Minnesota hospitals had a record high of over 2 million emergency department visits in 2024. That year, more than a quarter of hospitals lost money on operations.
The Minnesota Hospital Association painted a bleak picture of Minnesota healthcare Tuesday in a new report titled “A Statewide Crisis of Care.” The hospitals are gearing up for what could be a bruising budget year at the Legislature in 2027, as efforts to counteract federal Medicaid cuts will run into the state’s own long-term fiscal challenges.
At a Capitol press conference, executives of rural hospitals spoke of the federal One Big Beautiful Bill Act’s impact on what they described as already weakened hospital financials.
“Instead of ‘HR1,’ I’m gonna call it ‘H1R1’ because it’s gonna be like a pandemic when it hits,” said Rick Ash, the CEO of United Hospital District in Blue Earth, referring to the bill’s other moniker, for House Resolution 1.
The law, passed in July 2025, is the signature domestic initiative of the second Trump administration, cutting both taxes and social services — primarily Medicaid — and increasing spending on immigration enforcement. The report warns that the Medicaid provisions on state provider taxes will remove “the machinery that held hospital finance together.”
State governments tax healthcare providers — such as hospitals — and use the revenue to fund Medicaid, which pays providers. It seems circular, but the federal government matches state spending on Medicaid, so state provider taxes are a way to funnel federal Medicaid dollars into the state. The Minnesota Department of Human Services estimated that reductions on state provider taxes in the OBBBA may leave hospitals with $1 billion less per year, a figure cited in the hospital association’s report.
The OBBBA is also projected to decrease Minnesota’s Medicaid population by 140,000 people due to new work requirements, which will increase uncompensated care costs by hospitals, which are required to accept uninsured patients in their emergency departments.
“We’re still going to care for them. Those costs have to be covered somewhere. And we’re not sure how that’s going to work right now,” Ash said.
Ash said that over half of United Hospital District’s patients are insured through Medicare and Medicaid, public insurance programs on which hospitals have a negative margin, which executives said helps lead to operating losses.
Rachelle Schultz, the CEO of Winona Health and a board member of the hospital association, said that Medicare and Medicaid “reimburse less than the cost of care.”
“The result is a hospital in distress,” Schultz said.
Private insurers pay hospitals significantly more compared to Medicare and Medicaid because rates are set in contracts negotiated between insurers and providers, instead of through government formulas. Commercial hospitals prices have gone up as hospitals have consolidated and grown, which many health economists say is a key driver of America’s lack of healthcare affordability.
Hospitals say those high prices pay for their high expenses, and that they are not to blame. At the press conference, Rahul Koranne, the president of the hospital association, pointed instead to the insurance and pharmaceutical industries for rising healthcare costs, previewing the lobbying fights between the three industries in the next legislative session.
“The money is being taken away by for-profit big pharma companies, large for-profit insurers,” Koranne said. “Follow the money.”
Koranne advocated for protecting 340B, an obscure drug discount program that lets hospitals that treat low-income patients buy drugs at a discount and keep the savings. A bipartisan bill strengthening and extending 340B failed to pass in the 2026 Legislature amid an expensive lobbying battle between hospitals and drug companies.
Minnesota Reformer is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Minnesota Reformer maintains editorial independence. Contact Editor J. Patrick Coolican for questions: info@minnesotareformer.com.
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