About a year after warning that proposed federal Medicaid changes could create financial challenges for rural hospitals, a Montrose Regional Health official says his concerns have shifted from speculation to preparation as portions of the legislation move toward implementation in 2027.
Chief Financial Officer Paul Perrotti said the hospital remains concerned about changes that could result in patients losing Medicaid coverage, particularly through work requirements and more stringent enrollment and renewal processes.
“I think it’s going to get worse when some of the stuff hits January 1, 2027,” Perrotti said. “We’re preparing for that.”
Congress approved the One Big Beautiful Bill Act last summer, and President Donald Trump signed the legislation into law on July 4, 2025. Among its healthcare provisions are Medicaid work requirements that take effect Jan. 1, 2027, requiring certain adults ages 19 to 64 enrolled through Medicaid expansion to work, attend school, volunteer or participate in job training activities to maintain coverage. The law also requires more frequent eligibility reviews and additional verification requirements for some enrollees.
Perrotti said those additional requirements could result in more patients temporarily losing coverage because of administrative hurdles, even if they remain eligible for Medicaid.
Last summer, Perrotti estimated federal Medicaid changes could cost MRH between $600,000 and $1 million annually. He said that estimate remains largely unchanged, though rising healthcare costs could ultimately increase the financial impact.
“I would stay with that,” he said of the estimate. “It might inch forward a little bit because our costs have risen.”
The hospital’s largest concern, however, extends beyond the initial projections. Perrotti said changes in Medicaid enrollment could threaten the hospital’s eligibility for the federal 340B Drug Pricing Program, which allows qualifying hospitals to purchase outpatient medications at discounted prices.
For MRH, maintaining eligibility for the program is tied in part to the percentage of inpatient days attributable to Medicaid patients.
“Our patient days fluctuate between 11 and 12 and 13%,” Perrotti said.
He said the hospital recently experienced its first month in which Medicaid patient days dipped below 12%, falling to approximately 11.7% to 11.9%. While MRH remained eligible for the program, the drop helped illustrate how close the hospital is to the threshold it monitors.
“The biggest challenge we have is the disenrollment of Medicaid and not qualifying for 340B,” Perrotti said.
The 340B program is a US federal health initiative established in 1992 that requires pharmaceutical manufacturers to provide significant outpatient drug discounts to eligible healthcare organizations.
He estimated the savings associated with the program approach $1 million per month.
“When you’re talking about a 2% to 3% margin on $200 million, that’s your entire bottom line,” he said.
Perrotti said the hospital frequently encounters patients who unknowingly lose Medicaid coverage because of administrative issues and must be re-enrolled.
“They may not have consistent residences,” he said. “They move from one rental to another rental. The paperwork went to the old rental. Their email changed.”
He said those circumstances make it difficult to estimate the eventual effects of federal changes.
“If people don’t knock on our door and they’re uninsured, that doesn’t matter,” Perrotti said. “But when they’re uninsured and they knock on our door, that matters.”
Under Colorado’s indigent care system, hospitals still provide care to qualifying uninsured patients, meaning hospitals can continue absorbing costs even when patients lose Medicaid coverage.
In response to the uncertainty, Perrotti said MRH has implemented a certified enrollment program to assist patients in obtaining and maintaining coverage. The hospital is also reviewing expenses and pursuing strategies to lower costs.
“It’s not like we’re just sitting here waiting for a bomb to fall on us,” he said.
While MRH has not instituted hiring freezes or reduced services, Perrotti said concerns about a potentially shrinking payer base have made the hospital more cautious about expansion plans.
“A new doctor to us — the startup cost of a new doctor is expensive,” he said. “We’re having to reconsider all of those expenses carefully.”
The challenges facing MRH aren’t unlike the pressures confronting all rural hospitals nationwide, according to Perrotti. He spoke about workforce shortages, increasing labor expenses, rising pharmaceutical and supply costs, and expensive technology investments as ongoing concerns.
“Hospitals are very, very hard to operate,” he said.
Despite those pressures, Perrotti said the hospital’s focus still remains on helping patients maintain access to healthcare while keeping services intact in the community.
“The backup plan is enrollment. The backup plan is lowering our costs,” he said. “We’re just trying to give people help so they can get the resources to care for themselves and trying not to cut services at the same time.”
Justin Tubbs is the Montrose Business Times editor. He can be reached by email at justin@montrosebusinesstimes.com or by phone at 970-765-0915 or mobile at 254-246-2260.
