Medicaid + health system liquidity: 10 notes

Health systems gauge financial strength on a variety of metrics, with one of the key indicators being days cash on hand.

While the average days cash on hand has improved in the last year, according to Strata’s “Performance Trends Report: Market Insights from Q2 2025,” eminent changes to the Medicaid program could derail this progress.

Ten things to know:

1. Medicaid is typically the lowest reimbursing payer for healthcare organizations and systems serving a larger Medicaid population often have below average days cash on hand.

2. Days cash on hand has fluctuated over the last year; health systems nationally reported 112 days in June 2024 and at times dipped to 110 days before ending June 2025 at 128 days, a 12-month high.

3. Health systems reported on average, Medicaid accounts for 12% of overall revenue.

4. The One Big Beautiful Bill Act signed July 4 tightened eligibility for Medicaid, introduced work requirements and accelerated the redetermination cycle over the next two years. The Congressional Budget Office estimated 11.8 million people will lose Medicaid coverage as changes are rolled out, and increase the number of uninsured people in the U.S.

5. The lack of insurance could lead to more patients delaying care until they need the ER, an expensive site of care. “If fewer people qualify for Medicaid benefits due to policy changes, a troubling shift in patient behavior is likely to put additional strain on hospital finances,” according to the report.

6. For health systems with greater than 10% of Medicaid patient days, the days cash on hand improved from 79 days in June 2024 to 123 days a year later. Hospitals with the greater percentage of Medicaid patients closed the gap with hospitals nationally and actually had higher days cash on hand in February and March.

“Despite this recovery, these health systems remain more vulnerable to policy and reimbursement changes, and the anticipated Medicaid reductions could quickly erode these gains,” the report states.

7. When Medicaid eligibility tightens, hospitals are likely to see a surge in self-pay patients for emergency visits. In 2023 after the federal government lifted “continuous enrollment” in Medicaid, hospitals reported self-pay ER visits increased for all, with a 60% increase among pediatric patients.

8. Hospitals take a greater hit on self-pay cases by service line than specialty care. Strata found outpatient orthopedic Medicaid median cost margins were -$247 per case while self-pay medians were -$430 per case. In general medicine, outpatient Medicaid cost margins were -$95 on average, compared with -$486 for self-pay patients.

9. Behavioral health had a particularly steep gulf between Medicaid and self-pay margins. Outpatient Medicaid behavioral health cost margins were -$69, compared with -$564 per case for self-pay patients.

10. Emergency self-pay cases reported -$616 median per case margins, compared with -$128 for Medicaid patients.

“When care moves from outpatient to emergency settings, hospitals take a double hit: higher care costs combined with lower likelihood of payment,” the report notes. “If care shifts occur in the wake of Medicaid reductions, hospitals could see a widening gap between cost and reimbursement, particularly in high-volume service lines.”

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