Hospitals Facing 'Triple Whammy' Of Healthcare Cuts Could Be Forced To Sell Real Estate

More than 60 million Americans are at risk of losing health insurance coverage after the federal government has slashed funding for Medicaid, let subsidies tied to the Affordable Care Act expire and announced a freeze on payout increases for Medicare Advantage.

Fewer insured people means fewer customers for hospitals and health systems, which face a deteriorating revenue outlook as labor costs and other expenses continue to rise. Many could be forced to cut back on operations, hold off on expansions and sell their properties to keep their doors open.

“Hospital vacancy rates increase significantly, and then it's just about expenses and not enough revenues for the hospitals,” said Neeraj Puro, associate professor of health administration at Florida Atlantic University. “It's a massive risk because it's a double, triple whammy.”

The One Big Beautiful Bill Act, which President Donald Trump signed into law in July, cut about $1.1T in funding from Medicaid, Medicare and Affordable Care Act subsidies. The cuts are estimated to push nearly 12 million people off of health insurance, according to the Congressional Budget Office.

For hospitals, where Medicaid accounts for $283B of $1.5T in spending, it is a big hit — especially those in financially vulnerable areas with a large share of Medicaid patients, according to the Kaiser Family Foundation, a nonprofit health policy research organization. 

Many of those funding cuts don't take effect until next year, but they will weigh on an already challenged sector. Of all hospital sales that took place in 2025, a record 43% involved a financially distressed party — a jump from the previous 30% record set the year prior, according to healthcare management consulting firm Kaufman Hall.

The number of overall hospital transactions decreased from 72 to 46 in 2025, but the number of distressed sales is expected to keep rising, especially as federal funding pressures mount, said Joel Swider, a Hall Render attorney and healthcare real estate strategist. 

Following the Medicaid cuts, ACA subsidies enacted under President Joe Biden during the pandemic in 2021, which expanded income eligibility and reduced required household contributions for the ACA, expired on Dec. 31.

The issue was at the core of the longest government shutdown in the nation’s history last fall. Democrats refused to agree to a government spending bill without an extension of the subsidies, but after 43 days, eight Democratic senators voted with Republicans on a spending bill, contingent on further talks over the subsidies.

Negotiations to extend them after the government reopened in November subsequently collapsed. 

The decision has led to significant increases in monthly insurance premiums for millions of Americans. Individuals who are 60 or older and make $65K a year will see the most significant increase and could see a jump of up to $1K a month, The New York Times reported.

The Trump administration delivered a third blow when it announced it would freeze payments to private Medicare Advantage plans, which came as a surprise to insurers and the more than 34 million people enrolled in those benefits, Axios reported.

The Center for Medicare and Medicaid Services increased payments by 2.6% this year for outpatient care and 3.3% for hospital reimbursements, Healthcare Dive reported. Next year, the increases announced would be close to zero, although the decision won't be final for months.

“Combined with its continued inadequate market basket updates, [CMS] is exacerbating the challenging financial pressures under which hospitals are operating to serve their patients and communities,” Ashley Thompson, American Hospital Association senior vice president of public policy analysis and development, said in a November statement.

The reform is aimed at preventing unnecessary services being performed in hospitals and pushing for transparent and accurate pricing information, CMS Deputy Administrator and Director of Medicare Chris Klomp said in a statement.

About a third of hospitals are operating at a loss now, FAU's Puro said. In three years, he estimates that about half of the country's hospitals will fall into the red.

“They're just getting absolutely hammered in all directions,” said John Williams, a Hall Render Killian Heath and Lyman attorney specializing in government relations, healthcare and public finance. 

“These are nonprofit entities,” he added. “Their margins, we don't refer to them as profit margins — they're just margins. And for the overwhelming majority of hospitals in this country who actually have a positive margin, it's barely in the single digits.”

While the most significant changes to federal financing don't take effect until next year, hospitals are scrambling to get ahead of it, Swider said.

Some are preparing to shut down services or entire hospital wings that aren't profitable. One of the first wings and services to go would be obstetrics and gynecology services, which focus on pregnancy, childbirth and postpartum care, Puro said.

Hospitals are also increasingly looking at other options for their real estate, like selling their hospitals and leasing the properties back or partnering with larger developers.

The demand for these options has accelerated over the last six months, Swider said, but it also poses a risk to hospitals that would lose control over their real estate — Prospect Medical Holdings and Steward Health Care both cited onerous rent payments following sale-leaseback transactions as reasons for their bankruptcies over the past two years.

“That's great in the short term, but sometimes, they may regret that decision down the road, giving up that level of control to a partner,” Swider said.

Even financially healthy hospitals in fast-growing areas have started to reconsider expansion plans in light of the shifting funding environment, Puro said.

Some need to expand to keep up with demand, said Christine Gorham, who has more than 35 years of experience in healthcare real estate, including as an executive at Northside Hospital and Caddis Healthcare Real Estate in Atlanta.

“Not only are we having trouble building things because the numbers don't pencil, but you've got hospitals that have very small margins who are being asked to cut that even more,” Gorham said.

Swider said clients have also begun requesting to find ways to set money aside for already planned expansions.

“[They're saying,] ‘How can we preserve this capital for our real estate projects that are in the queue before we have to make that budget cut and the money goes away?’” Swider said.

Last week, Brown University Health hired JLL to oversee management and strategy of its 4.5M SF real estate portfolio in Rhode Island and Massachusetts. While there was no mention of cuts in the announcement, the hospital system signaled changes could be coming.

“Together, we will conduct a comprehensive portfolio optimization exercise to prepare Brown University Health for the most efficient and accessible care network across Rhode Island and Massachusetts,” BUH Vice President of Real Estate and Facility Planning Tim Quirk said in a statement.

Neither BUH nor JLL responded to Bisnow's request for further comment.

For hospitals in rural areas, where Medicaid payments make up a larger share of revenue, there is less time to prepare, and the situation is even more dire.

In Pennsylvania, 37% of hospitals are operating at a loss, and up to 14 are projected to close by 2030, according to a January report from the Hospital and Healthsystem Association of Pennsylvania.

If these hospitals close, they not only force those in the surrounding community to travel farther for healthcare but also sap the local economy by taking away what is usually one of the largest providers of jobs in a rural area, Puro said.

“It's an existential threat for them,” Swider said.