H.R. 1 presents twin threats for health care providers: federal Medicaid spending cuts of $793 billion over a decade, plus $268 billion in reduced spending for Affordable Care Act (ACA) marketplace subsidies — totaling over $1 trillion in cuts. These reductions are expected to increase the number of uninsured patients, while reductions in provider taxes limit states’ ability to raise revenues to support health care programs.
Resiliency planning is key to success in the new environment. Though the bill’s provisions will not start to take effect until late 2026, it is critical that health care providers prepare now.
What Providers Should Do: Embrace the Disruption, Lead the Transformation
What follows are near-term recommendations that providers can use to prepare for implementation in this new environment.
1. Tackle Total Margin Management
Health care providers must take immediate steps to model financial impact and identify levers for value-driven performance.
Starting with revenue and reimbursement baselines and managing to Medicaid and Medicare margins is a key first step. Providers should model the delta in revenue/reimbursement under the bill’s provisions, especially Medicaid reductions, Medicare PAYGO cuts, and changing payer mix. Models should layer in and adjust for patient volume shifts because of deferred or avoided care due to lack of coverage, increased emergency department (ED) utilization by uninsured populations, and/or a decline in patients’ access to social support and transportation.
Once scenario planning is complete, shift the focus to action—leveraging data to identify and control total cost of care:
- Use analytics to pinpoint where avoidable utilization is likely to spike by geography, patient segment, or clinical condition.
- Rethink contracting, procurement, and supply chain operations to support resilience, affordability, and alignment with new care models. The end-to-end supply chain is ripe for realizing savings, accomplished by harnessing a powerful blend of standardization, participation in a robust group purchasing organization (GPO), and strategic management of purchased services. Volume-based discounts obtained through GPO contracts can help smaller and more rural organizations that might be disproportionately affected by the coming cuts. Advanced automation and outsourcing select functions to leverage scale also can amplify efficiency, innovation, and speed to value. Meanwhile, value-based contracting helps ensure that every dollar spent is aligned with quality and measurable outcomes.
- Maximize reimbursement by leveraging a top-tier quality technology suite to help monitor, predict, and reduce avoidable readmissions and adverse events that carry significant reimbursement penalties, while also proving higher quality and value. Additionally, an advanced, artificial intelligence (AI)-enabled coding solution surfaces real-time opportunities to optimize and automate risk-based adjustment across Hierarchical Condition Categories for more accurate reimbursement.
- Drive financial stewardship and eliminate waste. In the clinical decision support space, look for a cost attribution technology that defines low-value care and makes costs transparent in real time. A leading solution marries clinical and financial data at the point of care to create financial efficiencies and remove waste while helping clinicians deliver better, safer care. Providers also should consider deploying service line analytics that can provide a holistic view of how products and medications affect the bottom line and contribute value to patients.
2. Speed the Move to Value-Based Care Arrangements
H.R. 1’s Medicaid and ACA cuts may leave hospitals with a higher share of uninsured and underinsured patients, meaning more care delivered with little or no fee-for-service reimbursement. As a result, health systems should start to see value-based care (VBC) not just as a choice, but as a survival strategy to avoid “death by a thousand cuts” in an increasingly restrictive payment landscape.
Alternative payment models reward care coordination, chronic disease management, and prevention—strategies that reduce costs and can mitigate financial losses from H.R. 1’s cuts. In addition, these models have ancillary benefits, including greater alignment with primary care and specialist physicians. They also incentivize the creation of social support structures that help uninsured or underinsured patients better manage conditions to remain out of expensive care settings.
But shifting to a VBC model can be bumpy, requiring up-front infrastructure investments, cultural transformation, and longer revenue cycles as payments are reconciled against year-end performance metrics.
To prepare, health systems must conduct a clear-eyed assessment of where they stand today. This means understanding what portion of contracts already tie payment to performance, how financially and operationally ready they are to take on risk, and which patient populations they’re best positioned to manage.
The transition requires investment in analytics tools, registries to track chronic conditions, and embedded care coordination models that reach into partnering physician groups (both owned and out-of-network) and other providers across the care continuum. The shift also demands a redesign of clinical workflows—moving from episodic care toward team-based, longitudinal models that prioritize prevention, care transitions, and virtual engagement. Internal incentives must align with these new priorities, just as contracts with payers evolve to include shared savings, bundled payments, or capitation.
While the transition can be daunting, those making the move are best advised to consider data-driven collaborative models where they can learn from early pioneers who have already adopted and are succeeding in VBC arrangements.
3. Deploy Technology to Optimize
In today’s resource-constrained health care environment, technology is no longer a nice-to-have—it’s a necessity. That’s where advanced technology, particularly AI, becomes critical.
Intelligent automation and data-driven decision-making help providers transform their operations. By embedding AI into everyday workflows, organizations can reduce the number of full-time equivalents needed to complete routine or repetitive tasks, from supply chain tracking and revenue cycle management to clinical documentation and care coordination.
Leading solutions go beyond simple automation. Advanced analytics and AI-powered solutions drive efficiency gains by flagging process breakdowns, standardizing best practices, and surfacing actionable insights. For example, workforce optimization tools can help realign staff to demand, while supply chain analytics reduce variation and identify cost-savings opportunities. In areas such as claims processing, AI not only helps accelerate throughput, but also improves accuracy and reduces denials—directly impacting the bottom line.
The result? Streamlined operations, smarter resource allocation, reduced costs, and more bandwidth for hospitals to focus on what matters most: delivering quality care.
4. Pursue Public Health Engagement
As hospitals face growing pressure to improve outcomes while managing tighter margins, collaboration is rapidly becoming a financial imperative. Many health systems continue to build and operate community-facing programs that overlap significantly with services already provided by both payers and local health departments (LHDs). Such initiatives include maternal health outreach, immunizations, home visits, and health education. While well-intentioned, this duplication is both costly and inefficient.
At the same time, public health programs have suffered budget cuts, making them more receptive to innovative partnerships with private sector organizations and nonprofit health care to achieve shared goals.
Working together, health systems can leverage LHD resources already embedded in communities—often delivered at lower cost due to established infrastructure, public funding, and community trust. By pooling resources, health systems can extend their reach, reduce overhead, and improve outcomes in ways that also improve the bottom line.
In VBC models, providers often are financially accountable for total cost of care. Partnering with LHDs and public and private payers to address upstream needs such as immunization, prenatal care, or chronic condition outreach reduces unnecessary ED visits and inpatient admissions, which can, in turn, boost shared savings performance.
As a first step, provider leaders should request a systemwide inventory of community-facing programs and services, specifically identifying overlap with those provided by LHDs or community-based organizations. From there, make informed choices about opportunities for consolidation, co-investment, or shared service models to improve impact and financial sustainability.
Looking Ahead
While H.R. 1’s passage introduces real challenges, it also creates a rare inflection point—a chance for health care leaders to convene, innovate, and shape the future of care delivery.
Association corporate affiliate member Premier brings a host of solutions together to help providers manage H.R. 1’s pressures while preparing for a better, smarter health care future.
Learn more about Premier’s comprehensive solutions and connect with the team today.