Proposed federal Medicaid reductions could significantly impact Montrose Regional Health (MRH), threatening the financial stability of the hospital and access to care for thousands in Montrose County and across rural Colorado.

The Republican-led U.S. House of Representatives recently passed a sweeping budget bill that includes up to $716 billion in Medicaid cuts over the next decade, alongside new work requirements and stricter eligibility checks. The Congressional Budget Office estimates that these changes could result in 7.7 million Americans losing coverage, with rural communities among the hardest hit.

In Montrose County, where approximately 24.3% of residents rely on Medicaid for health coverage, the consequences could be especially severe. An even larger percentage are Medicaid-eligible, but not everyone eligible applies for the benefits.

MRH Chief Financial Officer Paul Perrotti said the hospital could lose between $600,000 and $1 million in annual revenue due to the proposed cuts.

“While we may have $200 million of net revenue, the margins on hospitals, particularly rural hospitals, are below 5%,” Perrotti said. “A good margin would be 3% to 5%. So, of $200 million, that (margin is) $6 million; that would be on the average side. It would be a $6 million margin, and a million of it—close to 20% of that margin—would be immediately lost (due to Medicaid cuts).”

Medicaid in Montrose County

Montrose County, with a population of approximately 44,800, has about 15,372 residents enrolled in Medicaid. This includes children, seniors, low-income adults, and people with disabilities. Statewide, Colorado’s Medicaid program, Health First Colorado, covers about 1.2 million people—roughly one in four residents.

MRH provides care to a significant portion of this population. Perrotti noted that Medicaid patients account for approximately 13% to 15% of the hospital’s services, generating about $6.5 million in gross monthly revenue. However, reimbursements cover only about $1.7 million of that amount. A 5% cut in Medicaid payments would result in a loss of approximately $600,000 to $1 million annually, representing nearly 20% of the hospital’s operating margin.

Potential ripple effects

The proposed Medicaid cuts are part of a broader budget bill passed by the U.S. House of Representatives, which includes significant reductions to Medicaid funding and the introduction of work requirements for recipients. Analysts warn that such measures could lead to increased uninsured rates and financial instability for rural hospitals that depend on Medicaid reimbursements to operate.

Perrotti expressed concern that the cuts could disproportionately affect vulnerable populations.

“My biggest concern is women and children,” he said. “There are some women out there who are busy taking care of their kids because that’s a full-time job, and now they (could) have a work requirement.”

Despite the financial challenges, MRH has no plans to reduce services or staffing levels.

“Our board and the organization are not considering decreasing any service lines,” Perrotti said. “The community can depend upon us to maintain our emergency department, labor and delivery. We have no direction in changing any of it.”

To mitigate the impact of the cuts, MRH is focusing on operational efficiencies and expanding services to meet community needs.

“Looking for efficiencies, looking for automation, things of that nature, and growing our business to meet community needs,” Perrotti said. “Our CEO, Jeff Mengenhausen, has done a great job of increasing services to the community, whether it be cardiology, digestive health, pulmonology.”

Perrotti also highlighted the importance of the 340B drug pricing program, which allows hospitals to purchase medications at reduced prices.

“Accessing 340B drug pricing is critical for our hospital,” he said. “We’re able to buy our pharmaceuticals at 40% to 60% lower cost, and we’re able to pass that on.”

Statewide and national implications

The implications of the proposed Medicaid cuts extend beyond Montrose County. In Colorado, Medicaid covers approximately 1.2 million residents. Nationally, the program provides health coverage to over 70 million Americans, including low-income adults, individuals with disabilities, and the elderly.

The Congressional Budget Office estimates that the proposed changes could result in 7.7 million Americans losing coverage, with rural communities among the hardest hit. Advocacy groups warn that the cuts could lead to increased child hunger and families forced to choose between essential needs.

Healthcare leaders across the country are urging lawmakers to consider the potential consequences of Medicaid cuts on rural hospitals and communities. “Reductions in Medicaid funding could force many rural facilities to reduce or eliminate essential services or close their doors entirely,” according to the Center for American Progress.

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.