Last year, I warned in an opinion essay that hospital finances were becoming a house of cards — fragile, interdependent and increasingly vulnerable to policy decisions made far from the bedside in Washington, D.C., and Sacramento.
Unfortunately, that warning proved prescient.
With the passage of HR 1, Congress made sweeping changes to health care funding that are now reverberating across the country. According to Kodiak Solutions, hospitals could see up to $25 billion in annual revenue reductions as a result. At Scripps Health, we estimate the impact at more than $100 million per year, and we will need to adjust the services we provide to offset this impact.
For many hospitals, especially those serving vulnerable populations, the consequences are even more severe. The Commonwealth Fund projects that safety net hospitals could see margins shrink by nearly 30%. Those are not abstract numbers. They translate into fewer services, longer wait times, delayed investments in new facilities, and, in some cases, layoffs, which we are already beginning to see nationwide. Here in San Diego and Imperial counties, two hospitals have agreed to merge and close one of its locations, a national hospital operator sold a hospital, and two different district hospitals are pursuing turning over their keys to other organizations.
The house of cards didn’t just weaken, it collapsed.
Now, Congress is considering additional health care cuts beyond HR 1 to help fund homeland security and border protection initiatives. These proposals include further reductions in Affordable Care Act cost-sharing support, changes to the 340b program, expansion of site-neutral payment policies and additional Medicaid cuts. These proposals could easily cut funding to Scripps by another $50 million, which would further accelerate a reduction in services.
In other words, after knocking down the house, we are now debating how many more cards to take away. After the passage of HR 1, Congress left us with half a deck of cards.
Let’s be clear about what this means in practice.
Hospitals, particularly in California, already operate under enormous financial pressure. Medicare and Medicaid reimbursements typically fall well below the actual cost of care. For years, hospitals have relied on commercial insurance to help offset those losses. But as public program enrollment grows and commercial coverage declines, that balancing act becomes increasingly unsustainable.
Layer on top of that the realities of California’s regulatory environment: seismic compliance requirements under SB 1953, rising minimum wage mandates for health care workers, and a growing list of administrative and reporting requirements. These are important policies, but they are not funded. Each one adds cost without adding revenue.
There is a misconception that health systems can simply absorb cuts through efficiency or better management. In truth, hospitals have already done that. Over the past decade, health systems have streamlined operations, reduced administrative overhead and implemented technology to improve care delivery.
There is no excess left to trim without affecting patient care.
At Scripps Health, we have worked hard to build a strong, resilient system — one that delivers nationally recognized quality, invests in innovation and serves our community regardless of a patient’s ability to pay. But even strong systems are not immune to sustained financial erosion.
For safety-net hospitals, rural hospitals and community providers already operating on razor-thin margins, further cuts will push some to reduce even more services or close altogether. When that happens, access to care suffers — not in theory, but in real and immediate ways. Emergency departments become overcrowded. Patients travel farther for basic services. Preventive care declines, leading to worse outcomes and higher long-term costs.
This is not a partisan issue. It is a matter of infrastructure.
Health care is as essential to our national security as any border or defense system. A country cannot be strong if its hospitals are weak.
If Congress believes additional investments in homeland security are necessary, that is a legitimate debate. But Congress must consider the cumulative impact of these policies before more damage is done. Once hospitals close services or shut their doors, rebuilding that capacity is extraordinarily difficult — if not impossible.
At some point, as even more cards are taken away, health care will be left holding only the joker — and hoping it can somehow stand in for the entire system.
It can’t.
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