A new report commissioned by the Hospital and Healthsystem Association of Pennsylvania warns that up to 14 hospitals could close in the next five years without significant policy intervention, threatening access to care and regional economies across the state.
The analysis, conducted by consulting firm Oliver Wyman, paints a stark financial picture for Pennsylvania’s hospital sector. Nearly four in 10 hospitals in the commonwealth are operating at a loss, and fewer than half have sustainable margins. Twenty-five hospitals have closed in Pennsylvania over the past decade, and if current trends continue, another 12 to 14 could follow by 2030, according to the report.
Closures at that scale would cost the state $900 million in lost wages and increase the average Pennsylvanian’s drive time to the nearest hospital by 22 minutes. Rural communities, which tend to rely more on Medicaid, Medicare and uninsured care, face especially acute risks.
“This expert analysis underscores the urgent need to safeguard access to the care communities depend on,” HAP President and CEO Nicole Stallings said. “We cannot have healthy, vibrant and competitive communities in Pennsylvania without strong, financially stable hospitals.”
HAP is urging lawmakers to prioritize hospital funding in the 2026-27 state budget, particularly through sustained increases in Medicaid reimbursement rates and investments in workforce development, technology and infrastructure.
Hospitals bracing for federal cuts, structural underpayment
The report warns that recently enacted federal cuts through the budget reconciliation process will worsen an already unstable reimbursement environment. Medicaid currently pays Pennsylvania hospitals just 71 cents on the dollar, and the state’s reimbursement rate is 11 percentage points below the national average.
“What this report demonstrates is that hospitals in Pennsylvania are already underpaid for the care they provide, and payment cuts through the federal reconciliation process haven’t even been implemented yet. Our hospitals are still only reimbursed 71 cents on the dollar, and less than half have the operating margins necessary for long-term stability,” Ms. Stallings told Becker’s. “Hospitals have plans for every scenario, ranging from service reductions to reductions in force, to potential consolidation and even closure.”
Beyond Medicaid, hospital leaders are also sounding alarms over a projected shortage of 22,000 nurses by 2028, as well as Pennsylvania’s aging regulatory framework.
“Our hospital licensure regulations haven’t been updated since the 1980s, and care is delivered much differently now than it was then,” Ms. Stallings said. “We see this as a key opportunity for policymakers to support hospitals before any federal-level cuts take effect. The regulatory burden isn’t just pulling caregivers away from the bedside; it’s also adding considerable cost to hospital operations.”
Budget asks: Grow distressed hospital fund, invest in workforce
To stabilize access to care, HAP is advocating for several state policy levers in the upcoming budget. Chief among them: a five-year commitment to grow Pennsylvania’s distressed hospital fund and further increases in Medicaid rates.
“We believe in leading with solutions,” Ms. Stallings said. “We’ve proposed a number of policies to help strengthen Pennsylvania’s workforce — everything from loan repayment, which is a proven tool, to addressing shortages in clinical faculty.”
Each year, the state turns away thousands of qualified nursing school applicants due to a lack of instructors and clinical sites, according to Ms. Stallings, who said reducing those barriers would help grow the pipeline of healthcare workers and meet growing demand.
Rural Health Transformation Fund offers Band-Aid fix
CMS’ $50 billion Rural Health Transformation Fund has been welcomed by many, but for dozens of rural hospitals in Pennsylvania, the $193 million allocated for 2026 feels like a drop in the ocean.
Ms. Stallings called for caution in viewing the fund as a long-term solution. When spread across Pennsylvania’s rural population, the funding amounts to about $57 per person and underscores the need for sustainable, long-term policy solutions.
“We believe those investments are best targeted toward workforce development, infrastructure and technology upgrades,” she said. “Together, these efforts could help provide a bridge to sustainability for hospitals as they prepare for significant funding cuts on the horizon.”
HAP worked closely with the Shapiro administration on the state’s RHTF application, which outlines a two-phase strategy: rapid response grants to address immediate needs and a longer-term, regional approach focused on sustaining access to care.
Ms. Stallings emphasized the importance of CMS acting quickly to approve the program.
“Pennsylvania is certainly ready to meet the goals outlined in our application,” she said. “Our state moved quickly to submit this application — and did so with robust provider and stakeholder engagement — so we hope CMS will act with the same nimbleness, allowing us to begin putting these plans into action.”
Revisiting federal policy
With additional federal cuts on the horizon, HAP is closely monitoring H.R.1, the reconciliation bill that includes widespread cuts in healthcare spending. The legislation has drawn particular scrutiny for its Medicaid provisions, which include adding work requirements, increasing the frequency of eligibility redeterminations, and adding new limits on state-directed Medicaid managed care payments and oversight.
“I believe we need to revisit some of the incredibly challenging provisions of H.R.1, Ms. Stallings said. “We know there are significant cuts planned across the country, and I believe lawmakers are continuing to hear from hospitals, other providers and constituents about their concerns — particularly regarding reduced access to care and the ripple effects on jobs and economic activity. I remain hopeful, and we will certainly continue our advocacy efforts to mitigate some of the most damaging aspects of H.R.1.”
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