U.S. businesses are readying for another large jump in healthcare costs, with employers expecting those costs to rise about 8.2% next year. One contributing factor to the increase may seem surprising: the historic Medicaid cuts enacted by Congress last year in H.R. 1, known as the “big, beautiful bill.” Already, the bill is reducing safety net support. What’s more, cutting Medicaid doesn’t simply reduce government spending on healthcare; rather, it shifts financial pressure throughout the healthcare system.
Much attention has understandably centered on the closure of rural hospitals. But long before hospitals shut their doors, they may eliminate less profitable services, move costs onto private payers or turn to private equity. These quieter transformations could reshape healthcare for publicly and privately insured patients alike, with potentially dire consequences when care becomes poorer or outright inaccessible.
According to the Center for Healthcare Quality and Payment Reform, roughly 700 rural hospitals are currently at risk of closure, even before the Medicaid cuts take effect.
With H.R. 1, Congress cut almost $1 trillion from Medicaid. The Congressional Budget Office estimated that these cuts will result in roughly 10 million people losing their Medicaid coverage. Lost coverage is challenging enough for patients, but it also places greater strain on hospitals — especially more cash-strapped rural hospitals. As more people lose coverage, more will delay or forgo care or struggle to pay for it when they eventually seek treatment, leaving hospitals with the burden of less revenue.
Rural hospitals were already in a precarious financial position prior to H.R. 1’s enactment and implementation, serving a population that is more likely to be in worse health and Medicaid-reliant. According to the Center for Healthcare Quality and Payment Reform, roughly 700 rural hospitals are currently at risk of closure, even before the Medicaid cuts take effect. Closures hurt area residents regardless of health insurance status, because they will make people have to drive roughly 20 to 40 miles farther to obtain care. If you just need a few stitches, an extra half-hour drive is a nuisance. If you are dealing with a stroke or heart attack, that is precious time.
Yet there is also a broader shift to hospitals’ financing that may precede outright closure — the most visible manifestation of hospitals’ financial distress — and that will also hurt nearby communities.
For instance, hospitals may remain open but scale back services. CHQPR reports that 53 hospitals have eliminated inpatient services since the beginning of 2023. One particularly vulnerable area is inpatient psychiatric units. These tend to serve a disproportionate number of publicly insured and uninsured patients and thus are more likely to operate at a loss. More than 120 hospitals shuttered their inpatient psychiatric units between 2023 and 2024 alone. The new Medicaid cuts will almost certainly accelerate this trend. That means more psychiatric patients will be transferred to hospitals that are farther away from social support systems that can promote recovery from behavioral health conditions.
As nonprofit hospitals shed money-losing services, for-profit hospital chains and private-equity-backed providers increasingly occupy the healthcare landscape.
Psychiatric units are not the only services that rural hospitals have significantly scaled back. Between 2010 and 2022, 238 rural hospitals closed their obstetric units, compared with just 26 hospitals opening these units. As a result, women seeking obstetric care will have to travel longer distances to the next hospital, frequently when time is of the essence. These unit closures do not generate the headlines that outright hospital closures do, but the effects are devastating nonetheless, potentially fueling not only anxiety, but worse health outcomes.
As nonprofit hospitals shed money-losing services, for-profit hospital chains and private-equity-backed providers increasingly occupy the healthcare landscape. Private equity firms have taken increased interest in acquiring obstetric units: As of 2020, as many as 1,340 women’s healthcare offices and almost 4,000 women’s health physicians were affiliated with private equity. There have also been recent increases both in the number of psychiatric hospital beds at large, for-profit freestanding psychiatric hospital chains and in psychiatric hospitals being outright owned by private equity, a form of for-profit ownership.
Overall, private equity firms own 8.5% of hospitals across the country, and at least 27.7% of private-equity-backed hospitals serve rural populations. This has resulted in costlier care as these firms seek to boost their income within the bounds of the law, and higher costs of care can breed inequitable access to care and inequitable vulnerability to medical debt. These takeovers have been associated with lower quality and safety of healthcare delivery — whether through reducing investment in clinical staff, lowering of staffing ratios or focusing on short-term profits despite the reality that providing medically necessary care can simply be expensive.
Together, these decisions represent a broader financialization of healthcare, such that decisions about providing care are increasingly driven by concerns about revenue and profit. The fallout will not be confined to Medicaid enrollees.
H.R. 1’s consequences cannot be measured simply by counting the number of people who lose their insurance or how many hospitals ultimately close. When rural hospitals turn to private equity firms for a financial lifeline, or even pursue hospital consolidation to survive at the expense of competition, surrounding residents may face worse care — through the elimination of critical services like psychiatric and obstetric care, reduced staffing, a shift of potentially greater costs to privately insured patients, and other ways financialization corrodes these services. In each case, the institution can survive on paper while patients’ access to care is greatly diminished. A hospital’s doors can remain open even when what’s inside can no longer meet the needs of its community.
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