Q3 2026 hospital earnings show ACA coverage losses and rising Medicaid risks

Changes to federal coverage and Medicaid financing are manifesting in hospital volumes, payer mix and earnings both currently and in projections, according to Q3 2026 investor calls held recently by hospital companies.

The most immediate issue is that coverage losses in the Affordable Care Act (ACA) insurance marketplaces continue to create uncompensated-care pressure. For example, HCA Healthcare attributed a $400 million quarterly impact on adjusted EBITDA (out of a $3.918 billion total adjusted EBITDA) to the shift of patients from marketplace coverage to uninsured status.

The year-over-year decline in inpatient admissions of marketplace patients was a reported 19% at HCA, 18% at Tenet Healthcare and 17% within the acute-care business of Universal Health Services (UHS).

“We’ve seen an increase in self-pay or uncompensated care, largely sort of a one-for-one swap [with] the decline for the exchanges,” said Steve Filton, CFO of UHS, using another term for the ACA marketplaces.

Policy and affordability concerns about the marketplaces are unlikely to subside in the near term. A new analysis calculates a 13% rise in benchmark premiums for 2027, following a 26% jump in 2026. Those two years are the first with double-digit percentage increases since 2018, according to the analysis by KFF.

ACA coverage losses affect payer mix, revenue and elective surgery

Despite the year-over-year declines, HCA’s marketplace volume increased by roughly 8% from Q2 to Q3, and Tenet’s leaders said Q3 was a period of stabilization relative to Q2.

Still, HCA said uninsured patients accounted for 10.5% of equivalent admissions, up from 8.5% the prior year, and described 80% of the growth in uninsured volume as being attributable to marketplace coverage losses.

Tenet said marketplace-related pressures were responsible for a 1.8-percentage-point headwind that helped limit growth in hospital revenue. The constraints are offsetting much of the benefit of commercial pricing.

Weakness in HCA’s elective surgery volumes is linked to the coverage losses.

“We see some macro forces impacting the elective business — coverage being the primary macro force, and then just general affordability across the economy being a second one,” said Sam Hazen, CEO.

Medicaid payment changes create financial risks for 2027 and beyond

The earnings calls illustrated the impact of Medicaid state-directed payments (SDPs) on hospital finances, hinting at the relevance of SDP cutbacks under H.R. 1 (the One Big Beautiful Bill Act) starting in 2028.

HCA expects a net drop of between $550 million and $650 million in Medicaid supplemental payments next year relative to 2026 because 2026 payments in Florida and several other states have included services from prior years.

Tenet’s leaders declined to disclose the share of $356 million in Q3 reported SDPs that could be subject to H.R. 1 reductions. Roughly 60% of the health system’s admissions are in Medicaid expansion states, where SDP cuts will be steeper.

A major Medicaid development in 2027 is the scheduled Jan. 1 start of a nationwide work requirement for most adult enrollees in expansion states. For HCA, the work requirement is anticipated to affect between 15% and 20% of Medicaid volume. Nonetheless, management characterized the likely impact on full-year 2027 earnings as modest.

UHS leaders said they’re developing operational offsets that include revenue cycle improvement and AI investments, along with emphasizing length-of-stay management and growth in outpatient services.

“As we build outpatient [capacity], we are really shifting our payer mix away from Medicaid and more to commercial and Medicare because that’s where we think the growth is, and that helps us avoid some of these Medicaid cuts,” Filton said.

Outpatient surgery shifts reshape hospital competitive dynamics

HCA noted the impact of CMS’s three-year phase-out of Medicare’s inpatient-only (IPO) list, a process that began in 2026 with a focus on orthopedic and musculoskeletal procedures. Health system leaders described the issue as a secondary factor (relative to ACA marketplace losses) in elective surgical weakness.

Operational implications include a shift in procedures from inpatient admissions to hospital outpatient departments or ambulatory surgical centers (ASCs), the latter of which can be either a health system asset or freestanding competition.

“It’s fair to say that the outpatient market for surgery is a bit larger than the inpatient market for surgery,” said Mike Marks, HCA’s executive vice president and CFO. “There are more competitors, and so that is a factor.”

Regarding gastrointestinal (GI) procedures, UHS’s Filton said that “as more and more GI procedures are being done outside of the hospital and largely in physician offices and ASCs, we have found it difficult even to get [gastroenterologists] to cover our emergency rooms. We either cannot get them to do it at all, or the expense of doing it and the cost of doing it is really sort of outsized.”

Tenet has a built-in cushion through its ownership of the United Surgical Partners International chain of ASCs. The segment had 9.1% growth in year-over-year adjusted EBITDA and a 4.5% increase in same-facility revenue.

The migration of joint-replacement procedures from hospital outpatient departments to ASCs appears to be accelerating, said Saum Sutaria, Tenet’s CEO.

Proposed 2027 Medicare outpatient rule could benefit for-profit hospitals

CMS is expected to release the final rule for 2027 Medicare payments under the Outpatient Prospective Payment System (OPPS) in early November. Based on the proposed rule issued in July, HCA anticipates benefits from a budget-neutral reallocation related to the 340B Drug Pricing Program.

Given HCA’s lack of exposure to 340B (for-profit hospitals are ineligible), a proposed increase in payments for non-drug items and services would provide a boost. An estimated increase of 8.44% would be implemented under budget neutrality to counter a proposed 340B payment decrease from average sales price (ASP) plus 6% to ASP minus 33.4%.

Marks did not quantify the prospective benefit. A KFF analysis states that for-profit hospitals would realize a net 7.4% increase in Medicare outpatient revenue if the proposed rule’s provisions stand.

Some of that gain would be negated by a spike in the payment claw-back associated with hospital remedy payments stemming from a 2022 Supreme Court ruling on Medicare payment for 340B drugs. In the OPPS proposed rule, CMS said the budget-neutrality reduction on nondrug conversion factors would increase from 0.5% per year over 16 years to 3% annually over three years.

Nonetheless, said Marks, “we view the OPPS rule as proposed — and we’re hoping that it gets finalized here soon — as a positive factor for HCA as we head into 2027.”