Hospital price caps are gaining momentum across the U.S. A number of states have enacted or are advancing legislation to limit what hospitals can charge commercial payers, and health system leaders are navigating what those policies mean for their organizations.
In some states, organizations are already restructuring operations after new policies took effect. In at least one other, leaders are preparing for what similar legislation could mean.
More than a dozen states have enacted or are actively advancing legislation to cap what hospitals can charge commercial payers, with most proposals indexing reimbursement to a multiple of Medicare rates. Indiana and Vermont became among the first to enforce systemwide commercial price caps in 2025. Vermont specifically has adopted policies aimed at slowing healthcare spending, including a cap on commercial hospital prices for administered drugs that took effect in January 2026 and a broader commercial hospital price cap scheduled for 2027. The state also uses hospital budget oversight through the Green Mountain Care Board.
Meanwhile, California’s Office of Health Care Affordability set binding spending growth targets, with the first enforceable year being 2026. Delaware’s governor signed legislation in July that phases in Medicare-based caps through 2033. And Michigan is weighing a proposal that would cap reimbursement at 200% of Medicare and require hospitals to immediately cut prices by 10%.
Health system and hospital association leaders spoke with Becker’s and described how organizations are responding to that environment.
Stephen Leffler, MD, president and CEO of Burlington, Vt.-based UVM Health, took the helm as the system prepared for significant revenue reductions. State lawmakers passed legislation in May 2025 that restructured home infusion drug pricing, and budget guidance for fiscal 2026 added further constraints. Combined, the changes removed roughly $220 million from UVM Medical Center’s revenue Jan. 1, or about 10% of total revenue in a single year.
“The revenue came out quickly, essentially all at once, and we’ve been working extremely hard, starting last fall, but especially since January, to try and bring our expenses down to an equal measure,” Dr. Leffler said.
UVM Health is rolling out $300 million in expense reductions over three years, and has restructured parts of its workforce and changed employee benefits. About 65% of the system’s budget is staff and benefits, Dr. Leffler said, limiting how much cost can be removed without affecting people. He described the process as messy but necessary and said the organization’s governing framework has shifted.
“For most of my career, we never said affordability was our responsibility,” Dr. Leffler said. “Our responsibility was to provide care to people, to get them the care they needed and to provide high-quality care. We still have to do that, and it’s still job number one. But I really think in Vermont — and I think we’re a little ahead of the rest of the country on this because we’re such a small state — affordability has to be part of everyone’s commitment.”
Some of the early results are visible to patients. Commercial insurance rates dropped an average of 12% in 2026. MRI and CT scan costs fell 25%. Dr. Leffler recalled speaking with a patient whose copay for a CT scan had dropped by a meaningful amount at a time when fuel costs were high.
“It made a real difference for him on his monthly budget,” Dr. Leffler said. “So that’s a good thing.”
His advice to leaders in states where similar policies are still under consideration is straightforward.
“If you have more time to work on this, if you can feel it coming, if it’s one year out, 18 months out, two or three years out, start thinking now about how to be as efficient as possible,” Dr. Leffler said. “It takes longer to bring expenses down than it does for revenue to come out, and revenue can come out pretty quickly.”
In California, the first enforceable year of OHCA’s spending targets has produced challenges that are consistent with what the association projected, said Ben Johnson, group vice president of financial policy for the California Hospital Association.
Mr. Johnson said the spending targets have influenced contract negotiations between hospitals and insurers, with some hospitals receiving contract termination notices. He said smaller and rural hospitals have had less leverage in those negotiations. Some hospitals have also delayed capital projects, he said, as they balance the new financial environment with California’s 2030 seismic compliance deadline and an estimated $100 billion in remaining work.
“We’re also seeing some initial changes to the workforce,” Mr. Johnson said. “Last year, nearly 3,500 workers were laid off at hospitals and health systems.”
Mr. Johnson said one concern for the California Hospital Association is that insurers and hospitals are treated differently under OHCA’s oversight. He said premiums have continued to increase by 10% or more while hospitals are operating under the spending targets.
“Our concern is that we don’t think the path to improve affordability is cutting access, cutting quality or cutting workforce stability, and that’s the central tension between where CHA has been and where the office has been in some of its rulemaking,” Mr. Johnson said. “A key tenet has been that this has to be an all-in approach, where all providers and payers really have a responsibility to improve.”
CHA sued OHCA in October, calling the spending targets unattainably low and arguing the agency exceeded its authority. The case is pending.
For hospital leaders in other states considering similar programs, Mr. Johnson said California’s experience points to a key question: Will the program actually reduce costs for patients and employers, or will the savings be absorbed elsewhere in the system?
“There is significant concern that the efforts to improve affordability here in California aren’t actually getting down to the patient, the employee or the employer in terms of reduced premiums,” Mr. Johnson said. “That is certainly something we would suggest watching for in other states, how well are the programs designed to achieve the ultimate goal.”
The Colorado Hospital Association, in a statement shared with Becker’s, said hospitals in the state are already absorbing chronic under-reimbursement from government payers, facing increases in charity care and an uninsured patient population, and anticipate a reduction of more than $10 billion from Medicaid cuts under HR 1 in the coming years.
“Layering on reimbursement restrictions at a time when 70% of Colorado hospitals are operating on unsustainable margins risks service closures and workforce reductions in the communities that can least absorb them,” the association said.
Bryan Cross, Pharm. D., CEO of Midland-based MyMichigan Health, is closely watching Michigan’s proposed legislation. MyMichigan provided $243 million in uncompensated care last year across a 26-county mostly rural region. If commercial reimbursement were capped at 200% of Medicare, Mr. Cross said the effect on rural service delivery would be immediate.
“It would be much harder to deliver in the rural markets, in particular, where you have lower volumes and larger geographies for patients to travel,” Mr. Cross said. “So we’d have to relook at how resources are going to be deployed in those rural spaces.”
MyMichigan has been centralizing its leadership structure, moving to a market president model in which one leader oversees multiple hospitals. The change allows the system to share clinical leaders across sites and manage capacity more efficiently, Mr. Cross said. He said the model has been particularly successful in orthopedics and general surgery by reducing specialists’ on-call burden across multiple facilities.
The system is also investing in technology. It has deployed ambient listening tools to reduce physician documentation burden and is applying AI to revenue cycle functions, including claims coding and denial management.
“We’re looking at several different options to help our patients get access to our services easier and better,” Mr. Cross said. “A lot on the technology and AI front is very exciting, which I think will make a huge difference in how we perform.”
The broader goal driving those efforts is reaching a point where the system can break even on Medicare and Medicaid. Mr. Cross said that objective becomes even more important if commercial reimbursement is constrained.
“We have to get to a breakeven on Medicare in order to thrive in the long run,” Mr. Cross said.
The legislative environment has also changed how Mr. Cross approaches advocacy. He said health systems may have underinvested in state-level engagement, and the recent wave of pricing proposals has underscored the need to involve boards, employees and communities earlier in the legislative process.
“These sort of proposals that came to Michigan in the last year really highlight where we have to be very active, engage our boards, engage our employees, engage our communities to reach out and let them know what this would mean if those kinds of legislative efforts were successful,” Mr. Cross said.
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