Hospital cuts staff, citing $25 million in as-yet unpaid insurance claims. 34 laid off Monday; additional 43 positions lost by attrition and left unfilled

Montrose Regional Health laid off 34 employees Monday, citing a gaping chasm between what private insurers have not paid and the operating expenses it can no longer cover through its savings. With 43 positions that were not filled when vacated, the total reduction in workforce is 77. The hospital previously employed about 1,005 overall, across multiple departments and services.

The decision had to be made despite overall growth in patient loads and services, hospital CEO Jeff Mengenhausen said Tuesday.

"Eighteen months ago, we started seeing changes with our insurance companies. The organization continues to grow with the community, and the community continues to push us to grow. This reduction in force is not due to lack of growth. We actually need to grow more. … It truly is, the insurance companies are reimbursing us at the same rate as 18 months ago, but we've grown by 10%, by being busier," he said.

The growth includes business generated by the ambulatory care center, which opened before the insurance payment issue arose, and more patients from outlying areas, such as Delta and Ridgway.

"It's just natural growth. But we are getting paid the exact same. We're having to fight for that payment and we're having to cover those expenses and that growth with our savings account. It gets to a point where we kind of have to shrink the organization back down to what we were getting paid," the CEO said.

While the cost of care rises, the hospital is still waiting for about $25 million in outstanding payments from private insurance companies, Mengenhausen said. The overall 77-position reduction translates to about $8 million less in labor expenses.

That alone won't make up for the currently sluggish insurance payments, but the hospital hasn't given up on collecting.

"We are continuing to stay tight on expenses, and shrinking down the organization will help that. (We are) continuing to focus on collecting our money. We hope to collect another million to $2 million a month to slowly shrink that gap," Mengenhausen said.

"There's back money that they owe us. It's just a matter of getting that money," MRH Director of Marketing and Public Relations Katie Klossner said.

The hospital has been working on the legal side to get the money without going to court, but with limited results, and is filing notice of intent to sue some of the larger insurers it works with, Mengenhausen said, declining to name them at this time.

Job cuts and patient care

The 77 position pare-down included 36 positions in direct patient care, such as certified nursing assistants, and 41 not directly involving patient care, such as jobs in administrative, records and billing divisions. Twelve leadership roles, three physicians and three advanced practice providers are also among the positions now vacant or eliminated.

What positions were cut was based on factors such as service volumes, duplication of work, responsibilities, organizational and management structure, and staffing needs. "Many talented, dedicated employees were affected because their positions were eliminated, not because their contributions were unrecognized or unvalued," reads the MRH statement announcing the restructuring.

"The Board of Directors is committed to maintaining a financially strong and independent community healthcare system," said Jack Johnston, board chair of Montrose Memorial Hospital Inc., the not-for-profit corporation that oversees the hospital, in the same statement. "Rural healthcare systems face unique challenges in an increasingly complex industry. After careful review, we believe these steps are necessary to ensure MRH has the structure and resources needed to protect and strengthen the nationally recognized care our community depends on."

The 77 positions do not include the number of traveling nurses contracted with the hospital for temporary assignments; MRH has separately reduced its use of travelers by 12 assignments since June. The hospital also halted cardiology in Telluride, cut back on pediatric occupational therapy availability and reduced therapy wellness programs. The sleep clinic is to share a combined location with the pulmonary clinic at 715 S. Third St. Patients and providers are being informed; at present, the hospital doesn't have specific projections for caseloads or wait times for the affected services.

The hospital scaled back recruiting, even putting the brakes on a near-deal with an endocrinologist. That specialty, although desirable, does not typically bring in as much income/insurance payments as its expenses, and other revenue-generating service lines would subsidize it. "We have to be more strategic right now, with what we can bring to the community, which is a huge loss," Mengenhausen said.

Montrose Regional Health has also curtailed capital expenses and is making do with equipment it currently has, he said.

"We're operating super lean," Klossner said.

"We've cut expenses. We've done a lot of different things. But at the end of the day, we're a service-providing industry and our biggest expense is labor," Mengenhausen said.

Implementing a hiring freeze and leaving vacancies unfilled ultimately was not enough, he said. "It hit a point where we were not seeing the change with the insurance companies in collecting more. That's where we had to make a decision, make a big, drastic cut in our labor expenses."

August was a banner month — the busiest ever, said Mengenhausen — but MRH is still being paid as it was 18 months ago. "And we actually took a loss for that month, because of how we had to put it in the budget," he said.

August revenue and expense figures were not available because they have not yet been audited and remain subject to contractual and accounting adjustments, Klossner later said. Hospital finances are more involved than cash in, cash out, as well, she explained. The amount billed is not always the amount ultimately paid, because of insurance contracts and government reimbursement rates that serve to reduce initial charges.

Despite how busy the hospital was in August, as of the end of that month, it had about 42 days of cash on hand. The industry target for nonprofit hospitals is 90 days.

As other cost-saving measures, Montrose Regional Health stopped paying quarterly performance-based bonuses to employees who have already reached the top of the payscale for their positions. The customary January market adjustment to wages did not happen this year.

"We've tried different things to stabilize the organization, but it got to the point where we had to make this reduction in force that we did on Monday," Mengenhausen said.

He said staff retention remained strong, which meant fewer vacancies. "People are staying and working here. Weirdly, that's hurting us too, because people are staying here, wanting to work here, and that's where we kind of had to make this step to do the reduction, versus just letting people quit and reorganizing."

Dealing with the delays — and grappling with AI

Although MRH's patient load tilts heavily on the Medicare/Medicaid side — year to date, these patients accounted for 68.5% of the load — Mengenhausen said private insurance is where the hospital primarily struggles.

"The insurance companies are taking longer to pay us and they deny claims after we provide the service, then we have to provide medical records and prove to them why it was necessary for that service," he said. That substantially delays billing to patients for what insurance did not cover, sometimes, by months.

The issue isn't unique to Montrose. According to Becker's Hospital Review, hospital groups in Tennessee, Georgia, Texas, and California are among those bringing recent legal action against insurance companies over allegedly delayed reimbursements, improperly denied/underpaid claims and related matters.

In Colorado, about 70% of hospitals are operating with unsustainable margins, and nationally, more than 60 hospitals and health systems have cut staff, according to MRH, which cited the Colorado Hospital Association and Becker's Hospital Review.

In Montrose, individual patients tend to pay what they owe, even if it takes them years on a payment plan, Mengenhausen said; the hospital receives about $1 million per month from individuals.

"It's not the patients. It's purely the insurance companies," he alleged.

Mengenhausen also pointed to artificial intelligence as a culprit behind improperly denied or delayed claims. "They're using AI to deny claims. AI scrubs the bill and if there's one little thing, boom — they deny it, which then takes another 30 days. It's a game where AI is scrubbing our claims to find anything they can deny it over, which pushes it back," he said. "We're, as quickly as we can, trying to implement AI on our side, to scrub claims before they go out to the insurance companies."

That carries with it additional expenses for the appropriate software.

"The implementation of AI in the insurance claim process is brand-new. If we were getting paid what we're supposed to be getting paid, we would be screaming along. Usually in healthcare as you're growing, you can outpace your expenses. What happened is, it doesn't matter how much we grow, we're getting paid the same. That's very, very different now in the healthcare industry.

"We're having to pivot very quickly to that new norm."

Montrose Regional Health supports Colorado Hospital Association efforts to generate legislation that would establish more guardrails. As it stands, "clean" claims — those that are error-free — are supposed to be paid within 20 days, but that isn't happening, Mengenhausen said.

Mengenhausen said that although he's optimistic of collecting from insurance companies at some point, the situation hit the point where the hospital had to act to quickly pare down the organization, because he had not seen movement from the insurance companies.

"Hope is not a strategy," he said. "But moving forward, I am optimistic. We are going to get through this. This is just a season and we're going to adapt and continue to stabilize, and move forward."

A proposed partnership between MRH and Community Hospital in Grand Junction is also a tactic to stabilize both hospitals during these changes, Mengenhausen said. "Both of us together, we have more influence to push on insurance companies, as the big systems do. And we're able to get supplies cheaper, and drive down our expense, overhead."

The two hospitals announced earlier this year that they were exploring a partnership that would help consolidate investments in equipment and technology, beef up purchasing power, and also increase insurance reimbursements. The proposed partnership is not a merger and each hospital is to retain its own assets, according to how it was described in the announcement.

The articles of incorporation and bylaws are now nearly complete, Mengenhausen said. The partnership agreement is being fashioned; it has been delayed by about six weeks as efforts to get the best vendor pricing continue, but: "It's still moving forward." He said the entities now anticipate signing sometime in January, as both hospitals' boards continue to review the proposal.

"Between both organizations, we're estimated to save $19 million to $31 million a year through expense-savings. That tactic is a way to continue to bridge that gap," said Mengenhausen.

Hospitals have to provide care regardless of a person's ability to pay, or the willingness of their insurance company to do so — and the timeliness of private insurers' payments, or lack thereof, isn't the only factor at play.

Reimbursements from Medicaid and Medicare programs are also complicated. As just one example, Mengenhausen explained that MRH last year temporarily lost a Medicaid pharmacy rebate program allowing the purchase of medication at a discount through the government. Medicaid disenrollments had dropped MRH below the rebate program's eligibility requirements, and it lost access to the program from mid-2025 to July this year, once enrollment rates were again at the necessary threshold. But during the year MRH did not qualify, it meant an outlay of an additional $500,000 a month.

The hospital is working to keep eligible people enrolled in Medicaid, however, when new federal work requirements kick in, Mengenhausen anticipates enrollments will again decline below the rebate program threshold.

The hospital will keep meeting its requirement to serve all, he said. "Republican, Democrat, liberal, conservative — we take care of the human."

Distributed by Newsbank, inc.