For-Profit Hospitals See Revenue Spike Driven by Medicaid Supplemental Payments

Major for-profit hospital systems reported stronger-than-expected financial results in the third quarter of 2025, largely attributed to increased Medicaid supplemental payments. HCA Healthcare, Community Health Systems, Universal Health Services, and Tenet Healthcare all exceeded analysts' projections, with executives citing these state-directed payments as a primary factor in their improved performance.

Medicaid Supplemental Payments Boost Bottom Lines

Across the board, hospital systems reported significant increases in revenue per case, with Medicaid supplemental payments playing a crucial role. These payments, designed to cover the gap between Medicaid reimbursement rates and actual care costs, contributed substantially to the financial upswing:

• HCA Healthcare attributed half of its 6.6% jump in same-facility revenue per equivalent admission to supplemental payment increases.
• Community Health Systems reported that these payments accounted for about a third of its 5.6% increase in same-store net revenue per adjusted admission.
• Universal Health Services credited the payments for a significant portion of its 9.8% rise in same-store revenue per adjusted admission within its acute hospital segment.
• Tenet Healthcare acknowledged the payments' contribution to its 5.9% increase in same-hospital net patient service revenue per adjusted admission, including $148 million in out-of-period payments received this year.

The impact of these payments was so substantial that several companies adjusted their financial forecasts for the year. Universal Health Services, for instance, pointed to approximately $100 million in miscellaneous state-directed payment program increases during the quarter, with more expected in Q4, as a reason for raising its 2025 forecast. Similarly, HCA Healthcare attributed $250 million of its $450 million increase in adjusted EBITDA guidance to the expected net benefit from these payments.

Other Factors Contributing to Revenue Growth

While Medicaid supplemental payments were the primary driver, executives also highlighted several other factors contributing to revenue growth:

1. Favorable shifts in patient insurance coverage
2. Higher acuity of cases and services provided
3. Improved rates negotiated with payers
4. Efficient revenue cycle management, particularly in winning claims disputes

These elements combined to create a perfect storm of revenue enhancement for the hospital systems, resulting in substantially higher earnings than anticipated.

Future Outlook and Potential Challenges

Despite the current positive financial trends, hospital executives remain cautious about future projections. The One Big Beautiful Bill Act is set to reduce these supplemental payments in the coming years, which could impact future earnings. Additionally, the ongoing government shutdown has raised concerns about potential delays in payment approvals.

Most companies refrained from making specific predictions for 2026, citing the uncertain federal policy landscape. However, they generally expressed expectations of steady volume growth, relatively stable expense lines, and pricing increases led by Medicare rate adjustments.

The debate over subsidies for Affordable Care Act (ACA) exchange plans was also addressed, though executives noted that ACA enrollees represent a relatively small portion of their net revenues – less than 5% for Community Health Systems, for example. While the potential loss of these subsidies could have some impact, it was not considered a major concern for most systems.

As the industry navigates these challenges and opportunities, for-profit hospitals continue to focus on growth strategies, particularly in high-acuity services and network expansions in preferred markets. The coming months will likely bring further developments as these companies adapt to evolving healthcare policies and market dynamics.