Colorado’s hospital provider fee is legal, Denver judge rules

Colorado’s hospital provider fee does not violate the Taxpayer’s Bill of Rights, according to a District Court judge, who ruled that legislation passed in 2017 moving the fee into an enterprise fund is legal. The TABOR Foundation initially sued the state Department of Health Care Policy and Financing, then-Treasurer Walker Stapleton and the Colorado Hospital Association in 2015, claiming the hospital provider fee is a tax, not a fee. In his ruling Tuesday, Denver District Judge Ross Buchanan rejected the foundation’s arguments. The TABOR amendment doesn’t define what a tax is, nor does it define fees, Buchanan pointed out.

“As the courts have defined it, a tax is a charge levied for general government spending, while a fee is a charge intended to finance a particular government service,” Buchanan wrote.

To determine whether something is a tax or a fee, the criteria is the intended purpose. If the statutory language indicates that the primary purpose of the charge is “to raise revenues for general governmental spending,” the charge is likely a tax, Buchanan wrote, citing existing case law.

“On the other hand, if the language states that the charge’s primary purpose ‘is to finance a particular service,’ it is likely a fee.”

The statutory language of 2009 and 2017 legislation spoke to specific purposes for those funds, and a specific category of entities that would pay the fee (hospitals), making the HPF a fee, he wrote.

Under TABOR, adopted by voters in 1992, tax increases must be approved by voters, and the hospital provider fee was never sent to voters for approval. The fee was set up through legislation in 2009, levying hospitals a charge for every overnight patient stay and for certain outpatient visits. That money was pooled, matched with federal funds under the Affordable Care Act, and redistributed to hospitals, in part to cover health care costs for uninsured and Medicaid patients.

By 2017, the fee was drawing about $600 million per year and pushing the state over its TABOR revenue limits, which could result in a refund to taxpayers. It also would mean a budget cut to hospitals — up to a dozen rural hospitals complained they could not survive such large budget cuts and would be at risk of closing.

To solve the looming crisis, in 2017 a bipartisan group (then House Majority Leader KC Becker of Boulder, Republican Rep. Jon Becker of Fort Morgan, Senate Minority Leader Lucia Guzman of Denver and Senate President Pro tem Jerry Sonnenberg of Sterling) came up with Senate Bill 17-267.