Medicaid supplemental payment programs served as a financial cushion for for-profit health systems in the second quarter as the loss of enhanced ACA premium tax credits pushes more patients into uninsured status.
The scale of the benefit was substantial for the hospital operators. Nashville, Tenn.-based HCA recognized $400 million of incremental net benefit from Medicaid supplemental payment programs in the quarter, driven largely by a newly approved Florida program. Dallas-based Tenet built a $140 million contribution from expanded supplemental Medicaid programs into its raised full-year guidance. Franklin, Tenn.-based Community Health Systems pointed to newly approved state-directed payment programs in Georgia, Indiana and Florida as a full-year tailwind, though executives said those gains were more than offset by softer elective volumes and continued ACA-related disenrollment, which prompted a cut to full-year guidance. And King of Prussia, Pa.-based UHS raised its full-year estimate of net Medicaid supplemental funding benefit to approximately $1.5 billion, up $150 million from its prior outlook.
“These programs, which are fundamental to our providing services to Medicaid patients, play an important role in supporting access to care,” HCA CEO Sam Hazen said. “This support has been especially important for hospitals, as they are now providing more uncompensated care to uninsured patients.”
UHS CFO Steve Filton outlined on his system’s earnings call how it is preparing for supplemental Medicaid payments to phase down under the HR 1 starting in 2028, while also noting that Congress could still act to delay implementation.
Mr, Filton said UHS is “anticipating and trying to stay ahead of those … reductions that are scheduled to start beginning in 2028,” pointing to expense management, technology and AI investment, revenue cycle overhauls, and a deliberate shift toward outpatient behavioral health services, which tend to be more Medicare- and commercial-centric than Medicaid-dependent. UHS has also undertaken a review of its acute care revenue cycle with a third-party consultant and is beginning a similar process on the behavioral side.
Tenet CFO Sun Park noted on his system’s call that Tenet still delivered “a clean beat in the quarter even without these incremental Medicaid revenues.” On that same call, Tenet Chairman and CEO Saum Sutaria, MD, pushed back on the notion that supplemental payment dollars are a windfall rather than earned revenue, arguing the money funds real investment in high-acuity, Medicaid-heavy service lines.
“You really do have to put in place the services, make capital investments, work with physicians or attract them to build some of these sophisticated service lines for the sickest of Medicaid patients,” he said.
At the Becker's 11th Annual IT + Revenue Cycle Conference: The Future of AI & Digital Health, taking place September 14–17 in Chicago, healthcare executives and digital leaders from across the country will come together to explore how AI, interoperability, cybersecurity, and revenue cycle innovation are transforming care delivery, strengthening financial performance, and driving the next era of digital health. Apply for complimentary registration now.
