Hospitals nationwide are grappling with rising denial rates, elevated labor costs and looming Medicaid cuts, but public and safety-net systems face a particularly stark financial reality.
At the County of Santa Clara (Calif.) Health System, where 1 in 4 residents relies on Medi-Cal for coverage, leaders are preparing for potentially severe funding losses in the years ahead while working to preserve access, modernize operations and maintain financial stability.
“We have a $4 billion budget, and we’re potentially looking at losing about a billion dollars [in revenue] a year,” Sham Firdausi, deputy CFO of the health system, said on a recent episode of Becker’s “CFO and Revenue Cycle Podcast.” “There is no playbook right now. Anyone who says they have it figured out either isn’t being straight or isn’t paying close enough attention.”
Mr. Firdausi’s warning reflects a growing concern among safety-net leaders nationwide. These systems serve as the primary care access point for uninsured, underinsured and medically complex populations. They absorb the patients and the costs that the rest of the system does not. And they are now navigating their most difficult financial environment in decades.
Mr. Firdausi’s path to healthcare leadership is personal. He immigrated from Pakistan with his mother and sister, arriving with little money but a strong sense of responsibility. His mother taught him that if something is broken, you fix it — and healthcare quickly stood out to him as one of those systems.
After serving in the Marine Corps and the U.S. Army — including a deployment to Iraq — he began building a career in healthcare finance and analytics inside some of the largest organizations in healthcare. He served in roles at CVS Health, UnitedHealth Group, Centene and also as CFO of Watertown (Wis.) Regional Medical Center, part of ScionHealth. But over time it became harder to separate financial performance from the people affected by it.
“You optimize a network, tighten a contract, improve margins, and somewhere in that math you have real people who don’t have the right ZIP code, the right insurance card or the right documentation,” he said. “I came from a community that knows what it feels like to be on the other side of that.”
Safety-net hospitals and public health systems make up roughly 5% of U.S. hospitals but provide about 25% of the country’s charity care. They operate most of the country’s level 1 trauma centers. In California alone, public safety-net hospitals make up roughly 6% of hospitals but train about 50% of providers in the state, according to the California Association of Public Hospitals and Health Systems.
“They train a disproportionate share of the physician workforce and serve the hardest patients in the hardest circumstances with a fraction of the resources,” Mr. Firdausi said.
Despite that role, these systems remain largely absent from national conversations about healthcare innovation.
“When you think about the organizations dominating innovation discussions, they have communication teams, marketing budgets and venture capital relationships,” he said. “Safety-net hospitals are too busy taking care of everyone who walks through the door.”
A billion-dollar problem with no easy answers
For public hospital leaders, the financial pressures are no longer theoretical.
The One Big Beautiful Bill Act, signed into law July 4, is projected to cut Medicaid funding by nearly $1 trillion over the next decade. For County of Santa Clara Health System, which draws more than $2.3 billion in Medicaid revenue in the current fiscal year, the math translates to roughly $1 billion in annual revenue losses in the years ahead, against a $4 billion operating budget.
A recent Commonwealth Fund analysis found that safety-net hospitals could see operating margin reductions of up to 29.6% under new Medicaid work requirements, steeper than projections for most other hospital categories. Fitch Ratings has warned that such Medicaid cuts will significantly hamper nonprofit hospitals as they work to recover margins, even as the sector has been gradually stabilizing following years of pandemic-era disruption.
Across the industry, hospitals are also pushing back against increasing friction with commercial payers. Denial rates are climbing, prior authorization burdens are a constant battle — despite recent pushes for reform — and revenue cycle teams are under increasing pressure to recover every dollar of earned reimbursement. For safety-net systems operating on thinner margins with higher proportions of government payers, the compounding effect is acute.
At County of Santa Clara, leadership is pursuing a three-part strategy:
- Tightening expense management and supply chain operations;
- Working closely with California policymakers to advocate for continued support of public systems; and
- Modernizing revenue cycle operations with urgency.
The instinct in a financial crisis is to pull back. Mr. Firdausi argues that is the wrong response.
“You don’t protect a safety-net system by shrinking what it does,” he said. “You protect it by redesigning how it runs, where care is concentrated and how the system is organized, so it carries the same mission through a tighter budget. The goal is to come out more focused, not smaller.”
On the vendor side, Mr. Firdausi said the system is moving away from transactional relationships toward long-term partnerships grounded in shared financial transparency.
“We have to start thinking about vendors as long-term partners,” he said. “We need transparency about where we’re at financially and how we move forward together.”
Revenue cycle is where his focus is sharpest. The system is evaluating AI applications for denial management, charge capture and revenue optimization, with work divided between building internal operational capability and a parallel vendor evaluation through the county procurement process.
“Denials are skyrocketing,” he said. “Payers aren’t exactly playing fair. It can feel like drinking from a fire hose at times.”
He said the goal is not technology adoption for its own sake.
“We have to invest in technology that pays for itself,” he said. “That’s the kind of innovation public health systems are focused on right now.”
The pressure is familiar to safety-net leaders across the country. Cleveland-based MetroHealth System has called its charity care costs — which have more than doubled since 2022 to roughly $1 million a day — “unsustainable” and launched a communitywide insurance enrollment push in response. Kaufman Hall has cautioned that the upcoming work requirement policy could recreate a pre-ACA environment in which millions cycle in and out of coverage, driving up uncompensated care and bad debt at the systems least equipped to absorb the loss.
What many people get wrong about safety-net hospitals
Beyond the immediate financial crisis, Mr. Firdausi is focused on something he believes the sector gets wrong in its public posture: the persistent assumption that “safety net” and “lower quality” are synonymous.
He arrived at County of Santa Clara expecting to find a system defined by constraint. Instead, he found Ivy League-trained physicians, providers who completed residencies at Stanford and clinical quality that rivaled or exceeded private nonprofit systems he had worked with before. The system recently began running the Stanford residency program.
“I think when people hear ‘safety net’ or ‘county-owned hospital,’ they assume lower quality,” he said. “I want to continue changing that perception and showing people what these systems really bring to the table.”
His ambition is not to replicate what private systems do, but to clear a higher bar.
“I’m not trying to make this system run like a private one,” he said. “I’ve seen a struggling hospital turn into a healthy one without walking away from the patients who depended on it. A public system can outperform the private ones and still take everyone who walks in. That’s a higher bar, and it’s the one that matters.”
He argues that part of the problem is structural. Private systems have the marketing budgets, communication teams and board-level venture capital relationships to dominate the narrative. Safety-net systems spend their resources on patients.
“At the end of the day, every dollar we have goes back into patient care,” he said. “That’s always going to be the priority rather than expanding a marketing budget.”
That means the innovation happening inside these systems rarely gets the visibility it deserves.
“The innovation happening inside safety-net systems doesn’t come with TED Talks or venture capital term sheets,” he said. “We innovate because we have to.”
A mission that needs successors
When asked to name the one question he would put to a small gathering of public health system leaders, Mr. Firdausi did not reach for the expected answers. Not Medicaid, not workforce, not technology.
“Are we building the next generation of leaders willing to do this work?” he said. Not capable leaders. Willing ones.
For Mr. Firdausi, that distinction is personal. He grew up depending on systems like this one, and he is clear-eyed about what that means for how he measures his own tenure.
“This isn’t a finance problem I was hired to manage,” he said. “It’s the thing I’m trying to fix for good. The measure is whether this system is stronger and deeper in leadership the day I leave than the day I walked in.”
Safety-net leadership requires operational discipline, resilience and mission-driven commitment in combination, and the work is hard in ways that private sector finance roles are not. That is precisely why the pipeline matters.
“The deepest risk to public health infrastructure isn’t funding cuts,” he said. “Funding cuts are survivable. We’ll adapt and come back stronger. What’s not survivable is failing to develop the next generation of leaders willing to do this work.”
“Administrations will come and go. Policies will change. Funding will fluctuate,” he said. “But we need leaders who can adapt and continue protecting the backbone of this country: safety-net public hospitals.”
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