Senior and continuing health facilities reliant on Medicaid that were already beset by thin margins and labor shortages are in store for more distress—including bankruptcy, higher costs, and reimbursement trouble—as “One Big Beautiful Bill Act” funding cuts take effect.
The law will trim nearly $1 trillion from Medicaid, which typically covers nursing home services for eligible residents, and is expected to cause 11.8 million Americans to lose health insurance in the coming decade, according to an analysis by the Congressional Budget Office.
Reimbursement and eligibility adjustments are likely to exacerbate financial strain for skilled nursing facilities that were already feeling the heat from Covid-19 pandemic—which worsened the nursing shortage and increased medical malpractice litigation—and prior state Medicaid funding cuts, industry professionals said.
One of those already-distressed companies, Genesis Healthcare Inc., is one of the country’s largest skilled nursing facilities. It filed Chapter 11 last month—before the megabill’s impact had even begun to take hold.
“I hope that the Genesis filing will be a wake up call,” DGIM business bankruptcy partner Monique Hayes said. “Genesis isn’t going to be an anomaly, it’s going to be a tale of the times.”
The law’s impact on the health-care industry could mirror the aftermath of the Balanced Budget Act of 1997, which changed how Medicare reimbursements were distributed. By 2000, five of the seven largest nursing home operators were in bankruptcy, according to a 2006 government report.
The law will ultimately have a cumulative impact as future patients won’t be eligible for Medicaid assistance, Hayes said.
Immigration reform and higher equipment costs will also likely push facilities toward a bigger crisis, attorneys and academics said.
Building Distress
Genesis previously filed for bankruptcy in 2000 as Genesis Health Ventures, citing the 1997 budget act’s “unanticipated cuts to Medicare,” according to court records.
Genesis, which operates around 175 facilities in 18 states, reported more than $2 billion in total debt in its 2025 bankruptcy. That includes workers’ compensation, personal injury, and wrongful death litigation costs. Its state Medicaid reimbursement struggles began before the pandemic.
As of mid-July, at least 135 nursing homes, skilled nursing facilities, home health and residential care firms with liabilities over $10 million had filed bankruptcy since 2020—including LaVie Care Centers LLC and the Villages Health System LLC—although some of those are affiliates of each other, according to bankruptcydata.com.
Financial strain tends to hit nursing homes harder and faster than other areas of the health-care industry, according to Adrienne Sabety, an assistant professor of Health Policy at the Stanford Institute for Economic Policy Research.
While the pandemic worsened the nursing shortage and led to an increase in medical malpractice litigation, it didn’t immediately lead to more health-care bankruptcies—but it was a factor in increased skilled nursing facility bankruptcies.
Senior living and care facilities accounted for a quarter of the health-care bankruptcies in 2024, when the industry hit its second-highest level in six years, according to a Gibbons Advisors annual report.
Tariffs, Patient Care
Tariffs will likely affect the costs of drugs and medical equipment, industry professionals said. Those costs can’t be passed on, said Samuel Maizel, the chair of Dentons distressed health-care unit.
“A tariff is not going to directly affect the nurse coming into your room and checking your vitals, but the machines that she is checking your vitals with were all made overseas,” Maizel said. “The drugs, the equipment, it’s all made overseas.”
Senior care facility bankruptcies also prompt staff turnover, a May paper on health-care bankruptcies from the National Bureau of Economic Research found. Employees’ confusion about bankruptcy is part of the reason they leave, Sabety, who co-authored the report, said.
Turnover leaves patients more prone to bedsores, physical restraints, and hospitalizations, which could lead to more professional liability and tort claims, Sabety said. She noted that the immigration crackdown might also impact staffing availability since many skilled nursing facilities employ nurses from abroad.
“As we’re in an increasingly hostile climate in terms of immigration, their ability to get visas and other things like that may impact labor,” she said.
Nursing homes, hospitals, and other providers were trying to fill nearly 1.5 million open positions as of June.
“The American health-care system is Rube Goldberg-esque,” Maizel said. “It’s a hodgepodge of government-supported health-care systems, government-supported insurance plans, private enterprises, private equity, nonprofits, church-run hospitals—and now we have an aging population which is going to need more of it.”
On top of the Medicaid amendments, nursing homes could be hit by $500 billion in Medicare sequestration cuts—legally taking assets from facilities until debts are paid—from 2026 to 2034.
Despite the overall funding cuts, some rural providers may receive some support and incentive investments under the new law, said Ryan Hardy, a Levenfeld Pearlstein LLC partner focusing on restructuring and financial services.
“It is going to be a net negative for the senior care industry, but that’s not to say that there aren’t portions that are going to benefit seniors,” Hardy said.
Private Equity
Mergers and acquisitions of troubled skilled nursing facilities are poised to rise following the new law, because many already operate under a corporate umbrella, industry professionals said.
Genesis, LaVie, and others have been owned by private equity firms for decades because it’s a lucrative sector.
National health expenditures reached $4.9 trillion in 2023, accounting for 17.6% of the country’s gross domestic product, according to the Centers for Medicare & Medicare Services.
Medicaid spending accounted for 18%, or $871.7 billion, of the health expenditures in 2023.
“I expect to see a wave of case filings that are prompted to cleanse of liabilities and allow for a free and clear asset sale to some larger acquirer,” Hardy said.
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