Beyond Budget Cuts: Rethinking Health System Strategy for Long-Term Sustainability

When HR1 passed, it wasn’t just a new policy but a financial earthquake. With sweeping reductions in Medicaid funding and new restrictions on Disproportionate Share Hospital (DSH) payments and 340B eligibility, many hospitals are feeling the pressure to tighten their belts.

But margin improvement alone isn’t the answer. Sustainability calls for a strategy.

Instead of chasing temporary savings, the most resilient health systems are thinking bigger. They’re redesigning how care is accessed, which services they offer, and how they negotiate with commercial payers. In short, they’re rebalancing their business, not just trimming it.

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Start With Access: A Strategic Lever, Not Just a Scheduling Fix

Your medical group and ambulatory footprint should be a growth engine—but for many systems, they’re underperforming. The culprit? Long wait times, inconsistent workflows, and lost opportunities in high-margin specialties.

The solution starts with rethinking access strategy:

• Centralized, digital-first scheduling reduces friction and boosts referrals
• Expanded hours and telehealth meet rising consumer demand while diverting unnecessary ED visits
• Smart provider-patient matching improves throughput and satisfaction

We’ve seen firsthand how a data-driven approach to access and operational optimization can deliver powerful results. One Southeast regional health system partnered with Coker to transform its medical group operations, leading to a 25% increase in provider productivity, a 21% net revenue boost, and a 27% rise in patient satisfaction. These improvements were achieved by redesigning access infrastructure, aligning compensation, and streamlining workflows—proving that access isn’t just an operational fix, it’s a growth engine.

But this only works when compensation and accountability are aligned:

• Tie comp models to access, productivity, and downstream value
• Use dashboards and peer benchmarks to drive performance

Too often overlooked, access is one of the most powerful levers for sustainable growth.

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Evaluate Services with Strategy, Not Sentiment

For years, supplemental programs like DSH and 340B made it easier to justify high-Medicaid service lines. HR1 changes the game. Now, those same service lines might jeopardize eligibility and reduce overall funding.

A strategic approach means asking:

• What’s the contribution margin and payer mix?
• How does this service align with our mission and community needs?
• Could changes in Medicaid volume threaten DSH or 340B thresholds?

Rationalization doesn’t mean abandoning your safety-net mission. It means making informed decisions that balance mission with margin. For example, one hospital chose not to grow its cardiovascular service line and instead reinvested in oncology, aligning more closely with community demand while improving long-term financial performance.

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Use Data to Drive Commercial Strategy

Payer negotiations aren’t about guesswork anymore. Thanks to price transparency rules, hospitals can now see how their rates compare to competitors, and that’s a game-changer.

Use that data to:

• Target under-reimbursed services with high procedural volume
• Rebalance portfolios based on strategic growth—not just legacy deals

Too often, payer negotiations focus on across-the-board increases, but a more innovative, more sustainable approach is rate rebalancing. By identifying high-value service lines (i.e., imaging, procedural specialties, or areas where you’re planning capacity expansion), health systems can selectively push for stronger reimbursement where it matters most. In parallel, they can hold or modestly reduce rates in lower-priority areas to maintain payer neutrality.

This targeted strategy protects relationships with payers while enhancing revenue in areas that support long-term goals.

Of course, no commercial strategy is complete without the infrastructure to capture volume. Even with favorable rates, hospitals must ensure patients can access those services by reducing leakage, optimizing scheduling, and aligning marketing efforts with high-value specialties.

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Where Do We Go From Here?

HR1 is a wake-up call. But it’s also an opportunity.

You don’t need to slash your way to sustainability—you need to strategize your way there.

Focusing on access, service mix, and commercial strategy can help you build a future that balances mission with margin.

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Join Us Live: HR1’s Impact on Hospital Sustainability

How should healthcare leaders respond to steep funding cuts from HR1?

In this webinar, we’ll unpack the legislation’s financial implications and explore strategic responses across access, service lines, and payer strategy.

📅 August 26, 2025 | 🕑 1:00 PM ET

👉 Reserve Your Spot Now