The new law brings transformative changes to Medicare, Medicaid, and patient cost-sharing, requiring providers to strategically adapt revenue cycle operations.
On July 4, 2025, the “One Big Beautiful Bill Act” (H.R.1) was signed into law, initiating sweeping changes to healthcare funding and policy. With major reforms impacting Medicaid and Medicare reimbursement, patient cost-sharing, and eligibility processes, healthcare organizations must prepare for significant disruptions in billing, collections, and overall revenue capture.
Whether your focus is inpatient claims management, high-volume diagnostic testing, specialized molecular genetics and pathology services, behavioral health treatment, skilled nursing care, or home health services, these legislative challenges will directly affect revenue cycle operations across the entire healthcare continuum.
Here’s a breakdown of the key impacts and strategic actions to help you prepare.
1) Medicare Adjustments: Short-Term Gains Offset by Future Cuts
The law provides a one-time 2.5% increase in the Medicare Physician Fee Schedule (MPFS) for 2026. However, this temporary boost is offset by the reinstatement of the 2% Medicare sequestration, coupled with an additional 4% cut, both effective in 2026. According to policy analysis, Medicare payments could be reduced by 4% annually over the next decade. Without further legislative intervention, providers could face a total 6% net reduction in Medicare reimbursement, neutralizing any initial gains.
💲Implications for Revenue Cycle Management:
- For Hospitals: Anticipate suppressed reimbursement for high-cost services and increased difficulty in offsetting readmission penalties.
- For Laboratories: Labs relying on Medicare Part B for outpatient testing may see compressed margins—particularly in molecular pathology and genetic testing, where reimbursement rates are typically higher.
- For Pathology Groups: Expect tightening margins as Medicare cuts clash with stable costs for specialized services like cancer diagnostics and tissue analysis.
- For Physician Practices: The 2.5% increase will be quickly overshadowed by sustained reductions, posing cash flow challenges, especially for practices serving large Medicare populations.
- For Skilled Nursing Facilities: Post-acute Medicare Part A payments may be pressured, forcing reductions in service offerings or Medicare admissions.
- For Home Health Agencies: Margin compression may lead to reduced service frequency, limited geographic coverage, or market exits.
- For RCM Teams: A reassessment of cash flow forecast and financial models will be essential to reflect new reimbursement realities.
2) Medicaid Funding Reductions: The Surge in Uncompensated Care
A major component of the legislation involves $880 billion in Medicaid reductions over five years. The Congressional Budget Office projects that 11.8 million people could lose health coverage by 2034. This will shift costs form payers to providers, leading to an estimated $204 billion increase in uncompensated care over the next decade.
📉 Impact on Provider Revenue:
- For Hospitals: Prepare for more uninsured patients, longer A/R cycles, and increased bad debt. Projections show $63 billion in additional uncompensated care costs specifically for hospitals per NASHP.
- For Laboratories: Partner hospitals cut diagnostic budgets, delay payments, or limit test referrals. According to The Dark Report, hospitals are expected to push cost-saving measures onto reference labs, placing pressure on pricing and reimbursement negotiations. High-cost genetic testing may become discretionary as patients lose coverage.
- For Physician Practices: Practices may face an estimated $24 billion in additional uncompensated care costs will directly impact physician practices, with primary care and specialty practices serving vulnerable populations facing the greatest burden.
- For Skilled Nursing Facilities: Coverage gaps may delay admissions, shorten stays, or increase bad debt as patients struggle with co-pays and deductibles.
- For Behavioral Health Providers: With Medicaid covering a substantial share of behavioral health services, coverage losses could create access barriers to essential care.
- For Home Health Agencies: Reduced referrals for chronic diseases management and post-acute care will likely increase reliance on self-pay patients or force service cuts.
- Across the Board: Clinical labs serving low-income or rural populations may face more uncompensated testing as fewer Medicaid patients remain eligible for coverage. Providers should expect cascading financial risks across inpatient, outpatient, and ancillary services.
3) State-Level Variances: A Complex Reimbursement Landscape
The reduction in federal matching funds (FMAP) places pressure on states to either reduce Medicaid services, narrow provider networks, or lower reimbursement rates.
🗺️ Navigational Challenges:
- For Multi-State Organizations: National labs, pathology groups, behavioral health networks, and health systems must navigate a patchwork of state-specific reimbursement models.
- Financial Leadership: Strengthen Medicaid monitoring, adapt billing protocols accordingly, and prepare for contract renegotiations across varied jurisdictions.
- For Labs: Healthcare Attorney Elizabeth Sullivan recommends closely tracking policy shifts in each state and reevaluating payer mix and service offerings in response to Medicaid coverage changes.
4) Patient Cost-Sharing: Potential for Reduced Utilization
The Act introduces new cost-sharing for Medicaid recipients with incomes up to 100% of the federal poverty level—including co-pays up to $35 per service. While emergency and primary care are exempt, diagnostic, specialty, and elective services are not.
🏥 Operational Considerations:
- Hospitals: Expect more no-shows and treatment delays, especially for elective services like outpatient procedures or imaging.
- Laboratories: Anticipate a drop in testing volume in safety-net settings. Non-urgent testing may be deferred due to new co-pays, and labs may absorb increased administrative costs tied to billing and collections.
- Pathology Services: Patients may defer elective procedures involving tissue analysis, impacting routine screening volumes.
- Behavioral Health Providers: Co-pays could disrupt continuity of care and lead to higher reliance on emergency services.
- Home Health Agencies: Service refusals due to co-pays may result in hospital readmissions and poorer outcomes.
- RCM Teams: Emphasize financial counseling, train access staff on co-pay conversations, and enhance self-pay workflows.
5) Elevated Risks: Denials, Eligibility, and Audits
The legislation requires Medicaid eligibility redeterminations every six months—up from the previous 12-month interval. This may increase churn, administrative errors, and gaps in coverage.
🚨 Escalating Revenue Cycle Risks:
- Eligibility-Related Denials: Errors could trigger denials across all services—from basic labs to molecular diagnostics and behavioral health.
- Coverage Lapses: Gaps may lead to audits, delayed cash flow, or repayment demands, especially in long-term and recurring care settings.
- Uninsured Fallout: The Congressional Budget Office estimates 10 million people will remain uninsured, underscoring the financial strain from sweeping Medicaid and ACA changes.
- Proactive Measures: Clinical labs are advised to tighten insurance verification protocols immediately. Use real-time eligibility tools and ensure access and billing teams are retrained to handle more frequent changes.
6) Preparing Your Revenue Cycle for What’s Next
With major provisions kicking in as early as January 1, 2026, healthcare organizations must shift from awareness to implementation.
🔑 Key Recommended Actions for RCM Leaders:
- Payer Mix Analysis: Reassess your payer mix to model the impact of Medicaid losses, with emphasis on high-exposure service lines.
- Denial Management: Focus on achieving first-pass clean claims, especially with stricter eligibility requirements.
- Workflow Audits: Review front-end processes for eligibility, authorizations, and co-pay collection—customized by service line.
- Staff Training: Prepare teams for sensitive financial conversations, especially in behavioral health, skilled nursing, and home health.
- State Monitoring: Track how each state implements changes and stay ahead of reimbursement shifts across all practice areas.
- Contract Strategy: Labs should revisit agreements with health system partners to align on changes in coverage, testing volume, and reimbursement tiers.
How Quadax Can Help Hospitals, Labs, & Specialized Providers Navigate the Shift
At Quadax, we support health systems, labs, pathology groups, physician practices, and behavioral health providers in adapting their revenue cycle strategies to regulatory and payer shifts.
💪 We help you:
- Align billing workflows with new state and federal rules—across all provider types.
- Achieve a 99.7% first-pass clean claim rate across a range of services, from routine labs to complex diagnostics.
- Strengthen eligibility, authorization, and financial clearance tools, including workflows tailored to behavioral health, SNFs, and home health.
- Simplify compliance in complex, multi-state environments, ensuring agility regardless of specialty.
Let’s talk about building a revenue protection strategy—no matter what comes next.
