Healthcare sector shaken as Trump stirs havoc in D.C.

Modern Healthcare – Monday, March 31, 2025
By Bridget Early

President Donald Trump has rapidly and significantly shaken up the federal healthcare infrastructure, putting providers on unsteady footing.

Hospitals, health systems and other providers are struggling to maintain business as usual amid a cavalcade of executive actions, including a huge restructuring the Health and Human Services Department commenced under Secretary Robert F. Kennedy Jr. last week. The new administration has upended longstanding practices, means of communications with regulators, rulemaking procedures and bureaucratic chain of command, leaving healthcare providers uncertain about how to adapt.

Health systems have paused construction projects. Medical facilities are scrambling to acquire critical supplies as costs balloon under steep new tariffs. Hospitals are preparing to pare back services that don’t generate profits, such as and labor and delivery units. Medical schools and universities are laying off employees as they confront a deluge of funding cuts. Lobbyists worry mass layoffs at federal agencies will bring critical functions to a halt.

“It’s been a little over 60 days. It’s felt like a year,” said Jacquelyn Bombard, assistant vice president and chief federal government affairs officer at Renton, Washington-based Providence Health and Services. These weeks have been “very challenging,” she said.

The Trump administration has narrowed opportunities for the private sector to weigh in on rulemaking, pulled funding from research institutions and instituted an aggressive immigration enforcement operation that has reached inside hospitals. The administration has canceled advisory meetings, wiped swathes of health data from federal websites, slashed the federal workforce, frozen approved funding, backed congressional efforts to eliminate billions in healthcare spending, and limited new regulations.

Healthcare executives and their agents in Washington say this torrent of change puts immense strain on the sector, which is accustomed to smooth working relationships with federal agencies to help them navigate day-to-day operations.

“There’s the velocity with which these cuts are happening, and there’s the volume of them,” said Dr. Jonathan Jaffery, chief healthcare officer for the Association of American Medical Colleges. “It’s just overwhelming.”

The administration has also provoked apprehension about speaking out. Some industry leaders declined to comment, while others spoke on background because they fear retaliation from Trump and his lieutenants if they criticize the administration.

The White House and HHS did not respond to requests for comment.

Staffing and communications

An ongoing HHS communications freeze, weakened public notice and comment processes for policy announcements, layoffs at HHS and other departments, aborted public meetings, and the disappearance of troves of health data combine to make healthcare interests worry they won’t be able to make their voices heard on policies that affect them.

“The sheer volume of communication has changed tremendously, and the way that it’s communicated. A lot of these things are coming fast and furious, and so it’s been very difficult to keep up,” said Brian Frazee, CEO of the Delaware Healthcare Association, which represents hospitals. “Not only are we seeing new policies come down from the federal administration on a near daily basis, but then they change.”

Medicaid waiver applications and other actions regarding the program could grind to a halt because of the upheaval at HHS, said Beth Feldpush, senior vice president of policy and advocacy for America’s Essential Hospitals, which represents safety-net providers.

LeadingAge, which represents long-term care providers, slammed the HHS communications freeze, saying it leaves its members without clarity on technical assistance, vaccine development and public data sharing.

“This ban on communications is disruptive, obstructive and contradictory to the secretary’s commitment to ‘radical transparency,’” LeadingAge President and CEO Katie Smith Sloan wrote Kennedy on March 11, referring to the promise he made about departmental activities the day the Senate confirmed him. “The directive must be rescinded immediately, and federal agencies must be permitted to resume communication with the public they serve.”

The communications freeze is already having a concrete impact in at least one area, LeadingAge said in a statement. CMS is supposed to redistribute the fines it collects from rule-breaking skilled nursing facilities to support nursing home programs, but it can’t because federal workers are forbidden to talk to their state counterparts, according to the trade association.

Grants and contracts

The administration withdrew funding and grants for hospitals, research institutions, and medical schools. The White House justifies many of these cuts by claiming waste. But experts say these cuts complicate the recipients’ ability to budget, limit access to care and stymie research.

The prospect of massive cuts to Medicaid funding and other polices emerging from the GOP-led Congress has some providers preparing to reduce services and costs to protect core operations.

“There’s no way you maintain any kind of margin, so you start cutting things. You start cutting services,” Jaffery said.

Moreover, gutting funding will decimate American innovation as laid-off researchers pursue career opportunities in other countries, which would slow medical advances and threaten patient care, Jaffery said.

The National Institutes of Health withdrew hundreds of millions of dollars for public health research from Johns Hopkins University, for instance, which has since announced more than 2,200 layoffs. Other medical schools and academic research institutions are in similar positions.

“It’s about the pipeline of discovery, all the things that result in life-changing therapies, medications, other therapeutics. It all starts in academic medicine,” Jaffery said. “We’ve got a generation lost by cutting back on this, and people are genuinely, immediately losing jobs because their funding is cut off.”

Tariffs

The 10%-25% tariffs Trump instituted in January have raised prices for products from Canada, Mexico and China. Delaware hospitals are rushing to buy supplies such as personal protective equipment, blood pressure cuffs, stethoscope covers, needles and syringes, and anesthesia instruments before costs get any higher, Frazee said.

Health systems such as Providence Health and Services are constrained from planned expansions and renovations because the tariffs have inflated prices for building materials, Bombard said. “It’s hundreds of millions of dollars that it could cost the health system,” she said.

“We can’t build a clinic overnight,” Bombard said. “Most of these take several years to build, and we’re concerned that this could cost five times the amount of money than we originally committed to.”

That will contribute to health systems seeking to make up for higher expenses by demanding rate increases from health insurance companies and government programs, said Paul Kidwell, senior vice president of policy for the Connecticut Hospital Association. “If there’s consequences of macroeconomic policies, then that’s something hospitals will feel and will build on what we’re already experiencing,” he said.

“Hospitals are the aggregators of expense and cost. We need to purchase pharmaceuticals, we need medical supplies, we operate resource-intensive inpatient facilities. You try to be as efficient as you can in those areas. But at the end of the day, you need to acquire those things to provide patient care,” Kidwell said.

Immigration and staffing

Healthcare providers had difficulties finding employees before Trump launched a nationwide purge of immigrants, which includes authorizing Immigration and Customs Enforcement to search hospitals for people to detain.

Stricter policies on work visas also hamper healthcare companies’ ability to recruit clinicians, nurses and other workers from abroad. Absent international talent, providers may turn to domestic staffing agencies. Demand for those workers would make them costlier, Bombard said.

“Reliance on visas and workers coming from different countries has honestly been essential, especially as we have historic workforce shortages from both our nurses and our physicians. And we do have concerns of what that could mean and how that could further exacerbate some of the recruitment and problems that we have, especially for our nurses,” Bombard said.

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