Ten years after it became an authority independent of the city, Denver Health can point with pride to its successful transformation in the face of staggering challenges. Now the mere fact of its independence may be the biggest challenge of all.

Under new federal regulations proposed for Medicaid reimbursements, to take effect in September, Denver Health could lose $65 million a year because it is not a "public provider" under the narrow technical definition of that term - even though it clearly serves as a public hospital. A public provider must either be a unit of government with taxing authority, or be operated by one. The hit for Colorado as a whole could be as much as $118 million.

Cities and states are trying to push Congress to enact a moratorium on the new regulations until their full impact is understood. But even if they are successful in getting the regulations modified - and there are no guarantees about that - the new rules would add a huge paperwork burden for providers seeking reimbursement for procedures covered by Medicaid.

The idea is to reduce duplicate payments, which is a reasonable goal, but as usual with Medicaid, the costs of trying to reach it are handed off to providers.

By every measure, Denver Health is in much better shape now than the city agency it replaced. It is also more critical than ever for the city as other hospitals migrate to the suburbs. Dr. Patricia Gabow, who was the city's manager of Denver Health and Hospitals then and is now chief executive officer of Denver Health, explained the other day that the facility provides care for one in four Denver residents, including 35 percent of the city's children.

In part, Denver Health has done as well as it has in difficult circumstances by adopting management techniques used by top companies in other industries. It's moved heavily into information technology, so that patients' records are available wherever in the system they are served.

That's why it has been able to cope as the amount of uncompensated care nearly doubled in a decade, from $150 million to nearly $300 million. Nearly 45 percent of its care in 2004 was uncompensated. Without Denver Health, the system of public health in the area might simply buckle. Do the bureaucrats running Medicaid ever think about the real-world consequences of their regulations?