One year ago, President Donald Trump signed HR 1 and health system CEOs calculated the potential effects and began preparing for them. Today, CEOs are budgeting for financial losses, educating their boards on the changing landscape and in some cases reevaluating community programs.
The legislation, which includes Medicaid work requirements, more frequent eligibility redeterminations and new restrictions on state-directed payments and provider taxes, carries an implementation timeline that is still unfolding. Work requirements take effect Jan. 1, 2027, for most states, and directed payment cuts are phased in over multiple years, with cuts to new arrangements taking effect immediately and reductions to existing arrangements beginning Jan. 1, 2028.
How organizations experience the legislation’s effects depends heavily on factors such as geography and patient population. A 15-hospital academic system in Colorado, a 260-bed county-owned community hospital in North Carolina and a 25-bed critical access hospital in rural Oklahoma are contending with the same law in a number of ways.
For Aurora, Colo.-based UCHealth, the most significant pressure is visible in patient behavior and community anxiety. Elizabeth Concordia, president and CEO, said the system is the largest Medicaid provider in Colorado and expects to absorb some of the patients other hospitals can no longer afford to see.
“Implementations are going to start at the end of this year, so the biggest impact we’re seeing is the unease and the nervousness, as opposed to what we expect to see come December and January,” Ms. Concordia said. “As soon as they have to have work reauthorizations, it’s a new game. When you have to do the redetermination, I think that’s when we expect to see the significant decline in Medicaid coverage, increase in self-pay, people delaying care and ending up with more volume coming to our emergency room.”
UCHealth is already budgeting for increased emergency department volume. Ms. Concordia said the financial impact on the system could range from $400 million to $800 million.
Part of what concerns her is as other hospitals narrow their Medicaid caseloads or reduce services, she expects UCHealth — the largest Medicaid provider in the state — to absorb a disproportionate share.
In Hickory, N.C., Dennis Johnson, president and CEO of Catawba Valley Health System, is watching the same clock from a different vantage point. His system is one of nine independent hospitals in the state, which he describes as both a source of pride and a source of strategic pressure. The system generates $500 million in revenue and has performed well on quality, culture and financial metrics, but Mr. Johnson is clear-eyed about what the next two years could mean.
“Hospitals are cutting services. Some are closing,” Mr. Johnson said. “Frankly, these cuts to Medicare and Medicaid and the fights with the commercial payers, it’s not sustainable.”
Catawba Valley Health System is county owned, which means it takes all patients regardless of their ability to pay or insurance status. Mr. Johnson said the combination of Medicaid cuts and new work requirements means the hospital will continue treating the same patients without the same reimbursement.
“We’re going to treat the same patients we’re treating now, even though tomorrow they’re not going to have Medicaid because they don’t meet one of the new work requirements,” he said. “We’re still going to be treating the same people, but we’re going to be doing it for free.”
He is also navigating what he describes as a “schizophrenic” mandate for healthcare executives: Cut on one side while expanding on the other.
“We’re investing in the ambulatory enterprise because that’s where our competitors are going to be,” Mr. Johnson said. “The folks that have worked fully on the inpatient side don’t fully understand growing the ambulatory side. The left hand has to cut while we’re expanding the right hand, and that’s schizophrenic for healthcare executives.”
His board hired him three years ago with the understanding that independence may not be permanent. He is educating board members on mergers and acquisitions activity in North Carolina and working with consultants to understand how the system is positioned. The state’s consolidation activity has been significant: For example, In May, Raleigh-based WakeMed and Charlotte, N.C.-based Atrium Health shared plans to combine, and in June, Winston-Salem, N.C.-based Novant Health’s proposed acquisition of Mount Airy-based Northern Regional Hospital was approved by the Surry County (N.C.) Board of Commissioners. The transaction would add the 133-bed hospital and its related facilities to Novant’s network.
Tom Vasko, BSN, CEO of Newman Memorial Hospital in Shattuck, Okla., is in a different environment. His is a 25-bed critical access hospital in a county of 4,000 people, the kind of institution the Rural Health Transformation Program, a $50 billion provision of HR 1, was designed to support. One year in, he is living inside what he describes as two incompatible missions.
“Together they’ve shifted many rural leaders from planning for growth and innovation to planning for preservation, and I think that’s really the key message I wanted to drive home,” Mr. Vasko said. “What makes this particularly challenging is that it runs counter to the very spirit of the Rural Health Transformation Program. Transformation calls upon rural hospitals to innovate and expand access, recruit physicians, strengthen our maternal health, embrace new models of care, and fundamentally change how health care is delivered in rural America. Preservation asks us to protect what we already have. Those are fundamentally different missions.”
The compounding pressures are coming from both federal and state levels. In Oklahoma, the state’s Medicaid authority is confronting an approximately $218 million proposed reduction in hospital directed payments, funds that help keep rural hospitals financially viable, and Mr. Vasko is watching what that means for the community programs Newman has worked to build.
Newman has received some Rural Health Transformation Program funds, two micro grants of $50,000 each, applied toward medical equipment in Ellis and Woodward counties. Mr. Vasko is grateful for the dollars while acknowledging their limits.
“$50,000 doesn’t go very far when you have such a deep hole of aging infrastructure,” he said. “You might be able to purchase some pumps and some beds, and that’s about it. A lot of the infrastructure most of us are seeing around chillers and power plants can be upwards of a million dollars; we just don’t receive those dollars. Then you start to get into that world of, well, if I can’t heat or cool the organization or keep the OR functioning and humidity down because of that, then I just have a hospital that’s sitting here with brand new pumps or brand new beds.”
The programs most at risk at Newman are the ones the transformation program was intended to encourage. The hospital has been deploying certified nurse midwives and doulas through state grant funding to reach pregnant women with transportation barriers, patients who cannot reach even the rural health clinics. That program requires sustained operating funds that the current grant structure does not provide.
“We have deployed certified nurse midwives through grants from the Oklahoma State Department of Health that provide dollars to buy a vehicle, but we have to employ those certified nurse midwives and doulas to go out to those communities to provide that care,” Mr. Vasko said. “How do we create and forefront those funds to be able to achieve those things? Those things start to go away.”
Despite the pressure, Newman has continued expanding. The hospital has added 15 multi-specialty providers, built a transportation program that dispatches a van to pick up patients hours away and forged a cardiology partnership with Oklahoma Heart Hospital in Oklahoma City to bring advanced imaging to Shattuck. Mr. Vasko frames these not as optional initiatives but as essential to avoiding the alternative.
“As we’ve all learned in rural health, you can either do two things: You can push forward and innovate and create new models of care, which the RHTP wants us to do and which I think is the right direction, or you can simply manage decline,” Mr. Vasko said. “And when you start to manage decline, that is the beginning of the short path to closure.”
With most Medicaid work requirements set to take effect Jan. 1, 2027, all three executives are preparing for longer-term effects of HR 1. Ms. Concordia is watching for the coverage losses that begin once redeterminations go live. Mr. Johnson is tracking potential circumstances that might make independence untenable. Mr. Vasko is trying to do what the transformation program was designed to support while absorbing the cuts that make it harder to do so.
“My greatest concern is not simply the possibility of service reductions, it’s the innovations that may never happen that the RHTP was set out to achieve,” Mr. Vasko said. “Rural America deserves more than preservation. It deserves the opportunity to continue building the future of healthcare.”
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