Every day, Laura Gamble sees the importance of Pender Community Hospital in the lives of her neighbors. The woman who drove an hour to deliver her first baby. The man in a mental health crisis. 

They rely on her northeast Nebraska hospital. “It’s like an oasis on the hill,” said Gamble, who grew up in the area and practiced as a nurse before becoming the hospital’s CEO. 

The hospital is one of the largest employers in the 1,115-person town of Pender, Gamble said. It delivers more than 120 babies a year — the most per capita of any hospital in the state, according to  its own analysis. 

Across the state and country, it has become increasingly difficult for hospitals like the one in Pender to keep their doors open. Reimbursement rates for Medicaid have lagged behind skyrocketing costs, hospital leadership and analysts say, and it’s tough to recruit and retain employees.

The mounting challenges led Nebraska lawmakers to extend a lifeline to hospitals in 2024 — a bill to unlock up to $1 billion in federal Medicaid funding. But that money was tied up in a federal approval process for over a year, putting some hospitals on edge.

Funding has started coming through in recent months, but it may not last long. Congress this year put an expiration date on the current level of support while approving other Medicaid spending cuts that likely will affect rural hospitals. 

“We’ve got about five years, then there’s a cliff,” said State Sen. Mike Jacobson of North Platte, who sponsored the bill. “And that’s going to be a challenge.”

‘Who’s the chump?’

Hospitals legally have to care for anyone who comes through their emergency rooms, regardless of whether they have insurance. 

A big source of financial tension: patients on Medicaid, government-funded insurance for low-income people. That’s because states set Medicaid reimbursement rates that often don’t cover the full cost of care.

In Nebraska, hospitals were being reimbursed at rates as low as 34 cents on the dollar, said Jeremy Nordquist, president of the Nebraska Hospital Association.  

NHA data from earlier this year showed 35% of all Nebraska hospitals were losing money on operations. When looking at small rural hospitals alone, the number shot up to 44%.

“It’s not keeping up with that cost, and it put a lot of our hospitals in the red at one point,” Nordquist said. 

The 2024 bill, which the NHA brought to Jacobson, aimed to close the gap by tapping into additional federal dollars that most other states already received. 

The program, referred to as a state-directed payment program, requires hospitals to pay in a percentage of revenue and meet certain standards. The federal government then matches each dollar paid in, before all the money flows back to hospitals, with NHA and Nebraska’s Department of Health and Human Services collecting a 1% and 3% fee, respectively, for administering the program. The amount each hospital receives is determined by their share of Medicaid services. 

A similar resource has existed for decades, but Nebraska leadership had previously resisted taking the federal money. That’s in part a reflection of generally fiscally conservative politics coming out of the Great Recession, said Nordquist, who served in the state Legislature from 2009 to 2015. 

At the time the bill was being debated in 2024, three rural hospitals had closed their labor and delivery units in the previous 18 months while others had ceased behavioral health, hospice and home health services, Jacobson said. 

“If 44 and pretty soon 46 other states are taking these funds, who's the chump if we continue to stand on the sidelines and say, ‘No, we don't want $1 billion to come to our state to fund Medicaid and our rural and many of our urban hospitals to help with health care costs?’” the North Platte Republican said during debate.

The bill passed without a single “no” vote, and Gov. Jim Pillen — breaking with his predecessors’ opposition to the program — signed the bill into law.

A touch-and-go ‘survival tool’

The additional Medicaid money is just one piece of the funding puzzle for hospitals. But for some, it could be the difference between staying open and closing.

“For us, it’s kind of a survival tool,”  said Sam Pennington, CEO of Garden County Health Center in the Panhandle town of Oshkosh. “It's a lifeline that helps us cover the rotating costs of running a hospital.”

If his hospital got its full projected payment, he said, it would amount to about 5-7% of the hospital’s total revenue.

On the other side of the state in Pender, the hospital’s revenue funds itself while also propping up a child care center and assisted living facility that lose money but serve vital roles in the community.

“I was probably a little skeptical, but I thought, ‘Wow, if we can get this money, we can do some things that we need to do — we can sustain what we're doing now, even,’” Gamble said.

The Pender hospital budgeted for the new money that first year. Others did, too, according to Jacobson, who sits on the board of Great Plains Health. Without it, he said, at least a couple of them would be closing or moving to less costly emergency hospital models. 

“It’s significant money, and it’s money that they’ve been counting on,” he said.

But it didn’t come as quickly as expected. 

A year passed as hospitals waited for federal approval that would bring that new funding to fruition — what Nordquist understands to be a common experience among states in similar situations. There was a presidential election, then talk of major cuts to Medicaid programs.

“I mean, it was just telling the (hospital district) board that ‘Hey, we think we’re going to get this,’ then each time having to go to the board and saying, ‘Well, we don’t know yet. We don’t know yet,’” Gamble said. 

That was true for other hospitals, too, according to the NHA.

“Many of our hospitals were waiting on pins and needles to get this actually flowing,” Nordquist said. “For some of them, it is the difference between having a negative 3% margin versus a positive 3% margin at the end of a year. And if you can’t over the long run, as a hospital, maintain a positive 3-5% margin … you’re not going to make it.”

Nebraska’s federal delegation got involved. In May, all three congressmen signed a letter to CMS Administrator Dr. Mehmet Oz, urging the agency to approve the proposal.

Rep. Mike Flood, a former state lawmaker from Norfolk, knows the importance of hospital access firsthand. Over a decade ago, he said, the day his wife finished breast cancer treatment, an ambulance rushed him to the same Norfolk hospital with chest pain. Because the hospital had the resources, he said, he was in the cath lab within 30 minutes and got a stent placed in his right coronary artery.

“I think to myself all the time: If that cath lab wasn’t close to me … what are my options?” he said.

CMS did eventually approve Nebraska’s 2024 plan in June 2025 — just days ahead of the deadline for it to be exempt, for now, from changes included in President Donald Trump’s tax and spending bill.

“Candidly, I would say Nebraska qualified for state-directed payments on the skin of its teeth, because it was like a perfect storm for not getting approved,” Flood said.

Hospitals got the first payment in August, prompting Pillen to issue a press release calling this a “new era” for health care in the state. A second installment came in October, according to hospital leadership. 

In all, CMS approved up to $705 million in state-directed payments for 2024 and $1.4 billion for the current year to be distributed to more than 90 hospitals across the state.

Ahead: More watching, strategizing

The future of the payments, and of federal funding for Medicaid in general, is uncertain. 

Flood and every other member of Nebraska’s congressional delegation voted for Trump’s tax and spending bill earlier this year, which the Congressional Budget Office estimated will cut federal Medicaid spending by about $1 trillion over a decade. It caps state-directed payments and gradually reduces them for exempt plans starting in 2028. 

It’s unknown when and how all the various cuts and changes might hit individual hospitals.

“The challenge here is there is no historical context for something of this magnitude. … This is a historic decrease in federal support for health coverage that could spur unprecedented reductions in the number and percent of the population with coverage,” said Alice Burns, who oversees quantitative research on Medicaid at KFF, the health policy organization previously known as the Kaiser Family Foundation. 

The bill Trump signed also created the Rural Health Transformation Program, with $50 billion slated to be doled out to states before 2030. Nebraska could see approximately $200 million a year from that fund, depending on the outcome of the application process, according to Flood’s office.

The deadline for states to apply for the funding passed last month, but it’s unclear what Nebraska proposed to do with the money and how much it could help hospitals. 

By late November, almost 40 states had released at least the main piece of their applications, according to KFF Health News, and several had released additional documents detailing plans. Nebraska was one of just a half-dozen states that hadn’t released any documents.

The Flatwater Free Press filed requests for the plan with the state and federal agencies involved. 

Nebraska DHHS denied the request, citing exceptions in state law for public records relating to investigations and proprietary information. Federal CMS did not provide the documents as of press time.

Flood framed the current moment — while the state-directed payments are still flowing and more federal money is expected from the new program — as an opportunity for hospitals. That temporary Rural Health Transformation money, he said, could go toward things like loan forgiveness and incentives to recruit and retain staff.

“They have to use this as a runway to make sure that in five years, they are in a much better place than they are today,” he said.

It’s difficult to see how these resources will be enough to overcome the magnitude of the impending changes that will leave more people uninsured, said David Palm, director of the University of Nebraska Medical Center’s Center for Health Policy. He noted that the clock is also ticking for Congress to act on whether to extend Affordable Care Act subsidies that allow some Americans to afford insurance.

“There are a number of things that are driving up costs,” Palm said. “And of course, with Medicaid cuts, there certainly are going to be more uninsured people. Hospitals are required to see everybody in their hospital — in their emergency room, assuming it's an emergency — and so you're going to have more uncompensated care.”

Leaders at the hospitals in Oshkosh and Pender are looking at their options. Gamble said her hospital didn’t budget for the new state-directed payments this fiscal year and likely won’t in the future. The board is looking at new sources of revenue, and areas where it can make tough decisions to cut expenses.

“There’s just things coming down the road,” she said. “(I’m) scared that it’s going to make it even worse.”

The Flatwater Free Press is Nebraska’s first independent, nonprofit newsroom focused on investigations and feature stories that matter.