Colorado’s hospital systems aren’t just a network of clinics and emergency rooms — they are also one of the state’s largest economic engines.

So some 10 hospitals identified at any given time as vulnerable to closure, the alarm extends far beyond patient care.

Hospitals anchor local workforces, sustain regional economies and stabilize entire communities — meaning every threatened facility represents both a healthcare crisis and an economic one.

Colorado’s hospital sector generates more than $140 billion in annual economic output and supports nearly one in five jobs, making it one of the most consequential parts of the state’s economy.

In many rural counties, the hospital is effectively the center of the local economic identity, said Essey Yirdaw, Colorado Hospital Association vice president of data analytics and health equity. When hospitals struggle, the ripple effects reach well beyond medical services. Entire communities depend on the stability of their healthcare providers, she said.

Colorado’s growing reliance on healthcare — both as an economic driver and an essential service — is colliding with the financial realities of staffing and covering the rising costs of hospital operations.

State lawmakers echo the warning.

Sen. Dylan Roberts said hospitals in small towns “are such a big part of not only giving care to that community, but they are often one of the largest, if not the largest, employers in the community. They are a huge economic driver.”

When hospitals lose staff or services, he added, “those community members have families that operate other businesses and if those people aren’t there, those other businesses go away.”

A report from the Common Sense Institute warned that even a single rural hospital closure would send shock waves through local employment, tax revenue and business activity — a scenario some analysts said is increasingly plausible given the current strain on Colorado’s healthcare system.

Hospitals are economic anchors

Across rural counties, Colorado hospitals that once served as reliable employers and community anchors are now fighting to stay open, squeezed by rising costs, shrinking reimbursements and a workforce pipeline that can’t keep pace with demand, their executives said.

According to the Common Sense Institute report, Colorado’s healthcare workforce has grown significantly over the last decade, yet shortages persist in nearly every clinical category. The sector is expanding, but not fast enough to meet the needs of a growing, aging population.

Colorado’s healthcare sector supports more than 744,000 jobs statewide — directly and indirectly — a 15% increase between 2022 and 2024. The CSI report said that number is expected to continue rising over the next decade, as demand for care grows.

Hospital leaders said shifting state and federal budgets — with declining funds and increasing regulations — force them to focus on the bottom line and cover fixed daily costs. That includes competing with urban medical centers that can offer higher pay and lifestyle advantages rural communities can’t match.

A report from the Colorado Chamber Foundation noted that Colorado is now the sixth most regulated state in America. Its analysis put the number of regulations here at roughly 200,000, just behind New York.

When it comes to health services, Colorado has adopted some 13,700 rules, compared to the national average of about 4,700.

The highest expenses hospitals and medical centers incur are for staffing and labor. It’s estimated that, on average, nearly 50% of operating costs are workforce-related expenses, according to the Colorado Hospital Association.

Delta Health CEO Nicholas Colleran said workforce strain remains one of the hospital’s biggest challenges, noting that rural facilities must constantly adjust but still struggle to recruit compared with urban providers. Operating at a negative 9% margin, he said staffing accounts for about 70% of his hospital’s expenses.

“We usually have to pay a little more because we can’t get people to come here,” said Colleran. “We compete for every nurse. There’s only a certain number of nurses on the Western Slope.”

Recruiting for specialty services is also a daily struggle for all rural hospitals, Colleran said.

Hospitals must also staff departments, regardless of the volume of patients.

“Just because we had 120 births, we still have to have two nurses on (OB),” Colleran said. “You don’t have those economies of scale.”

CSI’s 2024 workforce modeling showed that Colorado will need tens of thousands of additional healthcare workers by 2030 — particularly nurses, behavioral health providers and long‑term care staff. Rural regions face the steepest shortages.

Service cuts: maternity deserts, specialty gaps and long drives

As margins shrink, hospitals are cutting services to stay open. Labor and delivery units have closed in multiple counties, creating what the Colorado Hospital Association calls “OB deserts” across half the state.

“It’s not acceptable that we have these maternal care deserts,” said Roberts, the state legislator. “They choose to no longer live in these communities.”

“That further erodes the character and vitality of rural Colorado,” he said.

Because of the ever-changing economic landscape, Colleran said hospitals are making tough choices to stay open, including discontinuing services altogether. Last year, Delta closed its labor and delivery department.

Colleran argued that closing can — or should — never be an option.

“If it ever did happen, the economic fallout to Delta County would be devastating. Over 600 employees… all the tax dollars,” he said. “It cannot happen,” he said.

“It would be like one of our mines shut down — but times two,” he added.

Yirdaw, from the hospital association, said hospitals struggle to “make the math work and as more services are cut, it’s getting hard to keep “care local.”

Hospitals operate with fixed daily costs that don’t change, regardless of how many patients they treat or how much they’re reimbursed by government programs or private insurance. They must maintain required staffing levels every day, even when patient volume fluctuates.

At Southwest Health in Cortez, that fixed daily cost is $213,000. CEO Joseph Theine said the hospital must be fully staffed whether the emergency department sees a record day with 60 patients, as it has recently, or a more typical day with around 30.

During a healthcare roundtable discussion hosted by U.S. Sen. John Hickenlooper in June, Lincoln Hospital CEO Kevin Stansbury said, “At my hospital, we employ about 160 people in a community of fewer than 800.”

“Last year,” Stansbury added, “our payroll exceeded $11 million. We’re the largest employer in our community and the second largest employer in our county.”

Nearly 80% of Colorado hospitals are operating with margins the Colorado Hospital Association considers unsustainable.

The stakes are clear for a system that is economically indispensable — but increasingly unstable, said Tom Rennel, the hospital association’s vice president of financial policy and data analytics.

“It would be hard for me to understand or even try to envision what a community would look like without that hospital, without those jobs and without those services,” he said.