A federal shutdown cut off Medicare telehealth and hospital-at-home authority, marketplace premiums climbed sharply, and deal activity picked up as distressed hospitals sought partners.
The federal government shut down on October 1 and stayed closed through the end of the month. Medicare claims processing continued, but several programs hospitals had built operations around lost their legal footing, and the dispute over ACA subsidies became the central obstacle to reopening.
With no stopgap in place, pandemic-era Medicare telehealth flexibilities expired on October 1, along with the Acute Hospital Care at Home waiver used by more than 400 hospitals in 39 states. CMS told Medicare contractors to hold telehealth claims for 10 business days, and providers could choose to hold their own claims while waiting on Congress. Many systems kept seeing Medicare patients virtually, betting on retroactive payment. Hospital-at-home programs faced a harder choice, since they involve inpatient-level admissions rather than single visits.
House Democrats criticized HHS for thin guidance ahead of the lapse. For operators, the episode underlined the cost of running clinical programs on short-term extensions.
Ahead of open enrollment, KFF estimated that ACA insurers raised premiums by about 26% on average for 2026, with benchmark silver premiums up about 30% in HealthCare.gov states and 17% in state-run marketplaces. Insurers pointed to hospital costs, GLP-1 drug spending and tariffs, and added roughly 4 percentage points in anticipation of healthier enrollees leaving if enhanced tax credits expire. About 22 million of the 24 million marketplace enrollees receive a tax credit; KFF projected their payments would rise about 114% on average without the enhanced credits.
Kaufman Hall counted 15 announced hospital and health system transactions in the third quarter, representing $8.9 billion in transacted revenue and including the year’s first two mega-mergers. Eight of the 15 involved a financially distressed party. The firm attributed the rebound in part to greater policy clarity after passage of the reconciliation law.
On October 31, CMS finalized the 2026 physician fee schedule. Conversion factors rise about 3.8% for qualifying APM participants and 3.3% for others, but a new 2.5% efficiency adjustment applies to many non-time-based services, and practice expense changes favor office-based settings over facility settings. Employed-physician groups should model the net effect by specialty.
Executive takeaway: Quantify revenue held up by the shutdown and prepare for a rise in self-pay patients if enhanced ACA credits expire; distressed peers may also present partnership opportunities.
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