The One Big Beautiful Bill Act (OBBB), signed into law on July 4, 2025, brings major policy shifts and transformation to the healthcare industry in the United States. As the legislation begins to take effect, hospitals and health systems across the country are preparing for a wave of changes that could reshape how care is delivered, financed and accessed, particularly for vulnerable populations.
The OBBB introduces reforms that seek to reduce federal healthcare spending and increase oversight of Medicaid and Affordable Care Act (ACA) programs. Proponents claim the bill will streamline healthcare delivery and address fraud in the industry. However, health system leaders have expressed concern about the potential consequences for patient access, hospital finances and workforce stability.
Changes to Medicaid and ACA
The OBBB brings major changes to Medicaid eligibility and funding, such as imposing work requirements for Medicaid recipients, mandating more frequent eligibility redeterminations and limiting state-directed Medicaid managed care payments. According to the Congressional Budget Office, these changes could result in approximately 11.8 million people losing their Medicaid coverage.
To reduce federal healthcare funding by nearly $1 trillion over the next decade, the bill also restricts eligibility for ACA premium tax credits, and it phases out enhanced federal medical assistance percentage (FMAP) incentives tied to provider taxes.
For hospitals providing care and services to large Medicaid and ACA populations, particularly rural hospitals, the financial implications of these changes are profound, as health systems anticipate reductions in reimbursement, increases in uncompensated care as well as amplified pressure placed on emergency departments and first responders.
How Health Systems Can Make Strategic Responses
Health systems and hospitals must take action to adapt to new policy changes in ways that preserve financial stability and maintain patient access to quality care. While the scale of impact varies by region and patient demographics, healthcare leaders (namely CEOs and CFOs) can make strategic responses to meet the challenges head-on.
Strengthen Financial Forecasting and Scenario Planning: Health systems and hospitals should look to enhance their financial modeling capabilities to anticipate fluctuations in revenue due to different policy scenarios, including stress-testing budgets, cash flow impact models and contingency plans that plan for worst-case scenarios regarding Medicaid disenrollment and reduced ACA reimbursements.
- Optimize Revenue Cycle Management: Revenue cycle efficiency is crucial with increased pressure on reimbursement. Optimization of the revenue cycle involves accelerating claims processing, enhancing patient eligibility verification and improving point-of-service collections; however, these improvements will require investment in improved technologies and intentional staff training.
- Reassess Service Lines and Operational Footprint: Evaluate which services are financially sustainable and strategically aligned with community needs. For example, consider consolidating underperforming service lines or shifting to outpatient models. Health systems and hospitals in rural and underserved areas should also consider investing in telehealth and mobile care units to maintain healthcare access.
- Diversity Revenue Streams: To reduce reliance on government payers, stems can explore alternative revenue sources, including employer-based direct contracting, launching new health-related ventures like wellness programs and specialty clinics and leveraging real estate and technology assets.
Long-Term Outlook and Policy Considerations
While the full impact of the One Big Beautiful Bill Act will unfold over several years, health systems are already planning for a future marked by tighter budgets and increased regulatory scrutiny. Some are investing in data analytics and operational efficiency tools to better manage costs, while others are advocating for state-level policy adjustments to mitigate the effects of federal funding cuts.
The bill also includes a $50 billion Rural Health Transformation program, which aims to support innovation and sustainability in rural healthcare delivery. However, hospital leaders caution that these funds may not be sufficient to offset the broader financial pressures created by the legislation.
Windham Brannon Can Help
The OBBB represents a significant shift in federal healthcare policy, with far-reaching implications for hospitals, health systems and the patients they serve. Windham Brannon’s Healthcare Consulting Practice professionals are poised and ready with our knowledge, experience and expertise to help you with strategic planning and operational adjustments to adapt to a new reality. For questions or more information, contact your Windham Brannon advisor immediately, or reach out to Denise Gaulin.
