Multiple health system CFOs recently traveled to Washington, D.C., to meet with lawmakers on Capitol Hill, advocating against proposed Medicaid cuts that could threaten access to care and lead to the closure of essential hospital services.
Health system executives participating in these discussions included:
- Brad Clark, executive vice president and CFO, Advocate Health (Charlotte, N.C.)
- Cheryl Matejka, executive vice president and CFO, Mercy (St. Louis)
- Brett Tande, corporate executive vice president and CFO, Scripps Health (San Diego)
- Andy Barrow, CFO, Cone Health (Greensboro, N.C.)
- Gail Kosyla, executive vice president and CFO, Yale New Haven (Conn.) Health
- Jonathan Ma, senior vice president and interim CFO, Sutter Health (Sacramento, Calif.)
- Jonathan Williams, vice president of government affairs, Sutter Health
- Sean Fadden, vice president of finance, Intermountain Health (Salt Lake City)
In late February, the House passed a budget resolution that plans to cut federal spending by up to $2 trillion over the next decade. The Republican-backed plan calls for at least $880 billion in spending reductions through 2034, with Medicaid expected to take the biggest hit. The Senate is expected to vote on the legislation in April.
Hospital leaders warn that cutting Medicaid funding would reduce access to care for millions, financially destabilize hospitals — especially safety-net and rural facilities — and increase uncompensated care costs. The ripple effects could also lead to healthcare job losses and broader economic strain.
“The bill that came out of the House proposed $880 billion in Medicaid cost reductions over several years — a massive number that some argue aims to return Medicaid to its original intent. There’s significant debate about that,” Mr. Tande said during an upcoming episode of the Becker’s CFO and Revenue Cycle Podcast. “Many of my peers and organizations have had to pivot quickly, working to understand how potential Medicaid funding reductions — along with other changes, such as site-neutral payments — could affect their operations. The challenge is not just assessing the impact on our organizations but also on how care is delivered to communities across the country. That has been, by far, the biggest focus over the past few months.”
The budget resolution directs the Energy and Commerce Committee — which oversees Medicare and Medicaid — to identify $880 billion in savings over the next 10 years but does not specify how those savings should be achieved. The Congressional Budget Office said that reaching the $880 billion healthcare savings target would likely require significant cuts to Medicaid or the Children’s Health Insurance Program.
Hospital leaders are actively advocating against Medicaid funding cuts while also seeking clarity on potential policy changes and preparing proactive strategies to mitigate the impact should cuts take effect.
“My sense of the direction is they are trying to get Medicaid — some of the expansion that we’ve seen over the years and some of the variety in the way in which states implemented that expansion — back under control,” Mr. Tande said. “Work requirements came up in nearly every meeting we had [on Capitol Hill]. My understanding is that, over the 10 years, that would be worth $130 billion in savings. It does seem like there is broad Senate Republican support for that change.”
Eliminating the enhanced Federal Medical Assistance Percentage, or enhanced FMAP, has also been floated by some lawmakers to reduce government spending. Under the ACA, states that expanded Medicaid receive additional funding through FMAP.
Historically, the federal government has covered up to 50% of Medicaid costs, but for expansion states, that number has reached as high as 90%, meaning that states might have the federal government take care of up to $9 for every $10 spent on some expansion populations.
“That seems to be a primary target, too,” Mr. Tande said.
Reducing FMAP — either immediately or gradually — could trigger automatic Medicaid rollbacks in some states. Many have “trigger laws” tied to federal match rates, meaning even a minor decrease (e.g., from 90% to 89%) could force an immediate unwinding of Medicaid expansion, leaving tens or even hundreds of thousands without coverage overnight, according to Mr. Tande.
Beyond Medicaid, there has been significant discussion about site-neutral payments, payer behavior — including prior authorization and denial practices — and the frictional costs associated with those issues. The 340B program has also been a topic of debate, but Medicaid remains the central focus.
“There are a host of hospitals and health systems that are really struggling, and even a small financial hit could push some over the edge, forcing drastic cuts — or in some cases, leading to insolvency,” Mr. Tande said. “Fitch has been great in talking about this trifurcation of credit quality. You’ve got hospitals that are kicking along and doing okay. Some have been improving, but there is a third of them that have been really struggling. Some of these cuts could be catastrophic.”
