US hospitals prepare for a more challenging 2027 as coverage losses and Medicaid reductions approach

US hospital operators are preparing for mounting revenue pressure as more patients lose Affordable Care Act coverage, government support for Medicaid care weakens and reimbursement cuts deepen in the years ahead.

Large chains such as HCA Healthcare, Tenet Healthcare and Universal Health Services continue to report solid admissions, helped by an aging baby-boomer population that needs more medical attention.

Even so, the companies said on earnings calls that a growing number of uninsured patients is squeezing margins. Emergency-room treatment for people without insurance is often never paid for, leaving hospitals to absorb the cost.

“They don’t pay, so it’s essentially a write-off,” said Jefferies analyst Brian Tanquilut.

One source of strain has been the expiration of pandemic-era federal subsidies that had lowered the cost of Affordable Care Act health plans.

Premiums for some enrollees surged by two to three times, while others saw double-digit increases. In the end, more than 3 million people have dropped their plans.

J.P. Morgan analysts said falling enrollment in government-run ACA exchanges, where people without employer coverage can buy insurance, could trim hospital profit growth in 2027 by a low- to mid-single-digit percentage.

HCA has said the disappearance of the federal subsidies could cut its income by as much as $1.2 billion in 2026. HCA, Tenet and Universal all reported year-over-year declines of 17% to 19% in third-quarter ACA exchange volumes, with many newly uninsured patients shifting to self-pay.

Another headwind is a sharp expected decline in Medicaid supplemental payments, which are government payments meant to help hospitals cover the cost of treating Medicaid patients.

HCA expects net supplemental benefits to fall by $550 million to $650 million in 2027, while UHS projects a hit of $175 million to $200 million.

Tenet faces less exposure because its outpatient surgery-center business, which made up about 40% of third-quarter adjusted core earnings, is less affected by exchange coverage losses and Medicaid reimbursement pressures.

Some analysts said the cuts could be softened if Democrats use control of the House and Senate to try to reverse parts of the policy changes.

“We see the Democrats as most likely to focus on attempting to walk back changes to Medicaid and the ACA exchanges, but continue to see any meaningful traction as unlikely,” said J.P. Morgan analyst Lisa Gill.

Under the Trump administration’s One Big Beautiful Bill Act, certain working-age Medicaid adults will have to meet work or community-service requirements to keep coverage, which could increase uncompensated care.

Morningstar analyst Julie Utterback said Medicaid patients provide low margins, limiting the direct revenue impact of the work rules for operators such as HCA, which has greater exposure in states that have not expanded Medicaid eligibility to more low-income adults under the Affordable Care Act.

The work-requirement changes generally apply only to people in Medicaid expansion plans.

The bigger threat for hospitals arrives later, when certain supplemental Medicaid payments from the government begin being reduced by 10 percentage points each year. Health policy research firm KFF estimates the changes could put about $60 billion in current federal hospital funding at risk once fully phased in.

Tanquilut said the phased reduction would leave hospitals facing four to five straight years of Medicaid pressure beginning in 2028.

“From a hospital profit perspective, I suspect the payment cuts will be a bigger headwind with a more lasting effect,” Utterback said.

(Reporting by Christy Santhosh and Kamal Choudhury in Bengaluru; editing by Caroline Humer and Devika Syamnath)