Welcome to another round of PYA Washington Updates. Today is the second-most common birthday shared by Americans; September 9 holds the top spot. The least common is February 29 (duh!), followed by December 25.
Government Shutdown Watch
Today is going to be a busy day on Capitol Hill. The House is set to vote on its continuing resolution (CR) to continue funding the government at FY2025 levels through November 21. Through procedural maneuvering for which the Senate is famous, Democrats have forced Senate leadership to schedule two votes for today: one on the Republican stopgap spending measure and one on the Democrats’ competing version. The Democrats’ CR would extend funding levels through October 31 but also would reverse OBBBA’s Medicaid cuts and make the ACA Marketplace premium tax credits set to expire at the end of the year permanent. (As a side note, neither bill addresses sequestration, meaning the additional 2% cut in Medicare payments beginning in 2026 still looms large.) Because both bills will require 60 votes to pass, both are nearly guaranteed to fail. With Congress out of session for a week, the next opportunity to prevent a government shutdown would be September 29, leaving little breathing room. And now it appears Speaker Johnson is considering extending the House’s one-week break to two, effectively forcing the Senate to approve the House version of the CR today to avoid the shutdown.
On a related note, the Congressional Budget Office reported yesterday that making the ACA Marketplace’s enhanced premium tax credits permanent would increase the deficit by $350 billion over the next decade while increasing the number of people with health insurance by 3.8 million. According to the CBO, reversing ACA Marketplace eligibility restrictions in OBBBA and new regulations would add an additional $312 billion to the deficit over the next decade while increasing the number of people with health insurance by 3.2 million.
Rural Health Transformation Program
On September 15, CMS released the Notice of Funding Opportunity (NOFO) for the Rural Health Transformation Program. A headline from Politico declared the Rural Health Hunger Games are now underway, with states competing against each other to secure funding over the next five years. States must submit their applications by November 5, with CMS making awards by December 31. Assuming all states submit an application detailing some sort of rural health transformation plan, each will receive $100 million each year for five years, for a total of $25 billion. However, CMS will award the other $25 billion based on specific geographic and population factors (e.g., total number of square miles, percentage of population living in rural areas) and detailed initiative-based factors. There are a lot of detailed requirements in the 124-page NOFO which states will be grappling with over the next 47 days.
House Hearing on Non-Profit Hospitals and Health Systems
On Tuesday, the House Ways and Means Oversight Subcommittee hosted a hearing entitled Virtue Signaling vs. Vital Services: Where Tax-Exempt Hospitals are Spending Your Tax Dollars. This hearing follows on the heels of the House Judiciary Subcommittee on Oversight’s July hearing, How Leftist Nonprofit Networks Exploit Federal Tax Dollars to Advance a Radical Agenda. As one might surmise from these titles, large non-profit health systems took some hits during these hearings. However, both legislators and witnesses were quick to defend independent community hospitals’ tax-exempt status, recognizing the loss of such status would force numerous hospital closures. It appears Republicans are poised to push for greater transparency and more detailed reporting requirements for non-profit hospitals.
One of the witnesses at the hearing, Ge Bai, PhD, CPA, Professor of Health Policy & Management at Johns Hopkins Bloomberg School of Public Health, spoke at length regarding urban hospitals’ use of a loophole to reclassify as rural, urging Congress to take action: “Since 2016, following a rule change…, many urban nonprofit hospitals have dual-classified themselves as ‘administratively rural.’ This allows them to simultaneously use the high urban wage index for Medicare payments while qualifying for rural-only perks, including 340B eligibility at a lower disadvantaged patient-mix threshold (dropping from 11% to 8%). Dual classification status also facilitates urban hospitals’ access to expanded [GME] slots and other benefits intended to support rural health. [A] recent study … found that the number of urban hospitals that obtained dual classification exploded from just three in 2017 to 425 in 2023, representing around one-third of all community hospital beds. In 2023, three-quarters of the 425 dual-classified hospitals were nonprofits, and the largest 20, mostly major teaching hospitals, had net patient revenues ranging from $2.9 billion to over $9 billion. If left unchecked by Congress, most large hospitals could soon obtain this status.”
PYA Webinars – Washington Updates
On October 1 — the first day of the new federal fiscal year — PYA will present a webinar on the latest healthcare-related developments in Washington. It’s anyone’s guess where things will be in 12 days, but we’re sure there will be plenty to talk about! Register here.
Please do not hesitate to contact us if you have any questions regarding these latest developments. You can also continue to check PYA’s website for updates.
Executive FAQ / Key Takeaways
What is the real risk in the continuing resolution (CR) standoff?
Both House and Senate CRs are almost certain to fail, and neither addresses the looming 2% Medicare sequestration cut set for 2026. Speaker Johnson may extend the House recess, heightening the risk of a government shutdown by the end of September.
Why does the CR debate matter for healthcare?
The Democratic proposal ties in permanent ACA Marketplace subsidies and the reversal of OBBBA’s Medicaid cuts. The Congressional Budget Office estimates this would add billions to the deficit while expanding coverage for millions — potentially shifting payer mix and coverage trends.
What are the stakes in the Rural Health Transformation Program?
CMS has launched a $50 billion, five-year initiative. Every state will receive a base allocation of $100 million annually, but the other $25 billion will be awarded competitively based on geography, rural population, and program design.
Why should states and providers act quickly?
Applications are due November 5, with awards expected by December 31. The Notice of Funding Opportunity runs 124 pages, leaving states just 47 days to respond. Providers who engage now can help shape state proposals and secure stronger positions for funding.
Why are nonprofit hospitals facing scrutiny in Congress?
Lawmakers are focused on “dual classification,” where urban hospitals reclassify as rural to access both higher wage index payments and rural-only benefits like easier 340B eligibility. This practice has grown from 3 hospitals in 2017 to 425 in 2023, representing a third of community hospital beds.
What is at stake for large nonprofit systems?
Major teaching hospitals have been the biggest beneficiaries, reaping billions while retaining rural perks. Congress is signaling potential reforms that could close the loophole, creating financial and reputational risk for organizations that rely on dual classification.
