Last week, congressional Republicans began quietly laying the groundwork for a second budget reconciliation bill. Congressional leaders said they plan to target healthcare spending as part of a new budget reconciliation bill that could be enacted by July. That’s three months from now. And buried in the framework is a proposal that should alarm every hospital leader and every patient who depends on one: site-neutral payment requirements on hospital billing in the Medicaid program, with projected savings of $172 billion over 10 years.
Let me translate that. “Savings” is the Washington word for cuts. And those cuts don’t come from somewhere abstract. They come from the revenue hospitals use to keep their doors open, staff their floors, and absorb the patients no one else will take.
We already absorbed nearly $1 trillion in healthcare cuts from the first reconciliation bill. That measure included nearly $1 trillion in 10-year federal healthcare spending reductions. Now they want to go back for more. The people who will feel it first are the ones who can least afford to.
WHAT THIS BILL DOES
The second reconciliation push does not yet exist as formal legislation, but its shape is becoming clear. The Republican Study Committee’s framework includes proposals that would use site-neutral payment requirements and other healthcare spending cuts to fund priorities including Department of Homeland Security funding and military spending related to the Iran conflict. Site-neutral payment reform, as proposed, would equalize what Medicare and Medicaid pay for a service regardless of whether it’s delivered in a hospital outpatient setting or a freestanding physician’s office. Supporters say this would save taxpayers $150 billion by ending what they call a hospital pricing advantage for routine services that could be safely provided in lower-cost settings.
HOW IT AFFECTS PATIENTS
For patients, the headline may seem appealing: lower costs, more transparency. The reality is more complicated.
The administration’s existing site-neutral rule already reduces payments for drug administration services like chemotherapy by 60% in off-campus hospital outpatient departments. Extending that logic across all Medicaid billing means hospitals serving high volumes of low-income patients (safety-net hospitals, rural hospitals, academic medical centers) face the deepest cuts. Those are exactly the hospitals patients with Medicaid depend on.
Providers expect to face revenue reductions and rising costs from uncompensated care as Medicaid changes create budgetary challenges for states, providers, and beneficiaries. When revenues fall and uncompensated care rises, services get cut. Units close. Specialists leave. The patient who took three buses to get to that hospital outpatient infusion center finds out it’s no longer available.
WHAT IT MEANS FOR INSURANCE COMPANIES
Insurance companies, particularly those running Medicaid managed care plans, stand to benefit from site-neutral payment reform, at least on paper. Lower reimbursement rates to hospitals mean lower costs in their contracts. That’s a margin improvement, not a mission improvement.
For 2026, greater attention is being paid to hospital prices, with several states establishing hospital cost targets with varying degrees of enforcement. Insurers have long argued that hospital outpatient rates are inflated. Site-neutral policy gives them the policy validation they’ve sought. What it doesn’t do is guarantee those savings get passed to patients in the form of lower premiums or copays. The track record on that is not encouraging.
WHAT IT MEANS FOR HEALTHCARE ORGANIZATIONS
This is where I have to be direct.
The American Hospital Association has stated that banning facility fees in outpatient reimbursement could cut hospital revenue by anywhere from $3 billion to $180 billion over 10 years, depending on the scope of the policy. That is not a rounding error. For health systems already operating on thin margins after the first reconciliation bill, a second round of Medicaid payment cuts could be catastrophic.
Hospital advocates warned that Americans will feel the reverberations of this legislation in communities across the nation, whether directly due to a loss of coverage, the increase of costs, or as doctors and hospitals scramble to sustain services and keep their doors open.
Provisions expected in the second reconciliation bill include site-neutral payments, 340B cuts, and prior authorization provisions. That is a three-front assault on hospital revenue. The 340B program helps safety-net hospitals stretch their resources for underserved patients. Prior authorization reform, depending on how it’s written, could reduce revenue further. Stack all three together and you’re not talking about efficiency, you’re talking about existential pressure on the organizations that carry the most patient burden.
BOTTOM LINE
A second reconciliation bill is coming. It will move fast, like the first one did. The entire first reconciliation process, from formal introduction to enactment, took less than two months, with no hearings or markups in the Senate. That is not how you make good healthcare policy. That is how you make policy that looks good in a budget table and breaks things in the real world.
Watch this one closely. Tell your legislators what it means for your community. And if you work in a hospital, start your scenario planning now. July is closer than it looks.