A growing number of rural hospitals in Washington state are facing a dire economic future, exacerbated by recent federal legislation enacted by Congress that has serious implications for healthcare funding.
Spanning from Anacortes to Republic and Goldendale, these hospitals are grappling with significant cash flow issues, with many relying on state assistance through the Distressed Hospital Grant program meant to stabilize facilities experiencing financial distress.
The grant program, which has a budget of $10 million, supports hospitals that serve large numbers of Medicaid patients while also meeting strict financial criteria, including insufficient cash reserves or risk of bankruptcy.
According to Cassie Sauer, CEO of the Washington State Hospital Association, some hospitals are at a critical point, using the grant funds to meet essential operational needs like payroll.
This distressing financial situation comes as the state’s healthcare landscape remains fragile, with many hospitals on a tight budget.
The funding from the Distressed Hospital Grant program is sourced from taxes levied on other healthcare providers across the state, reflecting the collective responsibility to support struggling healthcare institutions.
Even before the recent cuts to Medicaid, known as Apple Health in Washington, that were orchestrated during President Donald Trump’s administration, rural hospitals were straining under financial pressures.
These cuts to Medicaid funding pose a significant threat to the already precarious existence of many rural hospitals, contributing to a troubling pattern of closures nationwide.
Sauer expressed concern about the potential impact of the federal reconciliation bill signed into law on July 4, highlighting its dual nature: while it allocated $50 billion in grants for rural hospitals, this amount is overshadowed by the projected $1 trillion slashed from Medicaid over the next decade.
As of May 2025, nearly 1.8 million individuals in Washington state are enrolled in Medicaid, with approximately 70% of its funding provided by the federal government.
Ocean Beach Health, a critical access hospital located on the state’s southwest coast, has already felt the sting of impending Medicaid cuts.
CEO Merry-Ann Keane acknowledged that although their hospital is not on the verge of closure, like others across the state, their financial health is teetering on the brink.
Notably, 40% of Ocean Beach Health’s revenue is derived from Medicaid patients, and the anticipated funding cuts could intensify their financial challenges, especially given that they operated on a mere $8,000 profit the previous year.
Keane lamented the overall strong performance relative to many of her peers but noted that rising healthcare costs and inflation, along with uncertainties surrounding insurance reimbursements, have decimated profit margins.
The current financial strain is highlighted by the minimal assistance received from the Distressed Hospital Grant program, which was only about $1,000 so far this year, considerably less than what others facing more dire situations have received.
The broader implications of the recent Medicaid cuts could trigger a continuation of a trend that has already seen 62 rural hospitals shut down in the U.S. between 2017 and 2024—contrasted by only 10 newly established rural facilities during that time.
Sauer suggested that the consequences of federal changes to Medicaid funding may unfold slowly, describing it as a potential ‘slow bleed’ felt in Washington state, particularly after the mid-term elections when program provisions that will impact small hospitals are set to kick in.
Work requirements for Medicaid beneficiaries are expected to start impacting outcomes in 2027, leading to predictions of small hospital closures in the next three to five years.
In the shorter term, however, hospitals may forego key services, signaling already developing trends in both urban and rural healthcare sectors.
This trend is troubling, as the closure of essential services, such as labor and delivery and psychiatric units, affects an entire community rather than just those on Medicaid.
Sauer emphasized that when vital healthcare services like labor and delivery are discontinued at local hospitals, the impact transcends coverage type, restricting access for everyone.
The landscape of rural healthcare in Washington state and beyond hangs in a precarious balance, as these facilities face unprecedented challenges from both structural inequality within reimbursement models and forthcoming legislative changes.
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