliance with the TABOR regulations, KMHD has lowered their approved mill-levy over the years, (originally approved at 11%), effectively providing residents of the district with lower taxes. While the hospital is currently approved to collect approximately 7 mills, KMHD provides a credit back to the district of 2.5 mills, reducing the hospital’s levy to 4.5 mills, in order to cap our growth at the TABOR approved inflation rate. In comparison, the district supplied the hospital with $928,021 in 1991 and $852,180 in 2010.
Each year the taxing district contributes a portion of funding necessary to support healthcare services in Grand and Summit Counties. Throughout the years these funds have contributed a smaller and smaller portion of the resources necessary to support operations.
In 1991, tax revenue accounted for approximately 65% of the revenue necessary to keep the hospital operating. By 2009, the district supplied KMHD with less than 10% of the hospital’s total budget. Moreover, if the time value of money is factored, and expenses are adjusted for inflation, the tax revenue collected today means significantly less to the bottom line now than it did when the levy was approved in 1973. While TABOR has had a large impact in this area, this shift can also be attributed to the rising cost of healthcare, a factor not considered in TABOR legislation.
Changes taking place at both the State and Federal level have the potential to impact healthcare in both positive and negative ways. But after the dust settles in Denver and Washington D.C., it is ultimately left up to the people of our region to define what services and level of care are available here in our own back yard. Without the continued support of the District and the patronage of residents and guests of Middle Park, KMHD would struggle to acquire the resources necessary to provide a full range of services to the people of our region.
Simple zip code analysis of patient origin shows that the majority of hospital revenue is generated from services utilized by people from East Grand County; this includes those Timberline Family Practice patient patrons. (Timberline Family Practice located in Granby was purchased by KMHD in 2006). While approximately 10% of the hospital’s revenue is derived from the mill, nearly 60% of its revenue is derived from the utilization of services from people originating outside of the tax district, i.e.: east of Kremmling. That leaves approximately 30% of revenue derived from the utilization of services from people within the district. Simply put, if you minus the ever-decreasing revenue attained from taxes, and the patient base from East Grand, the hospital would not survive on the business from the population within its district alone.
A recently completed management feasibility market study indicates that the development of services in Granby to be provided by the proposed Middle Park Medical Center will be self-sustaining and contribute to the overall, bottom line of KMHD.
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