Safety-net providers tread water during nation’s longest shutdown

Modern Healthcare – Wednesday, November 5, 2025
By Bridget Early

Five weeks into the lengthiest federal government shutdown in U.S. history, the healthcare system is mostly operating as usual but safety-net providers and others are feeling the squeeze.

Medicare, Medicaid and the health insurance exchanges are not fully impacted by the shutdown that began Oct. 1 because the Health and Human Services Department has access to mandatory funding and other sources of money to keep them running.

But the longer the shutdown lasts, the greater the risk that healthcare will be broadly disrupted. And in the meantime, the lack of funding for providers such as community health centers and the expiration of policies such as Medicare coverage of telehealth services and hospital-at-home care threatens provider finances and access to care, especially for underserved patient populations and residents of rural areas.

Providers report tightening budgets and other headaches. Community health centers face cash flow problems they see as existential. Primary care providers are scrambling to manage Medicare beneficiaries who had been using telehealth. Some Medicare reimbursements have lagged. Medicare claims for some safety-net hospitals are smaller because special add-on payments haven’t been renewed.

“We’re treading water,” said Ann Greiner, president and CEO of the Primary Care Collaborative, a trade group. “There are some payments that are being made, or people are relying on the dollars they have. But when you’re treading water, at any moment, you can go underwater.”

Payment disruption

Providers are navigating payment concerns due to legal authorities that expired on Oct. 1, the same day the government shut down.

These had immediate financial ramifications for providers. Medicare coverage of many telehealth services and hospital-at-home care ended, Medicare-dependent hospital and low-volume hospital payment add-ons ran out and long-postponed Medicaid disproportionate share hospital, or DSH, payment cuts began.

“In the absence of congressional action, some states have instituted the Medicaid DSH reductions for hospitals that serve large numbers of Medicaid and uninsured individuals, which could impact care to some of our most vulnerable communities,” an American Hospital Association spokesperson wrote in an email.

The Centers for Medicare and Medicaid Services ordered its administrative contractors to hold most Medicare telehealth claims, leading some providers to halt virtual appointments, according to American Academy of Family Physicians President Dr. Sarah Nosal, who practices in New York.

Several states are still waiting for CMS to approve state-directed payments from Medicaid, meaning the federal share of those hospital reimbursements is on hold, said Beth Feldpush, senior vice president of advocacy and policy for America’s Essential Hospitals, which represents safety-net facilities.

Financial threats

Other lapsed policies, such as federally qualified health center funding, are generating deep anxiety as providers do their best to operate in an unpredictable financial landscape.

Community health centers have been able to draw down residual funding left over from a previous law, but nobody knows when those dollars will run out, said Amanda Pears Kelly, CEO of the trade group Advocates for Community Health.

“I feel like we’re in this horrible Jenga game where blocks just keep getting pulled from the bottom and stacked on top, because the weight isn’t going away. They’re just taking it from the foundation and putting it somewhere else with the expectation that [health centers] keep going,” Pears Kelly said. “But it’s going to fall over at some point and collapse.”

Hospitals that typically receive low-volume and Medicare-dependent add-on payments are grappling with lost revenue that’s upset their budget planning, said Brock Slabach, chief operating officer of the National Rural Health Association.

Workforce woes

Health center funding fears are having an immediate impact on employee recruitment and retention, Pears Kelly said, especially when coupled with expired teaching health center graduate medical education funding and expired National Health Service Corps funding.

The funding lapses are creating “a litany of consequences for the next generation of family physicians,” Nosal wrote in an email.

”In my practice, we have seen medical students decide not to apply to [graduate medical education] programs due to the uncertainty. We also have residents worried that they will have to switch programs mid-training or will be unable to complete training,“ Nosal wrote. ”We have also had faculty leave [graduate medical education] programs and struggle to recruit for them due to uncertainty.”

Regulatory questions

Providers and health insurance companies need answers from federal regulators on a variety of regulatory issues.

Although CMS said it would continue key agency operations, policymaking would depend on funding streams and staffing, leaving questions about what it would deem critical.

CMS recalled nearly 3,000 staffers in late October, Axios reported. But it’s unclear whether shutdown-related furloughs elsewhere in the government are affecting the regulatory pipeline.

CMS needs to finalize several Medicare payment rules for 2026. These regulations are usually completed on or around Nov. 1 and they take effect Jan. 1. The agency published the physician pay final rule last week but the hospital outpatient, home health and dialysis regulations are still pending, and may include significant new policies.

The shutdown also makes it harder for providers to query CMS about recently announced or soon-to-be implemented initiatives, such as a pilot program to introduce prior authorizations to fee-for-service Medicare.

Cancer doctors need answers about the Enhancing Oncology Model, for example, said Nick Ferreyros, managing director of policy, advocacy and communications for the Community Oncology Alliance, a trade group.

Shortly before the shutdown, oncologists learned that performance in the program dropped in 2024, its second year. Participants haven’t been able to contact CMS for details about what happened, or how to improve, Ferreyros said. “There’s nobody for us to talk to about it,” he said.

Access this article at its original source.