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DENVER – Lawmakers continue to struggle to find a compromise that would spare Colorado’s hospitals from the budgetary chopping block.

Negotiations on Senate Bill 267, which contains a number of provisions aimed at sustaining rural Colorado including the reclassification of the Hospital Provider Fee as an enterprise, took a leap forward Monday when Sen. Jerry Sonnenberg, R-Sterling and sponsor of the bill, told the media a compromise had been struck.

But in the middle of his announcement, a note arrived from Democratic leadership saying the deal was off.

Colorado’s hospitals could lose $264 million in federal matching revenue under the state’s budget.

The deal, in the works since before the session began, includes provisions to bond for $2 billion for transportation and other construction, a $25,000 property tax credit for small businesses, $30 million in funding for rural schools over three years and $33 million for the K-12 reserve fund and the reclassification of the provider fee.

Hospitals pay the fee to the state government, and then it is matched by the federal government and redistributed to subsidize care of individuals on Medicaid or without insurance. When it is paid back, it uses a formula which generally favors rural hospitals.

The three hospitals in Southwest Colorado which benefit from the fee, Animas Surgical Hospital, Mercy Regional Medical Center and Southwest Memorial Hospital in Cortez, are anticipating cumulative cuts of roughly $4 million for the 2017-18 fiscal year.

The fee was cut during the budget balancing process because the funds it accumulates, both the federal matching dollars and the money from the hospitals, count toward the revenue limit established by the Taxpayer’s Bill of Rights even though they pass directly through the state to healthcare providers.

By reclassifying the fee as an enterprise, it would no longer count toward the revenue limit and would open up hundreds of millions of dollars for other state needs such as transportation infrastructure and K-12.

The issue is, Republicans see it as a way for the state to hold onto additional tax dollars and have insisted on lowering the TABOR limit to stunt the growth of government.

It was the lowering of the limit that caused negotiation on SB 267 to break down until last week when a compromise was struck to reduce it by $200 million, Sonnenberg said.

To strike the deal, measures were included to limit the amount the state government can charge for administering the hospital fee, to increase the total sales tax on marijuana to 15 percent, the revenue from which goes towards schools and the small business tax credit, and raised the copays for Medicaid patients to the maximum allowed by the federal government.

An example of what this could look like is an increase in copays for medications. Coloradans on Medicaid pay either $1 or $3 for medication refills depending on whether they are brand name or generic. If the limit is increased to the federal maximum, it would jump to $4 for preferred and $8 for non-preferred medications.

It was that provision that caused Democrats to withdraw their support.

“It’s absolutely something we haven’t agreed too,” said House Majority Leader KC Becker, D-Boulder and sponsor of the bill.

The request to increase copays was not closely vetted since conversations started eight months ago, but rather an idea that was thrown out by GOP and shot down by Democrats, Becker said. “That’s no trifling matter, it’s not something we can just insert and think it’s not going to have an impact.”

Becker added that increasing copays was not part of the final compromise tentatively agreed upon by the bipartisan group of lawmakers working on SB 267, as Democrats have serious reservation about who would be affected by it.

With the compromise withdrawn, it is unclear if anything will be resolved before the Legislative session closes on May 10.

But both parties committed to continue to work on SB 267 in an effort to spare rural hospitals from cuts that could cause some to close their doors.

“I’m not willing to give up yet,” Sonneberg said.

Becker said the progress made on the bill since it was introduced is a reason for hope.

“We have agreement on all the major elements,” she said.