Month: January 2026

Rural hospitals across the United States are facing a pivotal moment. Recent federal policy changes, rising operating costs, and workforce shortages are intensifying long-standing financial pressures, raising concerns about service reductions and hospital closures in communities where access to care is already fragile. At the same time, many rural providers are demonstrating innovation and resilience, even as questions remain about whether new federal investments will reach the hospitals most in need.

Medicaid Cuts and the Financial Fragility of Rural Hospitals

According to Crain’s Chicago Business, the Trump administration’s One Big Beautiful Bill Act (H.R. 1) represents the largest reduction in healthcare funding in U.S. history, with Medicaid cuts projected to cost rural hospitals nationwide more than $140 billion. Rural communities are particularly exposed: 23% of rural Americans rely on Medicaid, compared to 19% nationally.

In Illinois alone, downstate hospitals with high Medicaid payer mixes are at heightened risk. A study by the University of North Carolina’s Cecil G. Sheps Center for Health Services Research identified multiple rural hospitals as financially vulnerable due to sustained losses and limited cash reserves. While some systems, such as Southern Illinois Healthcare, are investing to stabilize at-risk hospitals, leaders warn that thin margins leave little room to absorb further cuts. SIH estimates the Medicaid reductions tied to H.R. 1 could erase 10% of its annual revenue.

Hospital executives emphasize that rural hospitals are more than care sites, they are economic anchors. Closures or service reductions ripple through local economies, affecting employment, suppliers, and community stability. As one expert told Crain’s, in many rural areas “there are really no other options,” the hospital is a public necessity.

[Learn how Psychiatric Medical Care helps rural hospitals solve behavioral health challenges through program management, provider access, and consultation services. Complete our “Let’s Get Started” form to discuss options with a business development team member.]

Real-Time Impact on Rural Communities

Reporting from CPR News brings these policy debates into sharp focus on Colorado’s Eastern Plains. At Lincoln Community Hospital, a 15-bed critical access hospital serving multiple counties, leaders describe operating perpetually on the brink. Labor costs have increased nearly 40%, supply costs are up 50%, and Medicaid reimbursement covers only 79 cents per dollar of care.

Hospital CEOs across Colorado report that 50% of rural hospitals are operating at a loss, and up to 70% are running margins considered unsustainable. While rural hospitals have historically survived through persistence and sacrifice, leaders warn that resilience has limits, particularly as more patients become uninsured or underinsured due to changes in Medicaid and Affordable Care Act subsidies.

Executives also expressed concern that hospitals continue to provide care regardless of coverage, increasing uncompensated care. As one rural CEO put it bluntly: “People will not survive if the hospitals are not there.”

Innovation and Leadership in Rural Health Care

Despite these challenges, the American Hospital Association (AHA) highlights examples of rural hospitals leading with innovation and community partnership. Finalists for the 2024 AHA Rural Hospital Leadership Award illustrate how rural providers are expanding impact beyond traditional care delivery:

• In Elma, Washington, Summit Pacific Medical Center’s Food as Medicine program combines nutrition education, cooking classes, and food access to combat chronic disease.
• In Lincolnton, North Carolina, Atrium Health Lincoln’s virtual therapy program delivered nearly 18,000 visits in 2023, with significant improvements in depression and anxiety outcomes.
• In Seymour, Indiana, Schneck Medical Center anchors a county-wide coalition addressing chronic disease, food insecurity, behavioral health, and culturally responsive care.

The AHA underscores that rural hospitals serve more than 57 million Americans, functioning as clinical, economic, and social pillars. However, innovation alone cannot offset systemic underfunding, workforce shortages, and reimbursement gaps without sustained policy support.

The Promise—and Uncertainty—of the Rural Health Transformation Program

In response to mounting pressure, Congress created the $50 billion Rural Health Transformation Program, distributing $10 billion annually from 2026–2030. But reporting from Becker’s Hospital Review reveals growing concern among rural hospital leaders: states are not required to pass these funds directly to hospitals.

Hospital executives in multiple states worry that the funding could be diverted into state agencies, administrative programs, or competitive grants that offer little immediate relief. Some leaders report that hospital recommendations were ignored during state planning processes and that transparency around fund allocation remains limited.

While states like Illinois have signaled pathways for rural hospitals to access some funds, such as through critical access hospital networks, leaders nationwide warn that without guardrails, the program may fall short. Policy experts estimate that the transformation fund offsets only about one-third of projected rural Medicaid losses, raising doubts about its ability to stabilize hospitals already operating on razor-thin margins.

A Defining Moment for Rural Health

Taken together, these reports paint a clear picture: rural hospitals are navigating unprecedented financial and operational strain at the same time they are being asked to transform care delivery, expand prevention, and innovate with fewer resources. Hospital leaders broadly support long-term transformation—but caution that transformation is not possible if hospitals cannot keep their doors open.

As rural providers continue to advocate, innovate, and adapt, the coming years will determine whether federal and state policy decisions preserve access to care or accelerate the erosion of healthcare infrastructure in rural America.

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Sources

• Crain’s Chicago Business
• American Hospital Association
• CPR News
• Becker’s Hospital Review

The U.S. Department of Health and Human Services (HHS) has reversed a decision to terminate more than $2 billion in federal grant funding tied to mental health and substance use programs, according to reporting from NPR and NBC News.

The termination notices were sent late Tuesday to more than 2,000 organizations and grant recipients, many of which receive funding through programs associated with the Substance Abuse and Mental Health Services Administration (SAMHSA).

An administration official confirmed the decision was reversed following political backlash from members of both major political parties, and letters were expected to be sent restoring the grant funding. NPR reported the official requested anonymity because they were not authorized to speak publicly about the change.

NBC News reported that the reinstated funds support services connected to SAMHSA, including programs related to suicide prevention and crisis response, opioid treatment, disaster-related behavioral health support, and other community-based mental health and substance use initiatives.

The initial termination decision prompted responses from advocacy and professional organizations, including the National Alliance on Mental Illness (NAMI) and the American College of Emergency Physicians (ACEP), which raised concerns about potential service disruptions if the funding were not restored.

NBC News also reported that Rep. Rosa DeLauro criticized the funding termination and attributed the reversal to public pressure. HHS had not immediately provided additional public details regarding the initial termination or the reinstatement at the time of reporting.

A “Day of Panic” Across the Behavioral Health System

According to reporting from NPR, the initial termination letters came as a shock to mental health and substance abuse treatment organizations and grant recipients nationwide. The letters reportedly stated the programs no longer aligned with the administration’s public health agenda, which left frontline providers scrambling to understand what would happen next.

Public health leaders described the situation as chaotic, with many organizations suddenly facing the possibility of immediate service disruption due to possible staffing reductions and program shutdowns.

A Rapid Reversal After Bipartisan Pushback

By Wednesday evening, HHS officials confirmed that the funding cuts were being rescinded and that new letters would be issued restoring the grants. The reversal came after widespread backlash from both Republicans and Democrats, highlighting the reality that mental health and addiction treatment services remain one of the most broadly supported priorities in American healthcare.

National advocates expressed relief but also deep concern about the instability created by abrupt funding decisions. Hannah Wesolowski of the National Alliance on Mental Illness (NAMI) described the atmosphere to NPR as “a day of panic across the country,” while noting that the rapid response from lawmakers underscored bipartisan support for mental health services.

Why This Funding Matters: SAMHSA’s Role in the Continuum of Care

The grants involved were connected to the Substance Abuse and Mental Health Services Administration (SAMHSA), a key agency supporting mental health and substance use initiatives nationwide. SAMHSA funding plays an important role in helping communities maintain access to critical services such as:

• Suicide prevention and crisis supports
• Substance use treatment and recovery services
• Disaster-related behavioral health response
• Community-based mental health education and outreach

When funding is disrupted—even temporarily—it can strain the continuum of care that helps people access services early and stay connected long enough to recover.

The American College of Emergency Physicians (ACEP) warned that abrupt reductions in behavioral health support can weaken the very systems designed to prevent emergencies from escalating in the first place.

Moving Forward: Stability Is Essential to Expanding Access

At Psychiatric Medical Care, we support hospitals and communities working to strengthen access to behavioral healthcare through sustainable programs, clinical partnerships, and long-term solutions that meet patients where they are.

This week’s events show that regardless of policy shifts, the need for mental health and addiction services does not change. The demand remains high. The workforce remains strained. And the stakes remain deeply human. The best path forward is one where behavioral health funding and planning are stable, thoughtful, and focused on outcomes because families, hospitals, and communities depend on it.

Learn more about the services PMC provides to hospitals and health systems.

Critical Access Hospitals (CAHs) operate under persistent financial strain driven by low patient volumes, high fixed operating costs, and a payer mix that is heavily weighted toward Medicare, Medicaid, and uninsured patients. While cost-based reimbursement helps offset some expenses, it often fails to fully account for workforce shortages, rising labor and supply costs, aging infrastructure, and the growing demand for behavioral health and emergency services. Many CAHs also serve geographically isolated communities, limiting their ability to diversify service lines or achieve economies of scale. As a result, even modest fluctuations in census, reimbursement delays, or regulatory changes can quickly threaten financial stability, leaving these hospitals with little margin to absorb risk while still meeting their mission to provide essential care close to home.

Raymond Hino, CEO of Southern Coos Hospital & Health Center in Bandon, Ore., explained how Senior Life Solutions, a behavioral health program for older adults, is part of a plan to strengthen the financial sustainability of critical access hospitals in an interview with Becker’s Hospital Review.

“Our goal is to be a sustainable and profitable facility, which is a challenge for us,” Hino told Becker’s Hospital Review. “But we believe with the new programs we’re creating and being very careful about where we can be more efficient in the coming years. We’ve got some opportunities up the road as well for that.”

Through a partnership with Psychiatric Medical Care, Hino’s hospital plans to offer Senior Life Solutions to older adults experiencing depression, loneliness, and caregiver stress. Senior Life Solutions is a CMS-approved outpatient program specifically designed to help older adults (typically 65 and older) in rural communities. The program includes psychiatric treatment, intensive therapy sessions, and wellness checks. Participants gain coping and communication skills along with the confidence they need to live a healthier, happier life. Most participants who complete Senior Life Solutions experience a 56% improvement on the geriatric depression scale and a 36% overall improvement in mental health.

How Senior Life Solutions Works

Psychiatric Medical Care manages the Senior Life Solutions program for critical access hospitals. Program staff includes a board-certified psychiatrist, therapist, nurse, and an office and patient coordinator who are trained in geriatric mental health. Participants come to the program up to three times a week for group therapy, but also receive individual therapy, family counseling and medication management.

“One of the things we’ve noticed is that there’s a lot of seniors in our community that are caring for loved ones and spouses, and that can be very emotionally draining,” Hino told Becker’s Hospital Review. “This is a new service we think is going to be very important to provide support for caregivers and the seniors in our community.”

For most critical access hospitals, Senior Life Solutions can provide rural communities with needed behavioral health support, while also bringing in revenue. Learn more about how Senior Life Solutions can help critical access hospitals by filling out this form – Let’s Get Started.

As the United States enters 2026, behavioral health policies are undergoing one of the most consequential transformations in decades. A convergence of federal legislation, administrative actions, reimbursement reforms, and state-level innovation is redefining how mental health and substance use disorder services are financed, regulated, and delivered. While some developments point toward modernization and integration, others raise serious concerns about access, equity, and system sustainability at a time of unprecedented need. Here’s a deeper look at some of the biggest changes that were enacted in 2025 and coming in 2026.

A New Federal Policy Landscape

The most significant catalyst for change is the enactment of the One Big Beautiful Bill Act, signed into law in July 2025. The legislation implements the largest reductions to Medicaid and the Children’s Health Insurance Program (CHIP) in U.S. history. It cuts federal Medicaid funding by approximately $1 trillion, or 15 percent, over the next decade. New work and reporting requirements for enrollees, coupled with the expiration of enhanced Affordable Care Act premium tax credits, are expected to dramatically reduce coverage.

Medicaid is the single largest payer for behavioral health care, accounting for roughly one-quarter of all U.S. spending on mental health and substance use disorder treatment. The Congressional Budget Office estimates that nearly 12 million people will lose Medicaid coverage by 2034, with millions more losing subsidized marketplace coverage. Research already suggests that loss of Medicaid coverage is associated with higher rates of anxiety, depression, food insecurity, and functional impairment, underscoring the likely downstream mental health consequences of these policy changes.

The effects will extend beyond individual patients. Hospitals, community mental health centers, and training programs, many of which rely heavily on Medicaid reimbursement, face growing financial strain. Rural systems are particularly vulnerable: estimates suggest Medicaid reimbursement for rural hospitals could decline by more than 20 percent, placing hundreds of facilities at risk of closure and further limiting access to behavioral health services in already underserved areas.

During the first Trump administration, legislation such as the SUPPORT Act expanded access to opioid treatment and overdose prevention, and the 988 Suicide & Crisis Lifeline was established. The Biden administration built on this foundation by expanding coverage, improving access to evidence-based care, and strengthening federal agencies like the Substance Abuse and Mental Health Services Administration (SAMHSA). Recent data suggests that some opioid-related and mental health indicators have begun to stabilize or improve.

Beginning in 2025, the second Trump administration marked a shift in federal mental health and substance use policy. The administration has emphasized a more law-and-order approach while reducing the scope of federal leadership and capacity in mental health services. At the same time, it has continued certain treatment-focused initiatives, including reauthorization of the SUPPORT Act. These policy directions align with themes outlined in the administration’s campaign platform and proposals associated with Project 2025.

KFF, a leading health policy organization, is tracking key mental health and substance use policies. The group’s tracker can be viewed in the order that each mental health or substance use policy action was implemented. Alternatively, the tracker can be filtered by category (Mental Health; Opioids/Substance Use Disorder; Federal Infrastructure/ Data/Guidance; and Gun Violence).

Disruption to Behavioral Health Infrastructure

Compounding these coverage losses are proposed structural changes at the federal agency level. The President’s FY26 budget calls for dissolving the Substance Abuse and Mental Health Services Administration and the Health Resources and Services Administration, consolidating them into a new Administration for a Healthy America. The proposal includes approximately $1 billion in funding reductions to programs that currently support community mental health centers, suicide prevention initiatives, substance use treatment, and behavioral health workforce training. While congressional approval is required, the proposal has generated widespread concern about the loss of specialized expertise and fragmentation of services.

Additional federal actions have raised alarms across the behavioral health field. These include reduced funding for LGBTQ+ crisis services within the 988 Suicide & Crisis Lifeline, the halting of school-based mental health workforce grants, and return-to-office mandates for Department of Veterans Affairs mental health providers that have disrupted confidential care delivery in some facilities.

Professional organizations such as the American Psychological Association have warned that the cumulative effect of these actions represents a significant deprioritization of mental health infrastructure, disproportionately affecting individuals with serious mental illness, substance use disorders, and communities that already face systemic barriers to care.

Parity Enforcement and Coverage Uncertainty

At the same time that Medicaid funding is being reduced, federal enforcement of mental health parity protections is in flux. In May 2025, the administration announced it would not enforce strengthened mental health parity regulations finalized in late 2024. Those rules were designed to require insurers to demonstrate that mental health benefits are comparable to medical benefits in practice, not just on paper, using outcomes data and independent medical standards. Their suspension, following legal challenges from employer groups, has created uncertainty around coverage standards just as demand for behavioral health services continues to rise.

Paradoxically, regulators are also signaling more aggressive parity audits heading into 2026, particularly around non-quantitative treatment limitations such as prior authorization, network adequacy, and medical necessity criteria. For providers, this means both heightened scrutiny and potential new opportunities to challenge inappropriate denials, provided they have strong documentation and utilization review processes in place.

Reimbursement and Delivery System Shifts

Beyond coverage policy, the behavioral health financing landscape is evolving rapidly. Insurers are tightening utilization management across all levels of care, with shorter authorization cycles, increased peer-to-peer reviews, and higher documentation expectations. At the same time, economic pressures are pushing patients and payers toward outpatient, intensive outpatient (IOP), and telehealth-based models, often at the expense of higher-cost residential and inpatient care.

Value-based payment models are also gaining traction. A growing share of behavioral health providers expect to participate in arrangements tied to outcomes, readmissions, and care coordination by 2026. These models favor organizations with robust data infrastructure, interoperable systems, and integrated care capabilities, while posing challenges for smaller or under-resourced providers.

Telehealth remains a central component of access, with utilization far above pre-pandemic levels, but payers are implementing stricter billing, verification, and auditing requirements. Virtual care is stabilizing rather than expanding, and reimbursement for certain services is declining.

State-Level Innovation Amid Federal Retrenchment

Against this challenging federal backdrop, states continue to play a critical role in shaping behavioral health policy. In 2025 alone, at least 13 states considered legislation to strengthen behavioral health crisis services. Washington enacted legislation requiring managed care organizations to expand crisis service arrangements for Medicaid enrollees, reinforcing the role of coordinated crisis systems.

States are also exploring emerging and controversial treatment areas. Several legislatures have advanced bills to study or regulate substances such as psilocybin and ibogaine, with multiple states authorizing clinical research and contingent prescribing pathways if federal approval is granted. These efforts reflect growing interest in alternative and adjunctive treatments for conditions such as PTSD and opioid use disorder, even as federal policy remains cautious.

Looking Ahead

Taken together, these developments paint a complex picture. Behavioral health policy in 2026 is defined by tension: between innovation and retrenchment, integration and fragmentation, rising demand and constrained resources. Medicaid cuts and agency restructuring threaten access and stability, while state-level initiatives, parity enforcement efforts, and care integration models offer potential pathways forward.

For behavioral health providers, hospitals, and health systems, understanding and adapting to these shifts is no longer optional. Success will depend on strengthening administrative and clinical infrastructure, investing in documentation and outcomes tracking, and engaging actively in policy advocacy to ensure that mental health and substance use care remain accessible, evidence-based, and equitable in the years ahead.

Stronger Support for Integrated Behavioral Health Care

Medicare is also encouraging more “whole-person” care by supporting integrated behavioral health services within primary care.

In practical terms, this means:

• Primary care providers can be reimbursed for coordinating behavioral health care
• Collaborative care models—where medical and mental health providers work together—are being reinforced
• Digital mental health tools, including some ADHD treatment devices, are being recognized

This change supports a growing understanding that mental health and physical health are deeply connected and should be treated together.

Telehealth Is Officially Here to Stay

One of the most significant updates is that Medicare is making several telehealth flexibilities permanent.

These include:

• No frequency limits on certain telehealth visits
• Allowing providers to supervise care virtually using real-time audio and video
• Continued support for virtual care in behavioral health and chronic disease management

This signals that virtual care is no longer temporary or pandemic-driven—it is now a standard part of health care delivery. Private insurers are expected to follow suit, which could expand access to mental health services, especially in rural or underserved areas.