OBBBA Could Cost Your Hospital Billions

CFOs must act swiftly to protect margins, optimize payer mix, and prepare for rising uncompensated care.

Hospitals are looking over a financial cliff — and the drop could cost them $25 billion a year.

A new analysis by Kodiak Solutions projects devastating revenue losses for U.S. health systems stemming from the “One Big Beautiful Bill Act” (OBBBA), which slashes federal Medicaid funding by $1 trillion over the next decade.

For hospitals already operating on razor-thin margins, this legislation could mean the end of the organization.

According to the report, even moderate Medicaid disenrollment could reduce average health system margins by more than 50%. Worst-case scenarios forecast net income collapsing by up to 71%, as tens of millions of people lose insurance and pivot to self-pay status, severely increasing bad debt and uncompensated care burdens.

What CFOs Are Saying

CFOs are well aware of the extensive impact any Medicaid fallout will have on their organizations.

For example, Denver Health, Colorado’s largest safety-net hospital, sees close to 125,000 Medicaid patients per year – nearly half of all patients across the health care system.

"More than 10% of all Colorado Medicaid patients get their care at Denver Health," says April Audain, CFO of Denver Health. "As a safety net, nearly two-thirds of our funding comes from the federal government, primarily through Medicaid funding. Adding barriers to enrollment to Medicaid undoubtedly will result in more uninsured Coloradans.”

“The net result will be delays in care for patients and additional financial burdens for safety-nets like Denver Health, who are disproportionately affected by reductions to Medicaid and increases in the uninsured," she adds.

Providence CFO Greg Hoffman said in a statement that a decrease in Medicaid funds would exacerbate operating losses experienced by the Seattle-based health system during the last five years caused by inflation, according to the Orange County Register.

What CFOs Are Doing

To get a handle on mitigating the fallout, CFOs will need to zoom in on a few specific parts of their operations.

First, maximizing Medicaid retention as much as possible should be a priority. Invest in eligibility and outreach teams. Many patients who lose coverage are still eligible, but will need help re-enrolling. CFOs should ensure that their finance teams make this step as easy and efficient as possible for patients.

Scrutinizing service lines should also be in the CFO’s playbook. Identify low-margin or loss-generating services, adjust labor models, and cut fixed costs where possible.

CFOs should also stay proactive by stress-testing scenarios for 5%, 10%, and 20% Medicaid losses. Boost cash reserves and reassess capital spending to cultivate financial resilience before major losses occur.

Lastly, don’t forget to reexamine payer contracts. Strengthen private payer contracts to rebalance lost Medicaid revenue. Payers will be expecting this from health systems. Explore value-based care options tied to outcomes and where care models can flex.

The OBBBA isn’t just a policy change; it's on its way to being a seismic shift for hospital finances. CFOs must lead the charge in adapting quickly, tightening operations, and building resilience. Those that wait risk being left behind as the ground shifts beneath them.