Valley Health changes staffing contracts, trims service citing ‘Big Beautiful Bill’

From cutting its observation unit at Winchester Medical Center to ending contracts for certain workers there and at five other locations, Valley Health is making changes to reduce its spending amid federal Medicaid and Medicare reimbursement cuts — and anticipated additional financial strains caused by the “One Big Beautiful Bill Act,” which Congress passed last summer.

Valley Health’s Winchester hospital will close its observation unit by July 1 to save money. Observation units are used to monitor patients that are too sick to discharge but don’t need to be admitted for longer care. People needing observation care will be tended to in existing inpatient units while observation staff will be transitioned into other areas of Valley Health.

The health system is also dropping two contracts that help staff its hospitals.

The contracts were with Emergency Medicine of Blue Ridge to provide emergency department doctors and Sound Physicians to provide hospitalists, who care for patients throughout their hospital stays.

SCP Health, a private equity-backed company, will take over the employment of emergency medicine providers at all six of Valley Health’s hospitals in Virginia and West Virginia by Sept. 30, and by Jan. 1, 2027, SCP will also assume control of all hospitalists.

Mark Nantz, president and CEO of Valley Health, attributed the changes as a response to how health care is evolving nationally. A rule from the Centers for Medicare and Medicaid Services late last year reduced reimbursements while the H.R. 1, also known as the “One Big Beautiful Bill,” is expected to spur drops in Medicaid enrollment nationwide.

The need for hospitals to respond “has become more urgent following the adoption of House Resolution 1, which will reduce Valley Health’s funding by over $80 million annually,” Nantz said.

With Valley Health’s adjustments, it has joined a growing number of health systems or hospitals in Virginia that cite the federal law as a factor in staffing or service changes.

What the shift means for patients and providers

The new contract marks a shift from a democratic health group to corporate operations.

Democratic health groups like Emergency Medicine of Blue Ridge are a model where physicians have voting rights and they are often used in emergency medicine to staff hospitals. Nantz believes shifting workers under the SCP Health umbrella will extend operational resources and expertise “beyond what a small, local physician group can reasonably provide on its own.”

But Dr. Joran Sequeira, president of the Virginia College of Emergency Physicians, cautions that this can have negative effects down the line.

She explained that models where physicians have input ensures safe patient-to-physician ratios, supports physicians remaining in the communities they serve for longer, and ensures that a range of experienced professionals can treat patients.

“Unfortunately private equity doesn’t always see the same way we do,” she said.

“(The model) doesn’t always understand the nuances of medicine.”

Research has shown that when private equity firms determine a hospital’s staffing there is more reliance on advanced practice providers like nurse practitioners and physician assistants rather than doctors.

While each type of professional has a role to play and specialty to offer, Sequeira emphasized that doctors and other providers know how to proportion their roles in a schedule to deliver care for a variety of patient needs and volume.

“A trauma patient is very different from a 40-year-old man presenting with abdominal pain,” she said as an example.

She added that newly hired physician assistants or some nurse types are more likely to be fresh from graduate school and uncomfortable with flying solo on certain procedures.

A Harvard Medical School study has indicated higher death rates in ERs at hospitals managed by private equity firms.

When private equity takes over “we lose control of scheduling, we lose control of staffing ratios and departmental policies,” Sequeira said. “And physicians get kind of treated as replaceable employees rather than partners.”

A Valley Health news release said “we anticipate most physicians will continue to provide care at (the hospital chain), just working for a new employer.”

But Sequeira warned that there will likely be doctors, nurses or assistants that choose to leave out of discomfort working for private equity.

Nantz, however, has issued assurances in a statement to the communities the system serves.

“There are other physician services provided in our hospitals by national physician groups, some for 20 years or more,” he said. “This is a common arrangement for providing certain physician services and is transparent to patients.”

More health care strain on the horizon

Sequeira expects hospitals will continue to feel financial strain.

Thousands of Virginians are at risk of losing Medicaid next year because of federal actions and 33,000 people in the state had to drop their health insurance after Congress did not renew Affordable Care Act subsidies.

Those people will still need medical care, she said, adding they may be turned away from primary care providers for being uninsured and end up in emergency rooms.

People will still need to seek medical care, she said, they just might be turned away by primary care providers for being uninsured and then turn to emergency rooms when health conditions become dire.

“People come in super sick and get this whole big workup and get admitted, but how are they going to pay for that?” she said.

Emergency departments are legally required to care for all patients that enter, regardless of their ability to pay.

“We are basically providing a lot of free health care and having a really hard time getting people to pay us,” Sequeira explained.

After absorbing unpaid services, health systems tend to negotiate with private insurers, which means over time, people with private insurance may start to see rising premiums.

In an attempt to soften the blows, Virginia lawmakers are considering budget proposals to help the state comply with the additional federal work requirements for Medicaid and Supplemental Nutrition Assistance Program recipients. While the state invests in social services departments upfront to prevent eligible people from losing benefits, hospitals have warned that a drop in Medicaid patients will mean a hit to operating margins for more vulnerable hospitals.

Other budget proposals entail funding a state-level ACA subsidy and giving a boost to free clinics to help alleviate hospital ER strains. Lawmakers will meet next week with the goal of finalizing the budget.