Cuts imposed by the One Big Beautiful Bill Act that Congress passed a year ago will soon hit U.S. hospitals after a relatively strong cash and operating positions of the last five years, a new report shows.

A Fitch Ratings analysis out last week painted a picture of U.S. nonprofit hospital systems with operating margins that continued to rise this year, which Fitch said marked a third consecutive year of improvements. Overall operating margins rose to a median of 1.5% from 1.1% in the prior year, which Fitch described as an “improvement following the historical sector trough of 0.2% in fiscal 2022.”

“Performance was supported by strong volumes, easing labor pressure s and proactive operational measures, including the adoption of new AI tools, before emerging policy challenges fully affect results,” Fitch said in a statement accompanying its report.

But there’s trouble ahead thanks to the One Big Beautiful Bill Act, legislation also known as HR 1, which President Trump signed into law July 4 of 2025. The legislation imposes new work, eligibility and certification restrictions on Medicaid recipients that is projected to cut nearly $800 billion from Medicaid health insurance program for poor Americans over the next decade. Those cuts will begin in January 2027.

“The One Big Beautiful Bill Act represents the dominant near-term threat to the sector’s credit profile,” Fitch said in its report. “Medicaid enrollment reductions, stricter eligibility recertifications, work requirements, and caps on provider taxes and state-directed payments are expected to become meaningfully effective beginning in 2027.”

But hospitals are already beginning to sound the alarm on Trump policies and other decisions by the Republican-led Congress, which decided against renewing enhanced subsidies for millions of Americans to buy coverage available on exchanges under the Affordable Care Act, also known as Obamacare. The subsidies, or tax credits, made health insurance premiums more affordable for individuals and were enhanced by the Biden administration and the Democratic-controlled Congress, which passed the Inflation Reduction Act of 2022, allowing more Americans to buy coverage.

“We believe that access to healthcare and affordability for Americans begins and ends with health insurance coverage,” HCA Healthcare chief executive officer Sam Hazen told analysts and investors in his opening remarks two weeks ago discussing the company’s second quarter earnings. “Most people need support to secure it whether that is through an employer, the federal government or some other means.”

With the enhanced subsidies unavailable this year, Hazen said “many people became uninsured and still needed emergency care from hospitals.”

To be sure, several health insurers are reporting the loss of hundreds of thousands of customers. Centene, in particular, has lost more than two million Obamacare enrollees.

Looking ahead to 2027 and beyond, Fitch analysts said the Big Beautiful Bill creates a “new era of uncertainty.”

“The passage of H.R. 1 has introduced a new era of uncertainty, one in which the balance sheet cushion accumulated over the past five years will be tested,” Fitch Senior Directors Kevin Holloran and Mark Pascaris wrote in the firm’s report.

“AI driven efficiencies may need to be accelerated to find margin stabilization,” the Fitch analysts said. “Fiscal 2025 may ultimately prove to be an operational peak for the sector before a new and more challenging chapter begins. An important question to wrestle with is answering the balance sheet paradox. Is balance sheet strength overly masking operational fragility?”