Massachusetts hospitals face financial ruin under Medicaid cuts

State officials say Massachusetts’ health care system is set to lose an estimated $3.5 billion in the next three years. Cuts to Medicaid, the government’s insurer for the poor and disabled, and Affordable Care Act subsidies will lead to an estimated 300,000 people losing their health insurance.

At a time when many hospitals are already struggling — 16 of 22 health systems in Massachusetts operated in the red last year — the impending cuts could be existential for some of the state’s poorest hospitals. These are often also “safety-net” hospitals, where the uninsured, underinsured, and people on Medicaid are most concentrated. With the loss of so many federal dollars, experts say, these hospitals, who must treat all patients who show up, will face far greater costs, and some even possibly bankruptcy.

Health care leaders predict a slew of consequences. Emergency departments will fill. Wait times will lengthen. Doctors’ availability will decrease. Some areas could see closures of less-profitable but critical units, such as primary care, pediatrics, maternity, mental health and substance use treatment.

UMass Memorial Medical Center in Worcester provides a stark example of what many safety-net hospitals could experience in the coming years. Confronting an $86 million operating loss in the first half of the fiscal year, UMass Memorial Health leaders knew the situation was about to get worse. To help manage the looming federal cuts, they shuttered some costlier service lines: a behavioral health program, a teen substance use treatment center, and two primary care clinics.

Leaders are still bracing for what’s to come. Already stretched, its emergency department in October had nearly 100 patients awaiting hospital beds, or “boarding,” daily, more boarding than the department had seen in over a year.

“It’s going to get ugly the next three years,” said UMass Memorial CEO Eric Dickson. “I mean, I should have retired last year.”

Most other hospitals declined to specify how they’ll handle the cuts, but some acknowledged that times are about to get even tougher.

By the start of 2027, Medicaid recipients will have to prove every six months that they’re working or volunteering at least 80 hours per month. Low and middle-income people who don’t qualify for Medicaid and get their insurance through the HealthConnector could see their subsidies disappear, hiking up premium costs. And by the beginning of 2028, certain tax programs that the state uses to fund its share of Medicaid will face significant restrictions.

As insurance gets more expensive and harder to access, more people will go without coverage, delaying their care until they’re so sick they have to go to the costly and increasingly crowded emergency room. Hospitals will take on more uncompensated care, hurting their already crumbling financial wellbeing. Service lines, and possibly even entire hospitals, will close.

The rest of the health care system will struggle to absorb extra patients, said Steve Walsh, CEO of the Massachusetts Health & Hospital Association.

“More people are coming to academic medical centers if they feel like they can’t get seen close to home, or they’re concerned about services or workforce,” Walsh said. “They come into Boston, which creates longer wait times at academic medical centers.”

At Boston Medical Center — which Dickson calls the “granddaddy of safety-net hospitals” — more than 40 percent of patients are on Medicaid. The hospital is almost always skating on razor-thin margins, as Medicaid reimburses hospitals at lower rates than most commercial insurers.

Over the past year, Dr. Ellana Stinson, a BMC emergency physician, has noticed an uptick in patients who come to the ER for chronic, not emergency, conditions because they can’t keep up with the rising cost of care. They can’t afford their medications for diabetes, blood pressure, and heart conditions. They turn to the hospital for help, but BMC can’t always afford the costs either.

Stinson, who also serves as the president of the New England Medical Association, testified at a recent Massachusetts Health Policy Commission that she fears more patients are going to forgo insurance as prices climb. Patients will show up to her emergency department even sicker.

“I’m starting to see the seams of our health care system come apart,” said Stinson, who noted she was not speaking on behalf of any institution.

BMC operated at a 1.1 percent loss in 2024. Because the hospital cares for so many Medicaid patients in Boston, there’s a sense that BMC is too big to fail, said state Senator Cindy Friedman, Senate chair on the Joint Committee on Health Care Financing.

“But let’s talk, let’s say Baystate goes out of business,” said Friedman, an Arlington Democrat. “What happens there? Or UMass Medical. How do you make up for those systems, which not only are some of them quite big, but they’re the only game in town.”

Other safety-net hospitals are in even more dire shape. Tufts Medicine — which includes Tufts Medical Center, where nearly a quarter of patients are on Medicaid — lost more than 9 percent on operating costs last year; Baystate Health lost 2.5 percent; and UMass Memorial lost 2.3 percent.

In a statement, a spokesperson said Tufts would continue working with the state to help its patients maintain Medicaid coverage.

“While our financial recovery continues, we’re encouraged by the significant progress we’ve achieved — a nearly $300 million improvement in operating margin over the past two years through a series of revenue growth and cost management initiatives alongside world-class patient experience scores,” the statement said.

Among smaller hospitals, Signature Healthcare, which owns Brockton Hospital, reported operating margins of -17.2 percent last fiscal year. Brockton Hospital’s patient mix was 28 percent Medicaid in 2023.

Half of patients are on Medicaid at Cambridge Health Alliance, which operates in towns north of Boston, including Everett, Malden, and Somerville. The health system reported an operating margin of -4.5 percent last year.

In a statement, Cambridge Health Alliance said it expects to be “particularly affected” by the cuts, though it cannot speculate on how services may be impacted.

Even the hospitals that are operating in the black are concerned.

Emerson Health in Concord was operating at 128 percent capacity for the last two weeks of October. CEO Christine Schuster said Emerson has seen an increase in patient volume since Nashoba Valley Medical Center closed, a victim of Steward Healthcare’s bankruptcy.

Only 4.6 percent of Emerson’s patients were on Medicaid in 2023. The system reported a 4.5 percent operating margin last year, the second best in the state. Still, Schuster worries about how the system as a whole will suffer if patients put off unaffordable care and end up in the emergency department very sick.

Coverage for uninsured and underinsured patients is the shared responsibility of hospitals, health insurers, and the state, which all pay into a fund called the Health Safety Net. But that fund will have a $290 million shortfall this year, the Massachusetts Health & Hospital Association projects. Already, the state gave the fund, hospitals, and community health centers a $234 million supplemental injection to help manage that shortfall, but it won’t be enough to cover all the costs of care.

The system is unsustainable and health care costs are continuing to skyrocket, Schuster said.

“There continues to be fewer and fewer net payers into the system and many more hospitals that need to receive,” Schuster said. “You can’t really fix the system off the back of the hospitals that are net payers.”

Marin Wolf can be reached at [email protected].