Challenges for Nebraska’s hospitals continue into the new year as policy changes and potential cuts loom over the health care industry. The Nebraska Hospital Association brought health care leaders and policymakers together on a press call Monday morning to discuss these challenges.

NHA President Jeremy Nordquist said federal policy changes and Nebraska’s budget shortfall will be the largest issues for the state’s health care industry to overcome in 2026.

Nordquist said some policy changes – such as Medicaid expansion – have helped Nebraska hospitals stay open, but their overall financial situations are far from perfect. According to a recent NHA member survey, 55% of hospitals say their current fiscal year will be “challenging” or “very challenging.”

“Nebraska's hospitals are facing challenging headwinds and uncertain futures with costs increasing, residents losing coverage due to Medicaid and commercial insurance changes, key hospital programs like 340B and site-neutral reimbursement being legislated or litigated against, and we have growing payer and regulatory burdens that is making it hard for our hospitals to do their jobs,” Nordquist said.

Hospitals "playing defense” during state budget crisis

As the state faces a $471 million budget shortfall, Nordquist said Nebraska’s health care providers will be “playing defense” against potential cuts. The governor’s plan for $500 million in cuts to state agencies will be released this week. Nordquist hopes hospitals will be spared.

“As the state looks at its budget right now, we want to be clear that that we need to make sure we're not making deep cuts to our health care programs, especially our Medicaid base rates, which sustain services from border to border,” Nordquist said. “Pulling money out of that will result in more unstable hospitals and eventually the loss of services.”

Nordquist also mentioned the Rural Health Transformation Program funding Nebraska received in late December. The funding was intended to offset Medicaid cuts that would disproportionately harm rural hospitals across the country. Nordquist said the way funding will be distributed in Nebraska likely won’t be enough to get the state’s rural hospitals out of crisis mode.

The program – passed in the “One Big Beautiful Bill,” or H.R. 1 – was intended to offset sweeping Medicaid cuts and lift up rural hospitals. Nebraska received $218 million in funding for 2026, but Nordquist said the state’s funding application fell short.

“I think we need to be pretty clear that despite lots of stories being written about the dollars going directly to rural hospitals, if you look at the state's application, there's not that much that's clearly directed towards rural hospital investments,” Nordquist said. “We're certainly going to continue to work with Governor Pillen and his administration to try to improve the allocations within that application.”

Federal policy changes

Ivan Mitchell, CEO of Great Plains Health in North Platte, said decreasing the site-neutral reimbursement amount could cause hospitals to lose more money as well.

Site-neutral reimbursement is a payment policy where insurers – including Medicare and Medicaid – pay health care providers the same rate for a medical service regardless of what kind of health care facility it's provided in.

Mitchell said Great Plains Health has a negative 20% margin on Medicare and Medicaid patients. He said the health system is losing less than before, but it still loses money on underinsured or uninsured patients.

“We can sometimes have no revenue for those services,” Mitchell said. “We are the social safety net of society. So, the way that hospitals work is that they cost-shift and charge more to those who have insurance to make up the difference.”

Mitchell said the more reimbursement rates go down, the more hospitals will have to cost-shift, reduce services or eliminate them altogether.

As newly added Medicaid work requirements go into effect and health insurance premiums rise for some following the expiration of Affordable Care Act tax credits, many Nebraskans could lose their health insurance coverage.

Anthony Ashby, President of CHI Health Immanuel in Omaha, said hospitals could bear the financial burden of uninsured patients.

“Coverage losses increase uncompensated care at a time when hospitals are already facing rising costs,” Ashby said. “Medicaid already pays below the cost of care, and further reductions make it harder to sustain services and invest in the future of healthcare in Nebraska.”

The NHA estimates that about 23,000 Nebraskans will lose health coverage in 2026 due to these policy changes, and premiums will balloon for tens of thousands more. Ashby also said patients without access to regular and preventive health care will delay receiving care they can’t pay for, which could increase the use of emergency rooms.

Cuts to Medicaid from the One Big Beautiful Bill could also put the 340B program in jeopardy. The 340B drug program allows certain health care organizations to purchase drugs at lower prices, mainly to cover uninsured or underinsured patients. Overall, the program is a lifeline for hospitals – especially those in rural areas – that struggle to keep up with costs.

The program has been modified with Medicaid expansions, and the Nebraska Legislature passed a bill in early 2025 that prohibits drug manufacturers from disallowing or adding extra requirements for discounted drugs.

Tyler Toline, CEO of Franciscan Healthcare in West Point, said the 340B program has faced federal cuts to reimbursement amounts for years.

“We've had to take over the operation of a local, independent pharmacy because of the 340B changes and cuts in the last five years, and they were unsustainable,” Toline said. “We didn't really want to, but we knew that that service needed to be offered and have a pharmacy in the in the communities that we have clinics.”

Toline said fair pricing negotiations on the top 10 Medicare drugs will likely lower 340B reimbursement payments. Additionally, an injunction on a 340B drug rebate program has been granted by a federal judge.

“If you're supposed to get that rebate 30 to 60 to 90 days after the adjudication of the claim, there's really no guarantee that [hospitals] would be able to even make payroll and manage it,” Toline said. “And so, we're fortunate that that has at least been punted for the time being.”

Tough decisions

Medicaid cuts could also reverse legislative actions Nebraska has taken to help stabilize hospitals with Medicaid expansions, like the Medicaid State Directed Payment Program.

“This program allowed Nebraska to obtain additional federal funding to finally pay adequate Medicaid reimbursement rates for many Nebraska hospitals.” Nordquist said. “The State Directed Payment Program means the difference between a budget in the black versus one in the red at this point.”

Garden County Health Services in the Western Nebraska town of Oshkosh is in the process of converting to a Rural Emergency Hospital, effectively ending its inpatient hospital services to safeguard access to emergency care and clinics.

Nordquist said it was a “tough decision” for the longstanding traditional hospital and a “significant blow” to the community. However, Garden County Health Services isn’t alone.

Nordquist said about a third of the 92 member hospitals are still struggling financially. About 10% are planning service reductions within the next six months.

“Talking to my counterparts in Iowa, Kansas, Missouri – we're seeing similar challenges, especially among our smaller, rural independent hospitals,” Nordquist said. “Some are kind of hanging in there, and then there's others that are really struggling within their communities.”

Nordquist said hospitals with large, privately insured populations are doing better, but those that serve Medicare and Medicaid patients receive low reimbursement rates that leave them with a shoestring operating budget.

Future financial issues – such as changes from the “One Big Beautiful Bill” going into effect in 2028 and the looming insolvency of the Medicare trust fund – are also on the minds of Nebraska’s health care leaders.

Hard decisions and policy fights are just beginning, but Nordquist said the NHA will keep fighting to reduce costs for patients and support hospitals.

“We believe at the NHA that every Nebraskan deserves access to life-saving care close to home,” Nordquist said. “In order to achieve this, we must not allow policy changes and budget cuts that further jeopardize the well-being of our hospitals, and we must use the opportunity that's before us today – especially with the Rural Health Transformation Program – to make well informed investments that strengthen rural hospitals for years to come.”

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