After nearly five decades in hospital and healthcare administration, I’ve seen firsthand the fragility of the financial framework supporting hospitals — and today, that foundation is starting to crack. If current discussions in Washington result in sweeping policy changes, we may soon witness a collapse that could destabilize hospitals across the country.
Many hospitals are already in distress. Rural facilities are closing entirely or eliminating essential services. Safety-net hospitals in urban areas are also under pressure, with many operating at a loss, pulling out of underserved neighborhoods, or shutting down. Despite this, Congress is now weighing further cuts to Medicaid and other supplemental payment programs — decisions that would have catastrophic consequences.
Hospitals are already stretched thin. Medicare and Medicaid reimbursements routinely fall short of covering the actual cost of care. These rates have not kept pace with inflation, let alone the escalating expenses of medications, supplies, energy, and labor. For years, hospitals have offset these shortfalls by shifting costs to commercial insurers — what former California Governor Arnold Schwarzenegger once called the “hidden tax,” borne by employers and privately insured patients.
But that model is no longer sustainable.
The demographics have shifted. In many regions, particularly those served by rural and safety-net hospitals, Medicare and Medicaid patients now make up the majority. Commercially insured patients represent a shrinking portion of the payer mix. This imbalance leaves hospitals increasingly unable to cover their costs, driving them further into financial jeopardy.
Now, Congress is directing its focus toward deficit reduction. The House Energy and Commerce Committee has been tasked with identifying $880 billion in cost savings over the next decade. There’s no realistic path to those savings that doesn’t involve deep cuts to Medicaid — a program that already underfunds hospitals, even with the current patchwork of state and federal reimbursements and supplemental programs like provider fees. If those supports are reduced or eliminated, many hospitals simply won’t survive.
At Scripps Health, we’ve long relied on our hospitals with stronger commercial payer mixes to help support our safety-net facilities. But even this model is starting to break down. Government reimbursement has declined so significantly that physicians practicing at our safety-net hospitals are asking for financial subsidies just to continue operating — and many can no longer recruit or replace retiring colleagues. Without adequate physician coverage, these hospitals could face closure.
And we’re not alone. If Congress proceeds with the proposed cuts — whether through reduced Medicaid payments, scaled-back supplemental programs, or policies that increase the number of uninsured patients — safety-net hospitals across the country will face impossible choices. Health systems will no longer have the financial capacity to subsidize these hospitals or support the clinicians who serve them. Like many healthcare leaders, I’m preparing contingency plans. Unfortunately, none of the options protect our patients, staff, physicians, or communities from harm.
My message to Congress is simple: look at what’s happening now. Rural hospitals are disappearing. Safety-net facilities are operating on the edge. The signs are clear. Further funding cuts won’t result in minor service reductions — they will accelerate closures and reduce access to care in the communities that need it most.
The hospital financial structure is not infinite — it is fragile. And without intervention, it may not hold much longer.
