The Upper San Juan Health Service District has been operating an ambulance service in Archuleta County since 1985 — a critical need since the nearest hospital was, at the time, in Durango. Then in 2006, the District asked the voters for permission to go deeply into debt to build a hospital in Pagosa, and the voters overwhelmingly approved the plan. The Pagosa Mountain Hospital — later to be renamed ‘Pagosa Springs Medical Center’ — opened its doors in 2008.
The financial key to success was the ‘Critical Access Hospital’ designation, under which the new hospital would be reimbursed by Medicare for 101% of its costs for treating enrolled Medicare patients. The reimbursement at PSMC has since dropped slightly, to about 99% of actual costs.
Nationally, most health care systems are reimbursed only about 80% of the cost of treating Medicare patients.
From what I could tell from a cursory visual survey of the people who attended the Monday presentation by PSMC CEO Rhonda Webb and CFO Chelle Keplinger, nearly everyone in the room appeared to be qualified for Medicare.
But as we heard from PSMC CEO Rhonda Webb and CFO Chelle Keplinger last Monday at their presentation at Pagosa Peak Open School, another piece of the financial puzzle is Medicaid, which aims to assist low-income families. Medicaid is currently reimbursed at about 60% of costs. To cover the revenue shortfall caused by Medicaid services and by charity care for patients unable to pay their bills, PSMC relies partly on offering a “service line” of specialists, including:
- Cancer Center
- Cardiology
- General Surgery
- Infusion Therapy
- Integrated Behavioral Health
- Interventional Pain Management
- Laboratory
- Neurology
- Orthopedic Surgery
- Primary Care
- Radiology
- Telemedicine
- Women’s Health
In 2025, PSMC added Pulmonary Medicine to its service line. By offering these ‘specialty services’, PSMC has managed to consistently cover its overall operating costs. But the healthcare landscape may change significantly in the near future, thanks to ‘efficiency measures’ in Washington DC.
Here’s CFO Chelle Keplinger, sharing some Power Point slides with the ‘mature’ audience:
“We’re going to talk a little bit about Medicaid today, and we’re going to talk about the cuts they are proposing for us. We’re looking at this as a ‘worse case scenario’ because, as you’ve read, everyday they are throwing stuff out there, and saying, ‘It could be a combination of this, or a combination of that’. So what we’ve put together is a ‘worse case scenario’, if they really cut everything they’re talking about cutting right now.
“I don’t know how many of you know about Medicaid, and what the rules are for Medicaid? To qualify for Medicaid, you either have to be a pregnant woman, or a child, or over 19 with an income — for a family of four, in this example — of less than $41,500.
“That care includes primary care, specialty care, all outpatient treatment, emergency room care, behavioral health, dental, vision, medication, and many more services — without limits and without co-pays.
“So we’re looking at low-income families, for the most part…”
We do have some low-income families in Archuleta County, thanks mainly to a tourism-dependent economy.
Ms. Keplinger: “During the Medicaid expansion, they expanded that out beyond the normal limits of Medicaid. They were trying to get more people covered, so there were fewer people who went without health insurance, and fewer people who got sick and went without health care.
“So this is what we know. We know that the Department of Health Care Policy and Financing… in this county, last year, spent $22 million on healthcare. That’s a lot. A quarter of that was spent on long-term care. So when folks get to those nursing home settings — not in the acute hospitals, but in those long-term settings.
“There are about 3,656 residents in Archuleta County who are currently on Medicaid. About one-fifth of our population, right?
“We are an expansion state, so that means that 1,405 of those adults and 208 of those children [in Archuleta County] were put on the Medicaid program during the expansion. They didn’t qualify before. But now we’re looking at 1,600 additional people who are now on that. And one of the things they’re talking about is hitting the Medicaid expansion…”
She then discussed the possible impacts in New Mexico, which expanded Medicaid more than other states.
“We don’t know how many people are on Medicaid in the New Mexico counties closest to us. PSMC does take New Mexico Medicaid patients, and we treat those patients all the time. But we don’t know that their actual population is like.”
Colorado law requires hospitals to provide the same level of service to patients who cannot pay, as they do for paying customers. The non-paying customers are billed “at the Medicaid rate” — that is, at about 60% of the cost — and in some cases, they never pay their bill.
“We don’t know how many people are going to start seeking their care in the Emergency Room. It’s a lot cheaper to do it in a primary care setting, but [Medicaid patients] currently have no limits and no co-pays. So if they’re seeking care in the primary care, they’re doing the right thing. But that doesn’t mean they will be able to afford that, going forward.
“Or how many people who simply won’t seek care. There’s going to be that population too…”
Ms. Keplinger noted that, while the Trump administration seems intent on cutting Medicaid, we also have a state government that’s looking at a $1.2 billion shortfall, partly due to increased Medicaid costs.
Medicare and Medicaid together comprise 70% of the business at PSMC, Ms. Keplinger told us.
“So the loss of the provider fees to our facility — based off the 2024 numbers — would be $3.2 million. That’s a lot for us…”
But if Medicaid-expansion recipients are indeed deleted from the rolls, the shortfall at our local taxpayer-supported hospital might be $4.3 million.
“Worst case scenario…”
Read Part Three, tomorrow…