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Facing volatility: how the 'One Big Beautiful Bill' may impact Healthcare asset owners 

Learn what healthcare asset owners can do to prepare for OBBB.

On July 4th, President Donald Trump signed into law H.R. 1, also known as the “One Big Beautiful Bill Act” (OBBB). As the name would suggest, the legislation contains wide-sweeping provisions, including the permanent extension of tax cuts from the 2017 Tax Cuts and Jobs Act (TCJA) and the fulfillment of several campaign promises, among other provisions. For example, it created temporary deductions related to taxes on tips and overtime pay, auto loan interest deductions for vehicles assembled in the U.S., and the phase-out of green energy tax credits. Overall, the bill’s tax cuts occur at the front end of a ten-year projection window, with spending cuts back-loaded. The OBBB is expected to increase the primary budget deficit by $3.2 trillion.1 For a more detailed analysis of the bill’s provisions and expected economic impact, please see Mercer’s note entitled "Implications of One Big Beautiful Bill." 

Expected Impact on Healthcare Providers

A majority of the bill’s spending cuts will come from an estimated $1 trillion in reductions to Medicaid over the next decade, which may pose the threat of significant financial ramifications for some healthcare providers.

  1. Changes to Medicaid eligibility, such as work requirements, stricter documentation rules, and cost-sharing measures.
  2. Reductions to state taxes on healthcare providers, including a gradual decrease in maximum rates charged by Medicaid expansion states.
  3. An estimated $500 billion in cuts to Medicare funding, according to the CBO, in relation to increases in the federal deficit.2
  4. Affordable Care Act (ACA) Marketplace reforms, including shorter reenrollment periods, increased documentation requirements, and elimination of enhanced premium tax credits.
  5. Establishment of a $50 billion Rural Health Transformation Fund intended to offset Medicaid cuts.3

For hospitals, this would mean an expected increase in uncompensated care. While this ultimately could affect all healthcare providers in some way, those with a large proportion of Medicaid recipients within their patient population, are expected to be the most impacted. 

Initial Investment Considerations

While the bill’s impact may take years to play out fully, we encourage health systems to incorporate its expected effects into their investment programs as part of broader efforts to assess at an enterprise level. Ultimately, the path ahead for any given system will depend on its own unique circumstances. However, we offer the following insights as a starting point for examining potential investment implications.
  1. Liquidity Planning for Operational Shortfalls
    Reductions in revenue on top of already elevated expense structures can pose a threat to operating margins that, for many, are currently razor-thin. Therefore, we believe liquidity planning will be necessary to gauge the magnitude of potential cash needs from investment portfolios to cover any shortfalls from operations. We believe the most straightforward way to achieve this is through additions to short-term reserves, which tend to serve as primary liquidity buffers beyond bank cash accounts. For systems that cannot fund this from operating cash flow or debt issuance, it may be necessary to transfer funds from long-term investment pools.
  2. Strategic Asset Allocation
    As the OBBB’s financial impact takes effect, certain providers may find it necessary to adjust their strategic asset allocation. For example, rural hospitals—a segment of the provider landscape that appears most at risk—may find it necessary to de-risk their investment portfolios in favor of high-quality fixed income to preserve capital, especially if assistance from the aforementioned Rural Hospital Transformation Fund eventually falls short. In addition, providers that are reliant on research funding could find it necessary to incorporate those needs into investment return objectives to offset reductions in grants, leading to more aggressive investment risk profiles.
  3. Private Markets Investments

    While not an immediate concern, some systems may find it necessary to decrease future private market commitment levels in response to potential portfolio outflows or adjust their target level of private market investments altogether. One mitigating factor lies in the assumption that many systems with private market investments presumably had the risk tolerance in the first place to pursue illiquid investments, aided by relatively favorable operating metrics and greater access to other sources of capital to help them navigate periods of business uncertainty. Recent survey data from Mercer suggests that this holds true, with less than 5% of systems planning to decrease their target allocations to private investments.4

    Alternatively, some may find it more appealing to incorporate evergreen investment structures into their private market allocations as a way to maintain exposure to the space while increasing their liquidity profile. For example, this could be implemented within private debt allocations, which can have the added benefit of an investment return profile that is income-oriented and can be appealing for health systems.

  4. M&A Activity
    Operating and financial pressures could potentially contribute to an uptick in future M&A activity, creating an environment similar to the wave of deals executed in the years following the Global Financial Crisis and passage of the Affordable Care Act. In that case, it would be necessary for parent organizations to gauge the financial impact of newly-acquired providers on the broader system. While we would not expect any drastic changes to investment strategy, this represents an additional element to consider during periodic enterprise risk management reviews for investment programs.
In conclusion, healthcare providers have faced previous periods of elevated uncertainty and remained resilient in their efforts to fulfill their mission to communities. As with anything, future policy changes could mitigate the concerns of the present moment. However, as institutions that represent a vital part of the communities in which they operate, it is incumbent upon health systems to contingency plan based on what is known at present and to solicit help from skilled advisors who can help. While many are currently considering how to navigate challenges posed by the OBBB in the years ahead, we believe that a health system’s investments will play a critical role in the process.
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1 Penn Wharton Budget Model analysis as of July 2, 2025.

2 Source: CBO response letter to US House Representative Brendan Boyle regarding Potential Statutory Pay-As-You-Go Effects of a Bill to Provide Reconciliation Pursuant to H. Con. Res. 14, the One Big Beautiful Bill Act dated May 20, 2025.

3 Source: H.R.1 – One Big Beautiful Bill Act, Chapter 4, Section 71401.

4 Mercer’s 2025 Healthcare Asset Owners Survey, August 2025.

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