Because executive and congressional decisions are still in flux, health system leaders need to account for a range of possibilities within each category. For example, Medicaid cuts are likely to happen in some form but may be limited to work requirements, which would have a comparatively smaller impact on health systems since they affect mostly healthier beneficiaries. Broader cuts would impact sicker and higher-use populations in addition to health segments and therefore have a deeper impact on financial performance. Health system leaders need to understand the range of possibilities across all categories.

We’ve categorized policies into mild, moderate, and severe scenarios based on their impact on health system finances. Increasing severity corresponds to larger cuts to revenue or expense increases.

The impact of policy changes will vary depending on the health system. For example, health systems with higher exposure to Medicaid patients will see a larger impact than those with a payer mix dominated by commercial payers. We group those internal factors into three categories, which amplify or mitigate the impact of different federal policies:

• Payer mix: Higher exposure to Medicare and Medicaid populations will amplify the impact of federal cuts, while lower exposure will mitigate the impact.
• Research and grant dependence: Large research organizations and community health services for large populations will be more exposed to cuts.
• ACA: The number of covered lives in your market that get insurance from ACA exchanges will amplify the impact of federal cuts.

To arrive at a range of scenarios, health system leaders should model mild, moderate, and severe impacts on their key financial metrics (outlined in steps 1 and 2), and then amplify or moderate those impacts based on their specific organizational characteristics (step 3).

This scenario planning exercise should focus on the discrete policies with the greatest direct impact on financial performance drivers for health systems. This allows leaders to understand the different impacts of potential policy changes so they can plan for market- and organization-specific implications and begin to map out mitigatory steps or corrective actions.

Note that this approach accounts for the direct impact of health policy changes on health system finances. It does not account for the impact of larger economic changes, or the interaction of these forces with policy changes. For example, this approach captures the impact of work requirements on health system revenue based on historical precedent in loss of Medicaid insurance but does not anticipate a larger unemployment rate simultaneously increasing the population covered by Medicaid.