💡 What’s Happening?
Everyone is talking about how health care costs are too high, and rumor is that hospitals are mostly to blame.
The major drivers pushing up the cost of care – labor, reimbursement and demand – are well documented. But so is the cost to sustain the critically expensive and heavily regulated hospital operations. Insurance blames hospitals, think tanks blame consolidation and patients left holding the bill blame a broken system.
The rising cost of care is undeniable and unsustainable – but scapegoating hospitals helps no one. Texas hospitals are buckling under the weight of relentless external pressures, and the financial strain shows no sign of letting up.
“Rising bad debt and expenses challenged hospitals in January — and those pressures aren’t likely to abate this year, according to Kaufman Hall.”
(Hospitals’ financial performance off to a shaky start in 2026: report, Healthcare Dive)
“Many of [Paragon’s] recommendations would lead to reduced or closed hospital services, decreased access to care, and poorer health outcomes for patients and communities.”
(Why Paragon Gets Hospitals Wrong: Report Ignores Reality of Care Delivery, AHA)
✅ Reality Check
False Claim – During the House Health Care Affordability Committee hearing on May 30, witnesses falsely asserted that Medicaid supplemental payments make hospitals whole.
Fact – This assertion overlooks the billions of dollars in unpaid and underpaid care Texas hospitals provide even after supplemental and directed payments. In reality, base Medicaid reimbursement rates fall well below the cost of care, reimbursing only 72% of inpatient costs and 75% of outpatient costs on average. Costs of care for uninsured patients are almost 100% unreimbursed. While supplemental payments help narrow these gaps, they do not eliminate them – meaning hospitals are still paid less than the actual cost of treating Medicaid and uninsured patients.
THA Fact Check:
What the Hearing Got Wrong About Hospital Finances
Texas hospitals incurred $27 billion in Medicaid and uninsured costs in 2025, while net Medicaid payments totaled $18 billion after factoring in the hospital’s cost of financing the nonfederal share of the payment, based on aggregated cost and payment data from HHSC, leaving Texas $9 billion short.
🔍 Often Overlooked
- Below the Bar – consistent payer reimbursement below cost and weak coverage doesn’t just wear down individual hospital finances; it shapes the industry’s economy over time.
- Sicker and Sicker – post-pandemic patient demand is not only growing but arriving with higher acuity and complexity. Hospital prices grew by 2.7% in 2023 and 3.4% in 2024 – yet both increases were lower than the average increase in marketplace premiums during those years.
- Consolidation Keeps Care Available – mergers can and do create efficiencies that lower costs while allowing health systems to invest more in quality improvements and expand the scope of services they offer. Patients recognize that if the choice is between their provider closing or maintaining an access point for healthcare in their community, consolidation provides a path to keeping care local.
“When patients with Medicaid go to the hospital, their insurance pays less than 65 cents on the dollar relative to the actual cost of their care.”
(Trump’s Beautiful Bill Puts 446 Hospitals At Risk Of Closing. Here’s The Full List, Forbes)
“I’m here to address the critical gap in the mental health service continuum that is directly contributing to the criminalization of mental illness in Texas.”
(‘We need help’: Advocates, families plead for Texas to improve capacity, access in state hospitals, KERA News)
🎯 Why It Matters
Hospitals are critical infrastructure and economic engines in Texas communities. They provide 24/7 care Texans can’t get anywhere else. The rising cost of care doesn’t start with rising hospital prices – rising hospital prices are a reflection of many holes in the safety net.
👀 What We’re Following
- Patients Pay the Price – THA CEO John Hawkins reveals how insurers avoid paying the full cost of care. Denied claims, low coverage and high premiums = patient cost burden and missing payments used to cover the cost of running a hospital.
- Health Care Costs Hit the Capitol – Texas House lawmakers discuss what is driving rising healthcare costs – KXAN
⭐ Rising health care costs involve a complex mix of actors. Supporting hospital pain points helps strengthen Texas and helps relieve patients from financial stress.
📖 Learn More
What’s Driving the Cost of Care?
Hospitals Want to Bring Costs and Prices Down. Let’s Attack the Root Causes of the Problem.
What the Hearing Got Wrong About Hospital Finances
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