More than 25 hospitals have closed in Pennsylvania over the past decade, and industry leaders warn more could follow as looming federal cuts, structural reimbursement gaps and persistent workforce shortages increase financial strain across the state’s hospital sector.
“When a hospital closes, especially in a rural community, the fallout has been described as a ‘death spiral,'” Nicole Stallings, president and CEO of the Hospital and Healthsystem Association of Pennsylvania (HAP), told Becker’s. “Unemployment increases, population decreases, it becomes harder to attract families and businesses. This in turn increases the strain on other hospitals, which are now more dependent on government payers that reimburse below cost, caring for sicker patients due to reduced access to routine and preventive care, and facing greater challenges attracting the workforce they need. So the cycle continues.”
The numbers paint a concerning picture. Pennsylvania’s Medicaid program reimburses hospitals 71 cents per dollar spent on care delivery, which sits 11 percentage points below the national average.
An analysis from consulting firm Oliver Wyman, commissioned by HAP, also found that as many as 12 to 14 hospitals in the state could close in the next five years without policy changes to align care costs and payment. It also found that 37% of the state’s hospitals currently operate at a loss, with fewer than half holding sustainable margins.
“The combination of reduced reimbursement, rising uncompensated care driven by Medicaid coverage losses, and the end of enhanced premium tax credits poses a serious threat to hospital sustainability,” Sheilah Borne, vice president of Government Health Relations at Hershey, Pa.-based Penn State Health, told Becker’s. “Without action, communities could see reduced access to emergency services, maternity care, behavioral health programs and other vital hospital-based services that residents rely on.”
The passage of HR 1 also has deepened concern among hospital leaders. The legislation is projected to reduce hospital funding in Pennsylvania by an estimated $22.5 billion beginning in 2027.
“Right now, before a single cut has taken effect, fewer than half of Pennsylvania’s hospitals are operating with margins necessary for long-term stability,” Ms. Stallings said. “Payment cuts will worsen this already unsustainable trajectory.”
Hospital ownership instability has also compounded Pennsylvania’s challenges.
Kyle Snyder, president and COO of Penn State Health, told Becker’s the state has limited regulatory guardrails around hospital acquisitions, with private equity-backed ownership followed by rapid market exit in certain cases.
Rural hospitals often face the brunt of these pressures, where unlike larger urban systems, they can lack the commercial payer mix and economies of scale to offset losses from Medicare, Medicaid and uncompensated care. Mr. Snyder also pointed to aging infrastructure challenges at rural hospitals, with those that were built in the 1960s and 1970s now struggling to meet modern care standards and remain viable.
“Many of the pressures confronting Pennsylvania’s rural facilities mirror those seen nationwide,” he said. “Recruiting and retaining clinicians, particularly specialists like OB-GYNs, as well as nurses and allied health professionals remains one of the most significant hurdles. Limited workforce availability forces hospitals to rely more heavily on contract labor, which further increases operating costs.”
While these pressures have pushed some hospitals toward closure, others are exploring new ownership models aimed at stabilization.
Tenor Health Foundation, a newly formed nonprofit led by CEO Radha Savitala, acquired three Pennsylvania hospitals from Franklin, Tenn.-based Community Health Systems on Feb. 1 when the system exited the state. The hospitals are: Regional Hospital of Scranton (186 beds), Moses Taylor Hospital in Scranton (122 beds) and Wilkes-Barre General Hospital (369 beds).
“Tenor Health’s nonprofit model is built specifically for hospitals and health systems that are operationally viable but financially distressed,” Ms. Savitala told Becker’s. “The focus is not to downsize, but to stabilize, strengthen operations and reinvest locally.”
Tenor also acquired Sharon (Pa.) Regional Hospital from Dallas-based Steward Health Care in January 2025 and reopened the facility in May.
“One of the key lessons from reopening Sharon Regional Medical Center — now Sharon Regional Health System — was the critical importance of speed,” Ms. Savitala said. “The longer a hospital stays closed, the harder it becomes to rebuild workforce pipelines, physician referral patterns and EMS relationships. Restart timelines have a direct impact on long‑term viability.
“That lesson is being applied to the Commonwealth Health hospitals. Early engagement with employees, clinicians, EMS providers and community leaders is central to maintaining operational continuity and accelerating stabilization. Stabilization is not only operational, it is relational.”
A spokesperson for Philadelphia-based Jefferson Health told Becker’s that while the financial strain on Pennsylvania hospitals is “significant,” policymakers now have a stronger understanding of the crisis through sustained advocacy by hospital leaders working alongside HAP.
Jefferson’s top recommendations center on increasing Medicaid reimbursement rates to more accurately reflect care costs, mitigating the coverage and payment reductions expected under HR 1, and reforming Pennsylvania’s medical liability environment, which carries some of the highest malpractice costs in the country.
“Additional targeted investments, such as workforce development, AI-enabled productivity improvements, and support for rural hospitals, would also improve financial stability and prevent additional erosion of access in vulnerable communities,” the spokesperson said. “Similarly, modernizing and streamlining administrative and regulatory requirements, which reports show can account for more than 40% of the expenses hospitals incur, would lower operating costs and allow hospitals to redirect resources toward direct patient care.”
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