The One Big Beautiful Bill Act signed July 4 will change the rural healthcare landscape, and CEOs are finding innovative ways to prepare for changes phased in over the next few years.

The bill will phase in over the next several years:

• ACA special enrollment was limited for most enrollees
• Restricts state-directed payments and provider taxes for hospitals
• Medicaid cuts
• Medicaid work requirements developed by states as early as January 2027
• Increased oversight of the Medicaid provider taxes
• $50 billion over five years for the Rural Health Transformation program

Tom Vasko, CEO of Shattuck, Okla.-based Newman Memorial Hospital, has spent the last three years expanding services at the independent, 25-bed critical access hospital. Residents pay taxes to support the hospital for access to care in addition to their daily essentials.

“Every day I have to think thoughtfully, methodically yet quickly where I place those last few dollars of my neighbors,” Mr. Vasko said. “It can be agonizing, paralyzing, yet rewarding when we see another day. The bill threatens the day.”

Oklahoma has 97 hospitals with negative operating margins depending on the directed payments cut in the new bill. The hospital also treated a high percentage of government payers, losing money on every Medicare patient treated; the same will be true for Medicaid when all provisions of the bill go into effect. At Newman, 18% of Medicaid and 60% of Medicare patients will cost the hospital money; just 22% of the private payer patient base will have to make up the difference.

“Our PPS and CAH hospitals have been strained heavily by Medicare Advantage already this year,” said Mr. Vasko. “It seems our congressional leaders have created the perfect storm with the bill and the irreversible damage to come with Medicaid intensifying the strain.”

Mark Behl, president and CEO of Fairfield, Calif.-based NorthBay Health, said the legislation will “significantly affect hospitals nationwide.” He is particularly concerned with the nearly $1 trillion in Medicaid cuts over the next 10 years.

“This could result in a significant number of people in our communities losing coverage, which for hospitals like NorthBay means a sharp rise in uncompensated care, increased pressure on emergency departments and further financial strain,” he said. “In addition, reductions in provider tax revenue and nursing home funding could further destabilize the system by shifting more patients into already stressed acute care settings.”

Hospitals currently have a limited financial levers to pull in response to revenue losses, according to Mr. Behl, and those choices often have severe consequences for the community, including layoffs, service cuts and hospital closures.

“When faced with significant financial strain — such as what we’re anticipating from recent federal policy changes — health systems are often forced to scale back or eliminate programs that carry the highest operational costs,” said Mr. Behl. “Ironically, these are often the most complex, resource-intensive, and critically important services — such as trauma care, behavioral health, or specialty programs — designed to support the most vulnerable populations.”

Mr. Behl and his team are analyzing all options and exploring innovative ways to adapt to policy changes. But it might not be enough.

“With the magnitude of these changes, my greatest concern is the potential need to reduce the very care that our patients and community rely on most,” he said.

The new legislation’s cuts to Medicaid, provider taxes elimination and limits on state directed payments will increase the uninsured rate and weaken Medicaid as a payer, according to Nanis Hayek, an analyst at Moody’s Ratings. The move reverses several years of improving Medicaid reimbursement, and places rural and safety net hospitals at a particular risk.

“Though Medicaid is particularly critical for safety net and rural hospitals, it is an important payer for most hospitals, comprising about 15% of revenue sector-wide,” said Ms. Hayek. “While we expect states and hospitals to take mitigating actions, the magnitude of federal reductions and changes will be credit negative for the sector.”

States already taking action to support rural healthcare are a beacon for small hospitals.

“We’ve been watching this closely as some estimates show Wisconsin ranking as the lowest state in the country for use of federal funds to support our state’s Medicaid program, according to the Wisconsin Hospital Association,” said Kelly Macken-Marble, CEO of Osceola Medical Center. “The governor recently passed as part of the budget, increased reimbursement to Wisconsin hospitals via expansion of the existing hospital assessment or DPP. This means we will likely see an increase in reimbursement for the time being. We need to continue to watch [financial and access to care impacts] closely, and other possible changes to programs like 340B and critical access hospital cost-based reimbursement that threaten the long-term viability of rural healthcare.”

But there is hope. Forward-looking leaders are already partnering with community organizations and technology companies to bring new services and data capabilities into rural hospitals. Newman Memorial is partnering with primary care and specialty physicians, creating a partnership model to grow a stronger referral base and ancillary revenue. Mr. Vasko said the hospital has seen an uptick of 24,000 patient visits annually after developing the program and launching two new primary care clinics and a specialty clinic.

Orthopedics has been a boon for the hospital as well.

“Our orthopedic practice has created a true concierge approach to medicine that has produced results reversing the outmigration of surgical procedures,” he said. “We now draw orthopedic patients from Oklahoma City two-and-a-half hours away. This reversal approach has contributed to community benefit and driven local economic impact for our community businesses.”

The hospital is also focused on revenue cycle optimization, identifying underpayments and payer negotiations to align services and disease states. Mr. Vasko is also keeping a close eye on 340B policy changes and governance so the hospital captures appropriate drug pricing this year.

“Simply sitting flat footed remaining between four walls will result in certain death for any rural facility,” he said. “Over the last three years I’ve applied more private equity and for profit tactics with respect to liquidity and growth than ever seen in a nonprofit environment. I’m grateful these strategies are prevalent in past experiences. It’s been the defining factor in our ability to exist. As the Northwest Oklahoma Chair of the Oklahoma Hospital Association it is my responsibility to drive hospital care across 25% of Oklahoma’s landmass. Therefore, I will continue to spend time at the Capitol with our state and federal legislators to educate, lobby and author legislation to improve Oklahoma’s healthcare and address its healthcare rankings to acceptable terms.”