By Nicole Nixon, David Lightman
The Sacramento Bee
SACRAMENTO, Calif. — Rural hospital officials are in a nervous, uncertain holding pattern as they wait to learn their future following $1 trillion in Medicaid cuts in President Donald Trump’s Big Beautiful Bill.
“There are a lot of unknowns right now, so we’re obviously looking at things we can do to tighten our belts ahead of the potential changes,” said Siri Nelson, president and CEO of Marshall Medical, a nonprofit health system in El Dorado County.
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The cuts approved by the Republican-led Congress and Trump earlier this year will be felt largely through new requirements for Medicaid recipients. Starting in 2027, they’ll have to prove every six months that they are either employed, in school, volunteering or looking for work in order to keep their coverage.
Medicaid, called Medi-Cal in California, is a joint federal-state program that helps lower-income people afford health coverage.
Nearly 30% of Marshall Medical’s patients are covered under Medi-Cal, but other rural hospitals in the state have larger percentages, according to data from the nonpartisan California Health Care Foundation. At roughly a dozen hospitals in Northern California, the Central Valley and the Inland Empire, more than half of patients are covered by the low-income health program.
While Marshall Medical sees patients regardless of their ability to pay, hospitals, physicians and others are expecting a significant drop in Medicaid reimbursements once the work requirements take effect.
The system’s 65-year-old main hospital in Placerville – which houses its emergency department, birth center, general surgery and other departments – needs upgrades, Nelson said, particularly its sterile processing system – “basically a giant dishwasher that cleans all the surgical instruments.”
“We can still take perfectly good care of sterilizing instruments,” she said. “But we can’t be as efficient as we need to be if we don’t get those up-to-date.”
Because of the uncertainty surrounding Medicaid cuts, Nelson is delaying any infrastructure updates for the foreseeable future.
Already on the brink
California’s 67 rural hospitals have rarely been money-makers. Theirs is a nonstop struggle to maintain quality health care while balancing challenges unique to smaller, ethnically and economically diverse communities.
The California Hospital Association estimates that nearly half of rural hospitals currently operate at a loss.
Eventually, it becomes too much.
Glenn County’s only hospital and emergency room closed earlier this month. In the Central Valley, Madera County’s only hospital reopened earlier this year under new management after abruptly shuttering in early 2023.
Southern Inyo Health District, the only hospital within 100 miles of Death Valley National Park and Mount Whitney, is at imminent risk of closure and has asked Gov. Gavin Newsom and lawmakers for an emergency $3 million lifeline.
Losing patients who rely on Medi-Cal would be a huge blow to these facilities, experts said.
“Hospitals in rural areas definitely have a significant risk and will be negatively impacted by these cuts,” said Kristof Streimikis, director of market analysis and insight at the California Health Care Foundation.
Some areas may fare worse than others. In California’s far northeast corner, most of the patients visiting remote Modoc County’s only two hospitals are covered by Medi-Cal. One of those, in California’s northeasternmost reaches, Cedarville’s Surprise Valley Community Hospital, has a payer mix that’s 80% Medi-Cal patients, according to CHCF data. Hospital officials at Surprise Valley did not respond to interview requests.
“If you run a hospital and you’re facing a significant reduction in your revenue, you can offer fewer services or you can employ fewer people,” Streimikis said. “That leads to potential access problems, potential quality issues, job losses. And all those things can be magnified in rural areas, which are quite dependent on Medicaid funding.”
A new fund for rural hospitals
The bill Trump signed into law in July was supposed to ease the rural hospitals’ financial pain by including a $50 billion Rural Health Transformation Program, an effort to quell the intense criticism over the bill’s $911 billion in cuts to Medicaid spending over the next 10 years.
Supporters of the rural fund touted it as a useful way of stabilizing smaller hospitals while getting rid of fraudulent Medicaid users.
“This is an efficient way to ensure the sustainability of our rural health care facilities while protecting taxpayer dollars from waste, fraud and abuse,” said Sen. Mike Crapo, R- R-Idaho, chairman of the Senate Finance Committee.
But there’s a lot about the fund that’s still unknown – and deeply concerning to hospital officials throughout rural California.
The federal Centers for Medicare and Medicaid Services is responsible for distributing the entire $50 billion rural health fund. It will provide half of the fund equally across states with approved applications. Dividing that money equally could mean California, with 12% of the nation’s population, could get the same as a much smaller state, according to an analysis by KFF, an independent health policy research, polling and news organization.
The other half’s distribution of the other half of the fund will be based on 23 different factors, including rural population size and number of health facilities, as well as state initiatives for spending the money and other considerations.
“While CMS has released many new details about how the funds will be distributed across states, questions remain about which states will receive funding, the final distribution across approved states, and how well this will align with state needs,” said Zachary Levinson, project director for the Project on Hospital Costs at KFF.
The law provides $10 billion per year through the rural health fund for fiscal years 2026, which began October 1, through 2030.
The first round of funding will go out in January 2026. States will be allowed to spend funds that they receive through the end of the following fiscal year, and CMS will redistribute unused funds over time, but all funds must be spent before October 1, 2032.
CMS told the Bee the initiative is “a generational investment in the sustainability of rural health infrastructure and outcomes. The program is under development, and CMS is working in coordination with whole-of-government partners. Additional details will be shared as implementation advances.”
The Republican view
Republican supporters of the Big Beautiful Bill tend to be wary of such doomsday talk.
Rep. Kevin Kiley, R- Roseville, cited the $50 billion fund as an important way of strengthening rural hospitals.
“By expanding federal support for rural healthcare infrastructure and ensuring fair Medicare reimbursements, this legislation gives rural hospitals the tools they need to stay open, recruit doctors and nurses, and offer top-quality care closer to home,” he said.
While acknowledging there is waste and possibly fraud in the system, hospital officials and analysts cite ways they’re trying to be more efficient. More telehealth opportunities can be important, particularly in more remote areas.
“It’s important to acknowledge there is waste in our health care system. There’s waste in hospital operations, in private practice, in the pharmaceutical industry,” said Streimikis of the California Health Care Foundation.
“The larger question here is, how do you promote efficiency and improvement in the health care system? Do you do it by investing in parts of the system that need it or withholding money across the board?” he asked.
Among the possible areas for increased efficiencies: More telehealth opportunities can be important, particularly in more remote areas. There are also new ways hospitals could share services.
Peggy Wheeler, vice president, rural health care and governance at the California Hospital Association, cited three rural hospitals in Plumas County where such innovations are possible though “what we have to assure first is they all have appropriate broadband and connectivity.”
Hospital experts were deeply skeptical that the state’s piece of the federal rural fund will be enough to make such adjustments quickly.
Their biggest fear, supported by independent analysts such as Washington’s Congressional Budget Office, is that millions will lose their Medi-Cal benefits and become uninsured. The bill tightens those requirements, requiring proof of work or education in most instances, tightens eligibility requirements and reduces federal spending.
“There will be more uninsured patients, but what it doesn’t mean is people won’t get sick,” said Wheeler. At the same time, people will not be turned away.
“You’ll still have the cost of maintaining all the services you need, the staff, etc., but now you’re getting a reduction in how you’ll get reimbursed,” she said.
CBO estimates that 10 million people nationwide, and 1.6 million in California, mostly people who use Medi-Cal, will lose their health insurance by 2034. KFF estimated there were 2.4 million uninsured people in the state in 2023.
‘Folks will get sicker’
There’s also potential for more trouble because of the legislation’s cutbacks to routine medical services, said Streimikis. Without access to routine medical care, he said, “folks will be sicker and need care and present in emergency rooms with more complicated cases. That skill is going to cost money.”
Nelson, the Placerville hospital CEO, worries what it will mean for patients when it suddenly becomes harder to get seen by a primary care doctor. As an example, she pointed to a recent positive shift in patient breast cancer diagnoses.
“A couple years ago, we worked on getting women in for their mammograms, and we pushed really hard to make that happen,” she said. As a result, women began getting diagnosed earlier, which makes the cancer easier to treat and improves patient health and longevity.
“If you don’t have coverage, you’re not going to go get that mammogram,” Nelson said. “And the odds are you’re not going to get it caught soon enough to have a stage one or stage two cancer (diagnosis). You may be stage three or stage four, and we all know that outcomes are a lot worse when you’re caught at that late stage.”
She also noted that rural patients must often go to larger cities for specialized treatment. If their local hospital closes or cuts services, they may have to travel further for even routine appointments or surgeries.
“If you’re in Modoc County or in rural California, transportation and costs are a big deal,” said Nelson, who also serves as board chair of the California Hospital Association .
Marshall Medical often gives gas cards to patients who have to go to Sacramento or the Bay Area for treatment, Nelson said, but transportation is only one piece of a logistical puzzle.
“You have nowhere to stay when you get there,” she said. “What do you do? Sleep in your car while you’re waiting for your loved one to have their surgery? It’s really challenging.”
New ways to help
Rep. David Valadao, R- Hanford, had a more measured approach to the rural hospital issue.
Currently, “Medicaid is enough to keep doctors and hospitals open but it doesn’t bring in the specialists our communities need,” he told The Bee. “It doesn’t do the stuff we think we should be doing better.”
He cited recent rural hospital closings and cutbacks in his area, and said “No one is rushing to open them up. They are not profitable. They’re not making money. Medicaid is enough just to keep them afloat, but not really well because I’ve got some hospitals losing some money on a monthly basis.”
About two-thirds of all residents in Valadao’s Central Valley district receive help from Medi-Cal. The district includes most of Kings County and parts of Tulare and Kern counties.
Valadao is one of two California Republican members of the budget-writing House Appropriations Committee. Corona’s Ken Calvert is the other.
Pressed for specifics as to how he could help, Valadao said he’s done “quite a bit to bring more doctors and more clinics to the district,” as well as work explaining the subject to constituents.
Some Republicans say there’s still plenty of time to formulate new strategies and adjust to the changes, since most of the new Medicaid provisions don’t go into effect until January 2027.
That doesn’t help a lot, said Wheeler, though “in theory it gives us an opportunity to plan for the worst.”
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