Pending legislation could ensure Children’s Hospital in Colorado Springs receives millions in annual payments to make up for revenue shortfalls triggered by the military’s insurance provider TRICARE making changes to reimbursements.

Last year, Children’s Hospital lost $2.4 million each month because of cuts in TRICARE reimbursement for outpatient care, said Greg Raymond, the Southern Region president of Children’s Hospital Colorado, Colorado Springs. 

The Defense Health Agency’s insurance provider TRICARE covers active-duty troops and their dependents, National Guard members, reservists, retirees and others qualified through the military. The Colorado-Springs based hospital saw more than 10,000 TRICARE patients in 2023. 

After Children’s Hospital reached a deal on Christmas Eve with TRICARE’s benefit administrator, the hospital has been able to maintain specialty care, but it is still seeing revenue losses, Raymond said. 

Raymond told The Gazette in 2024 the changes to reimbursement could force the hospital to close the cancer and blood center, reduce emergency room openings and cut behavioral health programs. But the hospital has not made any changes to its care so far, Raymond said, in an email on Tuesday. 

If a proposal in the 2026 National Defense Authorization Act passes, the hospital could receive an annual sum equal to 30% of revenue received through its Outpatient Prospective Payment System, such systems set a flat price for medical services. It would still fall short of covering all the revenue lost to the hospital because of the TRICARE changes but it “would go a long way toward protecting access to pediatric specialty services for military families with TRICARE,” Raymond said in an email. 

“Children’s Hospital Colorado is grateful for the bipartisan efforts of Colorado Representatives Jason Crow and Jeff Crank,” Raymond wrote. 

To receive the payments, a hospital must qualify by receiving 10% or more of its revenue through TRICARE, or serving at least 10,000 TRICARE patients in a year. The hospital could also be classified as essential for TRICARE operations to receive the payments, the draft legislation states.

When TRICARE changed its reimbursement model in 2023, at least 14 children’s hospitals nationally were expected to see lower revenues, according to a letter sent by the Military Coalition. The letter signed by numerous veterans service organizations called for a change in the law last year to increase reimbursements saying that demand for care was outstripping services near key military installations even before the cut in TRICARE payments. 

“With capacity constraints across the U.S. healthcare system, military families already report long waits for many types of pediatric specialty care,” the letter said. 

Crank, R-Colorado Springs, said he worked on the bill to help children’s hospitals with a Virginia lawmaker from a district with another facility facing some of the largest revenue losses. 

Children’s Hospital Colorado sued the Department of Defense over its changes to TRICARE reimbursements. But in 2024, a federal judge ruled in favor of the changes and allowed the new payment system focused on actual costs rather than historic reimbursements to stay in place.

After losing the suit, Children’s Hospital turned to lobbying lawmakers for help and had hoped to see a change in the last National Defense Authorization Act.