At least two dozen rural hospitals in Washington state are facing a precarious economic future that will likely be made worse by the federal reconciliation bill passed by Congress last week.
Those hospitals are found across the state from Anacortes to Republic to Goldendale. All of the hospitals are tight on cash and were helped this year by funding from the state’s Distressed Hospital Grant program.
The $10 million pool is disbursed to hospitals experiencing “significant financial distress” even as they serve a large portion of Medicaid patients. To qualify, hospitals must meet criteria such as having too little cash on hand, being at risk of bankruptcy, or losing money within the most recent fiscal year.
“We’ve had a couple of hospitals who have used it like, literally they’re not going to make payroll,” said Cassie Sauer, the CEO of the Washington State Hospital Association.
Hospitals have to apply to the grant program, which is paid for by a tax on other healthcare providers in the state.
The distressed hospital program provides a list of the hospitals that the state considers most at risk financially, even before President Donald Trump’s administration’s cuts to the low-income health insurance program known as Medicaid, which is called Apple Health in Washington. Those cuts risk adding to a long trend of rural hospital closures around the country.
Distressed hospitals in Washington
The map below shows hospitals in Washington state that received grants through the state's Distressed Hospital Grant program in 2025. Such hospitals must experience significant financial hardship and serve Medicaid patients.
“We’re definitely going to feel the effects of this bill, pretty severely,” Sauer said.
Trump signed the budget reconciliation bill into law July 4. While it covered a broad range of Republican policies, cuts to Medicaid functioned as a main way to offset expenses that arose from extending tax cuts from the president’s first term. In response to outcry about health care cuts, lawmakers included a $50 billion grant program for rural hospitals. But that fund pales in comparison to the $1 trillion in cuts to Medicaid that will take place over the next decade.
In Washington state, 1.8 million children and adults were enrolled on Medicaid as of May 2025, according to the health policy nonprofit KFF. About 70% of the insurance program’s funding comes from the federal government.
On Washington state’s southwest coast, the critical access hospital Ocean Beach Health is facing serious threats from Medicaid cuts.
“There are hospitals across this state that are on the verge of closure. We are not,” said CEO Merry-Ann Keane, “but we are not doing well.”
Forty percent of Ocean Beach Health’s income is from patients who are on Medicaid, Keane said. With razor-thin profits and an estimated 250,000 Washingtonians who could lose their health coverage, the hospital’s budget will become tighter.
Last year, they made just $8,000 in profits.
“We were doing way better than a lot of my compatriots who were actually running in huge negative margins,” she said.
The negligible margins at Ocean Beach Health are due to high costs for health care, increasing salaries, inflation and uncertainty about how their services get reimbursed from insurance, Keane said. The hospital has only received about $1,000 from the Distressed Hospital Grant program so far this year. She expects that other struggling hospitals in the state got more because they had a greater need.
The cuts to Medicaid could accelerate an ongoing trend of rural hospital closures nationwide. From 2017 to 2024, 62 rural hospitals closed in the United States, compared to only 10 that opened, according to KFF.
In Washington, the federal changes to Medicaid will likely translate to a “slow bleed” starting at the end of 2026, Sauer said, since the bill’s provisions that affect small hospitals won’t take effect until after the mid-term elections. Work requirements for Medicaid recipients would take effect in 2027.
“I don’t think it’s immediate, but I think it is certainly possible in the next three to five years that we will see the loss of small hospitals in our state,” she said. “What we will definitely see in the shorter term is closure of services.”
Rural and urban hospitals are already closing labor and delivery units, psychiatric units, outpatient physical therapy and occupational therapy units, she said.
Those reduced services will affect everyone, regardless of their insurance.
“If your labor and delivery service closes at your local hospital, you can’t get it,” Sauer said. “They’re not just closing it for Medicaid, they’re closing it for everybody.”
Erik Neumann is a reporter with OPB. This story comes to you from the Northwest News Network, a collaboration between public media organizations in Oregon and Washington.
