what does hospitals do in such cases then? do they stop treating patients which will give lower rates?

This is really the crux of the whole debate — and the answer is nuanced because hospitals have very different options depending on whether they're a large for-profit like UHS, or a small rural community hospital.

The Legal Constraint: EMTALA

First, the hard floor. Hospitals cannot simply stop treating patients. Federal law (EMTALA, passed in 1986) requires that anyone coming to an emergency department must receive a medical screening examination, and if they have an emergency medical condition, the hospital must provide stabilizing treatment — regardless of insurance status or ability to pay. U.S. Department of Health and Human Services

The penalty for violation is severe: fines of up to $119,942 per violation for large hospitals, and potentially exclusion from Medicare and Medicaid programs entirely — which would be a death sentence for any hospital since Medicare alone covers roughly half of all inpatient costs nationally. ACEP

So hospitals cannot turn away Medicaid patients in emergencies. The strategic response instead plays out across several other dimensions.

What Hospitals Actually Do: A Tiered Playbook

1. Cut Labor — The Biggest Lever

Staffing is typically 50–60% of a hospital's cost base, making it the first and biggest target. Historically, hospitals have responded to payment reductions by reducing the number of beds and nurses — and sometimes by closing entirely. University of Chicago Press

This has already started happening. Hospital leaders are warning that tough choices include service reductions, labor reductions, and possible closure. Hospital associations in Pennsylvania warned that 12 to 14 hospitals could close within the next five years. Chief Healthcare Executive

For UHS specifically, the playbook from COVID is instructive — management has noted they demonstrated the ability to rapidly reduce contract labor, freeze wages, and trim benefits when volumes dropped. That same flexibility is their first line of defense.

2. Close or Shrink Unprofitable Service Lines

Hospitals can — and do — shut down services that are used predominantly by low-income patients and lose money. This is already happening in real time. St. Mary's Sacred Heart hospital in rural Georgia ended its maternal health services, explicitly citing "recent Congressional cuts to Medicaid" as a factor. In December 2025, Centra Southside Community Hospital closed labor and delivery, OB/GYN surgical services, and outpatient care, citing "recently enacted reductions in federal health care funding." In January 2026, Greene County General Hospital in Indiana ended its obstetrics services. Public Citizen

Obstetrics is a classic example: it's heavily used by Medicaid patients, reimbursed poorly, and requires expensive 24/7 specialist coverage. When cuts hit, it's often the first to go.

3. Shift the Patient Mix — Pursue More Lucrative Patients

This is the for-profit hospital's most powerful long-term response — and it's exactly what UHS, HCA, and Tenet do when under financial pressure. The strategy is to grow the volume of commercially insured, elective, and surgical patients to offset losses on the Medicaid side. Concrete tactics include:

• Expanding ambulatory surgery centers (ASCs) — outpatient surgical centers that handle high-margin elective procedures (joint replacements, cardiac procedures, spine surgery) and attract commercially insured patients.
• Building in wealthier markets — UHS's expansion into Florida and its new hospital tower in South Carolina are partly about accessing better-insured demographics.
• Growing behavioral health selectively — commercial and Medicare-funded behavioral health pays better than Medicaid behavioral health.

The current industry commentary reflects this tension clearly: "There's only so much you can do if the administration cuts Medicaid reimbursement, ACA subsidies, and more" — highlighting that hospitals have levers but they're finite. Hospitalogy

4. Cost Shifting to Commercial Insurers — Increasingly Limited

Historically, hospitals would simply charge commercial insurers more to make up for what Medicaid underpays. This was the dominant strategy in the 1980s. In the early 1990s, urban hospitals could transfer up to 37% of Medicare cut losses onto private payers through higher charges — but hospitals with greater reliance on government payers were more financially distressed because they had fewer commercial patients to shift costs onto. PubMed

This lever has weakened significantly. Large commercial insurers are now sophisticated negotiators who push back hard on rate increases, so cost shifting doesn't work as cleanly as it once did.

5. Lobby Hard and Wait for Political Relief

This has worked historically every single time. Hospitals have argued for decades that any cuts to Medicaid or Medicare would harm patients and lead to service reductions — and because hospitals are usually one of the largest employers in a congressional district, industry leaders often warn of job losses. Such arguments typically give lawmakers pause. The BBA cuts in 1997 were partially reversed in 1999. Hospital industry groups are already fighting back hard against the OBBBA. NPR

Why UHS Is Better Positioned Than Most

The hospitals genuinely at existential risk from these cuts are not the large for-profits — they're small, independent, rural, and safety-net hospitals with no margin to absorb losses and no ability to shift patient mix. Over 400 hospitals are currently considered at risk of closing due to Medicaid cuts, with America's Essential Hospitals' CEO calling it "an existential crisis." Chief Healthcare Executive

UHS, by contrast, has real options: it can cut contract labor, adjust its service mix, accelerate its ambulatory surgery buildout, execute share buybacks to support EPS even if revenue is pressured, and rely on its behavioral health division (which is more insulated from the acute care Medicaid dynamics) as a buffer.

The risk for UHS is not closure — it's margin compression and slower earnings growth, which is why the stock is being de-rated rather than priced for bankruptcy. The market is essentially asking: how much of UHS's profitability was built on government subsidies that are now being taken away, and what's the true underlying earning power of the business without them?