Dire funding news for the state’s hospitals has left Republicans in rural Colorado pleading with the legislature to restructure the Hospital Provider Fee, despite ideological beliefs.

It is a thorny issue that pits conservatives in the legislature against fellow Republicans in rural parts of the state.

Hospitals face a $264 million reduction in the upcoming budget that begins in July. That number is up from an initial budget request in November, which proposed a $195-million reduction. Rural hospitals are expected to receive the worst of it, with expectations for some hospitals to close.

Budget writers have proposed a $28.3 billion annual spending plan that lawmakers will begin to debate this week. In an effort to pass a balanced budget, the Joint Budget Committee proposed reducing collections of the Hospital Provider Fee.

The fee is assessed on patient stays to force a match of federal health care dollars. With the federal match, hospitals in Colorado stand to lose about $528 million.

The reason hospitals are a popular target is because by reducing the provider fee, taxpayer refunds prescribed in the Taxpayer’s Bill of Rights are reduced or eliminated. The fee helps trigger refunds by contributing to state spending limits.

By reducing the Hospital Provider Fee, lawmakers can place the state under its spending limit, thereby eliminating surplus taxpayer rebates, which frees money for spending on other budget issues.

But hospitals say the maneuver would “hit rural communities and rural hospitals exceedingly and disproportionately hard,” at a time when the Front Range economy is booming, but rural Colorado trails urban areas of the state.

“Rural hospitals, which serve vast rural areas with declining populations and struggling economies, will feel the consequences of inaction from the General Assembly in a far more profound and lasting way than will hospitals in the economically growing Denver-metropolitan area,” writes a coalition of 300 rural advocates, business leaders, healthcare providers and local Republican leaders.

The letter to lawmakers calls for a restructuring of the provider fee as an enterprise fund, or government-owned business. By doing so, the fee would be exempt from contributing to the state’s spending cap, which would free money for state spending.

A restructuring of the fee would not just free money for hospitals, it would make revenue available for other spending priorities, such as transportation.

Previous efforts to restructure the fee – first proposed by Gov. John Hickenlooper in 2015 – failed in the legislature over GOP objections. Many Republicans believe such a change to the provider fee would have to go to voters for approval. They argue that taxpayers would rather see rebates than more government spending.

But several Republicans have evolved on the subject and are working on plans for a compromise that would restructure the fee, with spending priorities for rural Colorado.

“Supporting legislation that enterprises HPF is not an endorsement of the original bill, but rather a pragmatic step to cure these unintended consequences,” writes the mostly rural coalition in support of the plan.

Sen. Jerry Sonnenberg, R-Sterling, who opposed restructuring the fee in the past, has been motivated by the crushing projections for rural Colorado. He suggested a supplement to a centerpiece transportation funding bill. The supplement would provide $100 million for projects in rural Colorado.

The question is what the legislation would do to the Hospital Provider Fee. Senate Democratic Leader Lucia Guzman of Denver was working on legislation to restructure the fee. But she ended that effort to make way for a bipartisan compromise.

A handful of Republicans, including Sonnenberg, have said that they would support a restructuring of the provider fee if the overall base of state tax revenue is reduced in order to preserve a state spending cap.

Senate President Kevin Grantham, R-Canon City, said it’s unclear what proposal, if any, could clear a divided legislature. At the start of the legislative session, Grantham said a restructuring of the fee without a lowering of the overall base would be a nonstarter.

“There’s no secret that Sen. Sonnenberg’s bill will try to address that in some form or fashion. We still have to vet that through the entire process … I’m not sure the introduced bill will be palatable to the House … It might not be acceptable in the Senate,” Grantham said.

The coalition’s letter supporting the change points out that last year Republican Attorney General Cynthia Coffman offered her legal blessing. The opinion conflicted with a legal memo from nonpartisan legislative counsel that said it would be illegal to restructure the fee without voter approval or legislation that would allow the legislature to create a new TABOR-exempt enterprise.

Kevin Stansbury, the chief executive of Lincoln Community Hospital in Hugo, said he hopes the realities facing rural Colorado have shifted the way Republicans in the legislature think about the issue.

“There is growing consensus among Republicans and Democrats in the Senate and House that doing nothing would have broad and devastating impacts on very basic hospital, road and education programs, especially in rural Colorado,” Stansbury said. “Enterprising the HPF is specifically authorized by TABOR, and it is mission critical for rural Colorado.”