As published in Modern Healthcare, by Alex Kacik, May 21, 2025.

Community Hospital Corp. President and CEO Jim Kendrick and other rural health executives took to Capitol Hill to lay out their views on the devastating impacts of cutting hundreds of billions from Medicaid.

Republicans are debating whether legislation that would implement Medicaid work requirements, limit eligibility and cap provider taxes makes a big enough dent in federal spending. The latest Congressional Budget Office estimates show almost $800 billion in Medicaid cuts outlined in the bill, which lawmakers hope to vote on this week. Kendrick says the cuts go too far and could cripple rural communities if hospitals were forced to wind down services or potentially close.

“This is some of the strongest advocacy I’ve seen at the federal level,” Kendrick said of executives’ trip to Washington, D.C., earlier this month. “We are trying to convey that saving $1 through Medicaid cuts could cost $5 in negative economic impacts for a rural community.”

Community Hospital Corp., a Plano, Texas-based health system that owns, manages and consults more than two dozen nonprofit rural hospitals, has been working with facilities to clamp down on their expenses ahead of the potential cuts, Kendrick said. Medicaid accounts for 9.3% of a rural hospital’s revenue, according to a median estimate from a recent Chartis Center for Rural Health report.

Kendrick said in an interview many rural providers cannot sustain a drop in Medicaid enrollment and lower reimbursement, even if they cut costs. The interview has been edited for length and clarity.

What did you discuss with Congress about Medicaid cuts under consideration?
When we were in Washington, D.C., this month with the American Hospital Association, we tried to convey that sometimes an expense reduction may have a greater negative economic impact than the expense reduction itself. Advocacy is very, very heavy right now.

It gets very complicated. You get into conversations like how Medicaid cuts will disproportionately impact states that didn’t expand Medicaid. You will close many rural hospitals if you go forward with the full-blown approach to cuts.

When a community loses its hospital, other businesses don’t want to come. We’re trying to bring more business back to America today, and those businesses want a place where the workers can have good healthcare and not have to travel an hour to deliver a baby.

How would potential Medicaid cuts impact rural hospitals?
The numbers that are being discussed are so broad and so large. They would be so devastating that there’s no need to even model it. They’re not sustainable.

You hope that there are varying degrees of implementation, which could ultimately result in a reduction in services. Medicaid is disproportionately administered in rural areas, so Medicaid would cause catastrophic changes in the delivery of care.

How are rural providers preparing for potential Medicaid cuts?
You can start to get your arms around the cost of the different services. If you have an infusion therapy clinic, you can model cuts out and know this is going to be a loss leader. But these may be the types of services a community really needs.

It’s not dissimilar to what we’ve seen over the last decade with obstetric programs closing across the country. Sometimes rural hospitals were able to go to the community and say, “This is something we need,” and ask if there is a way we can cover or subsidize these services. The answer was sometimes, “Yes,” in a variety of forms, but sometimes the answer was, “No,” and those programs closed. That’s what we’ll be faced with, depending on the degree to which the cuts actually come in.

Are rural providers increasingly looking to acquisitions to ease financial strain?
Definitely. I imagine all the hospitals that are facing a worse financial position have put out feelers for an alignment strategy with a bigger system in their state.

Many of these rural hospitals are independent. They’re locally governed or locally controlled. They don’t want to lose that independence, but they’re looking for scale. There’s some risk in the acquisition space, because many times organizations will not bring them into their system because of the negative balance sheet impacts, which affect their bond rating, their ability to borrow and how much debt they have to service.

Hospitals are also looking at sharing administrative burdens across 10 or more similarly situated organizations, as opposed to one large system. There’s a lot of private equity and venture capital, but those firms may view any investment as a math equation and not about care for the community. All these things are being explored.

Having care there when you need it is a need. It’s not a want. It’s not a financial equation. It’s the delivery of care that sustains and prolongs lives.

Could the rural emergency hospital program be adjusted to benefit more providers?
The program does not account for Medicaid or Medicare Advantage. Those patient populations don’t count in the rural emergency hospital cost-based reimbursement formula. That’s giving some rural hospitals pause.

I know there’s been talk of trying to expand that program by eliminating barriers like rural emergency hospitals not being eligible for 340B drug discounts and not being able to have any swing bed capacity. A lot of providers say the benefit of becoming a rural emergency hospital doesn’t equal the benefit they get from being a 340B facility.

How are rural hospitals managing Medicare Advantage growth?
You are seeing some organizations across the country getting out of Medicare Advantage plans because care is not getting covered and they see frequent claim denials. You are starting to see more people say, “This is not OK.”

If Medicare doesn’t require prior authorization for a service, then neither should Medicare Advantage plans. There are broad policy approaches, but there is significant pushback from insurers arguing that those approaches would drive up healthcare costs.