For months, rural medical providers nervously waited for Congress to finalize President Donald Trump’s “big beautiful” budget bill, which would cut at least $1 trillion from Medicaid, a government program that is a critical source of funding.
Now that the mega bill has been signed into law, rural medical administrators are scrambling to determine how hard they will be hit.
For rural hospitals already operating on tiny margins, looming Medicaid cuts will dial up the financial pressures they’re feeling even more, said Jean MacDonell, president and CEO of Fairview Range hospital in Hibbing, identified as one of the most vulnerable in the state.
Like all rural hospitals, Medicaid, a joint federal-state health program for the poor, is a key source of funding at Fairview Range. When patients lose Medicaid — projected to occur to at least 150,000 Minnesotans as a result of Trump’s budget plan, which would also make permanent a package of tax cuts — the care provided to them at hospitals and clinics is more likely to go uncompensated.
“I have heard some say, ‘I don’t have Medicaid so this isn’t going to impact me,’” MacDonell said. “We’re trying to educate the communities to the fact that just because you don’t have Medicaid, we’re all going to be impacted by this.”
Fairview Range receives up to 25% of its revenue from Medicaid, placing it among the top medical facilities in the state when it comes to dependence on the program.
Health care leaders have long said Medicaid reimbursements aren’t keeping up with rising costs. Yet instead of getting higher reimbursements rates, facilities are now preparing to take a net hit on Medicaid payments. Many of these facilities, according to state hospital financial data, already aren’t bringing in enough revenue to offset expenses.
The Center for Healthcare Quality and Payment Reform offered a bleak landscape for rural hospitals in an analysis of their financial situation released before the budget bill was approved by Congress and signed into law by Trump last week.
It determined that at least nine rural hospitals in Minnesota were at immediate risk of closing.
Even before the new cuts to Medicaid take effect, a community hospital in rural Nebraska announced it was closing because of “anticipated budget cuts” due to the budget bill.
The budget bill would cut Medicaid in several ways. It would impose new reporting and work requirements on beneficiaries that are aimed at eliminating even those who qualify from the rolls. It also puts restrictions on a mechanism known as the provider tax that states use to leverage more Medicaid funding from the federal government.
The Hibbing facility was one of two in Minnesota to be labeled at risk by four U.S. Democratic senators who opposed the budget plan. The Mayo Clinic Health System in Fairmont was the second. It did not respond to requests for information.
‘Seismic changes’ for rural hospitals
Mark Jones, executive director of the Minnesota Rural Health Care Association, said it’s more expensive to provide medical care in rural areas than in the state’s suburbs and large cities and towns.
“It’s mainly an economy of scale,” Jones said. “We don’t have the volume.”
Jones said rural hospitals and clinics “are not always busy,” so their profit margins are slim. He also said that at least 9% of rural facilities are operating on negative margins “and there’s little opportunity to turn that around.”
With negative profit margins, and prospects of losing more money, hospitals will have to look at the services they are providing, and possibly cut some types of services and care, Jones said.
A unique challenge for Hibbing’s hospital is its inpatient behavioral health unit. These beds are precious commodities around the state, and MacDonell said they’re also the primary reason for Hibbing serving a higher percentage of Medicaid patients than Grand Itasca hospital in Grand Rapids, a sister facility about 35 miles to the west.
Patients mostly come in from the surrounding 100-mile radius, although coming from further out isn’t uncommon due to mental health bed shortages. Losing this unit, along with any other services currently in place, would create more strain on a stressed system. Other facilities would need to pick up the slack. Patients would need to travel farther away from home for care.
Mental health providers outside hospital and clinic settings couldn’t fill in gaps if they’re also feeling the crunch of Medicaid cuts. Shannon Brown, CEO of Fernbrook Family Center in southern Minnesota, brought this up during a press call last week on the far-reaching effects of Medicaid cuts.
About 75% of Fernbrook’s clients use Medicaid as primary or secondary insurance coverage, Brown said. Many of them don’t have a therapist within 30 miles of them.
“If we did not go to them they would not receive care,” Brown said.
MacDonell sees the Hibbing and Grand Rapids hospitals as safety nets, because without them patients don’t have many other nearby options. More traditional safety net providers, officially known as federally qualified health centers (FQHC), are in place to serve underinsured or uninsured patients. They’re also feeling anxious about Medicaid cuts.
FQHCs provide care in exchange for sliding fees based on the patient’s ability to pay. Minnesota has 17 facilities like this in both urban and rural communities, with about half of their patients enrolled in Medicaid.
By no stretch of the imagination will the new federal budget help, said Jonathan Watson, CEO of the Minnesota Association of Community Health Centers.
“This will be one of the most seismic changes in the history of Medicaid, where things are taken away from folks,” he said. “This is somewhat uncharted territory.”
Closing certain sites or reducing services would be considered if the hit to revenue is as bad as it seems. Watson was initially hopeful about a last minute provision inserted in the act because of concerns from GOP senators about the impact Medicaid cuts would have on rural health facilities.
This $50 billion provision, known as the Rural Health Transformation Program, was aimed at defraying the costs to rural hospitals of the increase in uncompensated care that the Medicaid cuts will usher in, especially after work requirements are imposed in December of 2026.
But Watson is less optimistic after seeing what Congress ultimately approved. So is Jones, who said “it is helpful, but we don’t know how the money will be distributed.”
Others say the $50 billion is not enough to cover the impact of a loss of Medicaid patients and the growth of uninsured patients.
Apart from the negative impact on patients, losing a hospital as a result of Medicaid cuts would have a devastating economic impact on a community. Fairview Range is Hibbing’s biggest employer. The same is true for Grand Itasca in Grand Rapids, MacDonell said. Health care is the state’s largest employment sector overall.
“In rural areas, places that prosper have medical facilities and schools,” said Louis Johnston, an economics professor at the College of St. Benedict and St. John's University.
Johnston said states like Minnesota might have to bail out rural medical systems, and raise taxes to do so.
MacDonell expects the ramifications of the bill to start hitting hospitals in late 2026, when the work requirements kick in.
Between now and then she’s in communication with other hospital leaders to prepare. She wants patients to know the hospitals are still there for them, while also making sure they and policymakers know how challenging the immediate future will be.
“We’re trying to balance raising concerns about the changes that are coming,” she said. “We don’t want patients to have to drive further to get care.”
This article first appeared on MinnPost and is republished here under a Creative Commons Attribution-NoDerivatives 4.0 International License.