OBBBA impact could cost hospitals $25B a year: Report
Hospitals nationwide could see annual revenue losses of up to $25 billion through Medicaid losses stemming from the One Big Beautiful Bill Act, according to a new analysis from Kodiak Solutions.
The law, passed July 4, cuts about $1 trillion from Medicaid over the next decade, making it the largest reduction in the program’s history. The number of uninsured Americans is projected to grow by 14.2 million by 2034, which includes the 10 million newly uninsured estimated by the Congressional Budget Office due to the legislation’s Medicaid and Medicare provisions, plus the 4.2 million that will lose coverage from the expiration of ACA enhanced premium tax credits.
Five things to know:
1. Kodiak modeled the hospital revenue and profit impact of four Medicaid disenrollment scenarios (5%, 10%, 15% and 20% reductions) in which enrollees become uninsured and shift to self-pay. The analysis is based on data from 2,100 hospitals and 300,000 physicians using Kodiak’s revenue cycle platform.
2. Depending on the scenario, the average hospital would lose between 0.4% to 1.4% of its annual net revenue, or $1 million to $4 million. Collectively, hospitals could see a decrease of up to $25 billion in net revenue annually. Net income for the average hospital could decrease by more than 71%, with a 70% drop in operating profit margin.
- 5% Medicaid disenrollment: $1M+ drop in annual net revenue
- 10% disenrollment: $2M+ drop
- 15% disenrollment: $3M+ drop
- 20% disenrollment: Nearly $4M drop
3. Worst-case scenario: For an average hospital with $278M in net revenue and a 2% margin, net income could fall by 71% to $1.6M, while operating profit margins could shrink by 70%, to 0.6% from 2%.
4. Hospitals will see uncompensated care costs increase by more than $63 billion by 2034 if disenrollment accelerates.
5. Hospitals are encouraged to focus on Medicaid enrollment assistance, expand preventive care services for the uninsured, and prepare for cost reductions or increase payer reimbursement elsewhere to offset the revenue declines.
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