The board of the Upper San Juan Health Service District, which oversees Pagosa Springs Medical Center (PSMC), heard the first draft of the district’s 2027 budget on Thursday, Oct. 8, with Chief Administrative Officer Ann Bruzzese offering a caveat — “We think it will change greatly.”
Bruzzese explained that the district has to present a draft budget, but that multiple factors will lead the district’s second draft of its budget to look very different.
Bruzzese then explained some of the main factors leading to that assessment.
Bruzzese first indicated that, last June, the state provided an opportunity to receive funds through the Rural Health Transformation Program (RHTP).
The RHTP, the state’s website explains, “was authorized by H.R. 1 Section 71401 of Public Law 119-21, to provide grants totaling $50 billion in federal funds from Federal Fiscal Year (FFY) 2026 through FFY 2030 ($10 billion per year) to States (territories and Washington D.C. are excluded). The RHTP is a five-year nationwide initiative administered by the Centers for Medicare and Medicaid Services (CMS) and designed to strengthen access, improve outcomes, expand the workforce, accelerate innovative care models, and modernize technology-enabled services for rural and frontier residents.”
On Sept. 28, the state announced $4,201,527 from that funding would be directed to PSMC.
That, Bruzzese explained, is not in the budget right now and would be paid to the district on a reimbursement basis.
She noted that the district had signed the contract and, once the state signed, it would be included in the budget.
Later in the meeting, Bruzzese noted the RHTP is a “daunting” amount of work.
The second issue Bruzzese outlined is a software mapping issue that resulted in unreliable service-level volume and revenue data in the district’s general ledger software.
The district is rebuilding 2026 volumes to base 2027 budget estimates off of, she indicated.
She added the staff is also working with Cerner, one of the software companies, to correct the mapping errors, with the presentation noting, “This is not a quick fix.”
In response to a question from board member Matt Mees, Bruzzese indicated the district believes the mapping issue is not impacting claims.
PSMC CEO Dr. Rhonda Webb reiterated there’s no reason to think anything has been overbilled.
Bruzzese’s budget presentation states that, for more than a year, operating room recovery has been mapping to cardiology, with some other areas also seeing mapping errors.
“Since July/August 2026 there are substantial mapping errors,” it states.
Bruzzese then explained the first draft of the budget is based off the gross charges that were formulated for the 2026 budget, with some other changes, such as changes to provider fees, factored in.
She noted the second draft of the budget would be completed using accurate volumes by service, updated targets and budgeted gross charges based on those targets.
“It will change a lot by the second draft,” Bruzzese reiterated.
Bruzzese then explained some factors that are anticipated to drive gross charge growth in 2027, including adding telemetry to inpatient to retain more patients; having a full-time general surgeon with colonoscopy capability; more primary care providers and a full-time neurologist; and more referrals to lab, radiology and specialists from having additional primary care providers.
She noted that the provider fee payment was reduced in the first draft budget by a net $248,000.
She noted operating income will also include operational grants and other income.
In terms of expenses, Bruzzese explained that, on Oct. 1, PSMC did market increases for all registered nurses and radiology technologists to remain competitive, explaining the goal is to cut travel nurse expenses in half by next year.
She noted the move is already seeing benefits.
“We made a substantial investment in those people,” she added.
In 2027, she added, certain staff will see a 3 percent increase in compensation, with the presentation noting that excludes employees with an employment agreement, staff who received the market increase and staff hired after Oct. 1.
Bruzzese explained there will be a net increase of four full-time equivalents over the 2026 budget.
In terms of nonoperating income, Bruzzese noted no new state or federal grant opportunities are currently anticipated, lower interest income is expected as cash revenues are used and no increases in property tax revenue are assumed.
She added the PSMC Foundation raised $800,000 for the San Juan Street EMS Station renovation in 2026 that will be transferred to PSMC in 2027, with the Foundation’s fundraising goal for 2027 sitting at $300,000 for the remainder of the project’s cost.
The initial draft budget also anticipates $553,000 coming from fund balance reserves to balance the budget, with Bruzzese noting the hope is to reduce that figure when better counts are known.
The board’s next meeting is scheduled for 5 p.m. on Nov. 17 in the board room at PSMC.
randi@pagosasun.com
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