Becker's Hospital Review

12 CFO / FINANCE A hospital payment lifeline faces a 2028 reckoning By Andrew Cass M edicaid supplemental payment programs served as a financial cushion for for-profit health systems in the second quarter as the loss of enhanced ACA premium tax credits pushes more patients into uninsured status. The scale of the benefit was substantial for the hospital operators. Nashville, Tenn.-based HCA recognized $400 million of incremental net benefit from Medicaid supplemental payment programs in the quarter, driven largely by a newly approved Florida program. Dallas-based Tenet built a $140 million contribution from expanded supplemental Medicaid programs into its raised full- year guidance. Franklin, Tenn.-based Community Health Systems pointed to newly approved state-directed payment programs in Georgia, Indiana and Florida as a full-year tailwind, though executives said those gains were more than offset by softer elective volumes and continued ACA-related disenrollment, which prompted a cut to full- year guidance. And King of Prussia, Pa.-based UHS raised its full-year estimate of net Medicaid supplemental funding benefit to approximately $1.5 billion, up $150 million from its prior outlook. "These programs, which are fundamental to our providing services to Medicaid patients, play an important role in supporting access to care," HCA CEO Sam Hazen said. "This support has been especially important for hospitals, as they are now providing more uncompensated care to uninsured patients." UHS CFO Steve Filton outlined on his system's earnings call how it is preparing for supplemental Medicaid payments to phase down under the HR 1 starting in 2028, while also noting that Congress could still act to delay implementation. Mr. Filton said UHS is "anticipating and trying to stay ahead of those … reductions that are scheduled to start beginning in 2028," pointing to expense management, technology and AI investment, revenue cycle overhauls, and a deliberate shift toward outpatient behavioral health services, which tend to be more Medicare- and commercial-centric than Medicaid-dependent. UHS has also undertaken a review of its acute care revenue cycle with a third-party consultant and is beginning a similar process on the behavioral side. Tenet CFO Sun Park noted on his system's call that Tenet still delivered "a clean beat in the quarter even without these incremental Medicaid revenues." On that same call, Tenet Chairman and CEO Saum Sutaria, MD, pushed back on the notion that supplemental payment dollars are a windfall rather than earned revenue, arguing the money funds real investment in high-acuity, Medicaid-heavy service lines. "You really do have to put in place the services, make capital investments, work with physicians or attract them to build some of these sophisticated service lines for the sickest of Medicaid patients," he said. n What drove Providence's $400M turnaround, per its CEO By Kristin Kuchno R enton, Wash.-based Providence has now sustained more than a year of positive operating margin, and executives say the improvement is being driven by a sustained set of operational changes across the system. e 51-hospital system's first-half operating income improved by $400 million year over year, moving from a $225 million operating loss in the first half of 2025 to $175 million in operating income through June 30, 2026, according to an Aug. 13 health system news release. Operating EBIDA for the first half of 2026 was $914 million, a $422 million improvement over the prior year. "Progress like this comes from intention and hard work," President and CEO Erik Wexler said in the release. "is reflects the bold steps taken throughout our organization and the outstanding commitment of our caregivers, physicians and leaders. Together, we have strengthened our operations, expanded access to care, and focused on the services our communities need most. ese efforts are creating a stronger foundation for the future." e operational drivers Providence attributes the turnaround to a set of deliberate operational changes: Reducing leadership layers to streamline decision-making; sharpening focus on core services while scaling back underutilized programs; expanding services aimed at community health needs; transferring ownership of or partnering on services other organizations are better positioned to provide; and cutting reliance on agency staffing. e turnaround was intentional. Mr. Wexler, who took over as president and CEO in January 2025, inherited a system coming out of what he has called a "polycrisis" — a stretch of overlapping economic, regulatory and environmental pressures — and has since taken a disciplined approach to which initiatives get funded and when, he told Becker's in July. Rather than pursuing multiple strategic bets simultaneously, Providence deliberately delayed some investments — including a planned acute skilled nursing program with Select Medical — to keep the focus on returning to sustainability. "We have been very, very selective about what we pursue, especially as we have been coming out of what I have called the polycrisis and getting our organization back to financial sustainability," Mr. Wexler

• Cover