Hospitals have absorbed cuts before, but OBBA signals a deeper reckoning, one that exposes a broken business model, eroding trust, and an industry running out of workarounds.
In the Medicare Era, hospitals have always found a way out. Leaders who have been in the industry long enough will not-so-fondly remember The Balanced Budget Act of 1997, forever known within industry jargon as “Bubba,” when the first real faucet turning happened to cut the flow of future Medicare funding by $127 billion over a decade.
Hospitals were able to turn on another faucet: cost-shifting, where deficits in government funding were squeezed out of a mix of commercial payer contracts.
Hospitals got good at it. When the Patient Protection and Affordable Care Act (ACA) came along in 2010 with a variety of funding restrictions on readmissions and Medicare productivity adjustments, hospitals could glide along with Medicaid expansion and Medicare Advantage growth, which paid more than FFS Medicare.
The One Big Beautiful Bill Act (OBBA) is a whole other thing entirely. Signed into law by President Trump last July 4, the bill contains includes more than $1 trillion in federal healthcare spending reductions over 10 years, largely via cuts and restrictions to Medicaid, ACA marketplace subsidies, and Medicare spending.
The administration and Congress essentially told America’s roughly 5,500 hospitals to make it work. Because they always have. But the government also made sure to close the loopholes, because they knew what they were. Medicaid provider taxes? Capped and restricted. 340B, which allowed hospitals to use drug discounts to subsidize care? Curtailed. ACA subsidies which expanded access? That one got politically messy and remains unresolved.
Three very real threats are all happening at the same time:
• Payment cuts are a structural reset
• Hospitals are losing the political math
• The business model is finally breaking
HealthLeaders Exchange gathered three health system CEOs and a CFO for a special roundtable in late 2025 in Washington, DC. On the table was a discussion of the current reality: the system doesn’t work anymore and it’s time to stop pretending that it’s fixable.
It’s different this time.
Read the full article here.
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KEY TAKEAWAYS
This time, there is no financial escape hatch. Payment cuts, political pressure, and public distrust are converging in ways hospitals can no longer offset.
Hospitals are losing more than revenue, they’re losing credibility. Without public trust or political leverage, even essential care is becoming harder to defend.
The business model is breaking in plain sight. Leaders agree the system can’t survive as designed, but the path forward demands trade-offs no one wants to name.