Medicaid Cuts Could Be ‘Last Straw’ for Rural Hospitals, Says Garnet Health-Catskills CEO

The CEO of Garnet Health Medical Center – Catskills is warning that newly signed federal legislation could deal a severe blow to rural hospitals already on the financial brink.

In an interview with Radio Catskill Wednesday, Jerry Dunlavey, who oversees Garnet Health’s two Sullivan County campuses in Harris and Callicoon, expressed concern about the sweeping Medicaid changes enacted earlier this month as part of the so-called “Big Beautiful Bill” signed into law by President Trump.

“This bill shifts a significant amount of the funding responsibility from the federal government to the state government,” said Dunlavey. “And the concern is that the state is not going to be able to make up that difference. That’s going to cause significant challenges for health systems, particularly our rural hospitals.”

State lawmakers have warned that as many as 1.5 million New Yorkers could lose access to health coverage under the new law.  According to Dunlavey, that could include as many as 40,000 residents in the Hudson Valley region alone.

Financial Uncertainty Deepens
Although the specifics of the law are still being analyzed, Dunlavey noted the immediate risk is clear. In Sullivan County, he said, 35–40% of Garnet Health’s patients are on Medicaid, and a similar portion are on Medicare. Only about 20% are commercially insured or pay out-of-pocket.

“That payer mix is a recipe for barely being able to break even,” he said. “If you start to cut programs that fund the organization, it’s going to be significant.”

Rural hospitals like Garnet Health have already been navigating financial headwinds, including recent cuts to Medicare reimbursement rates and physician fees. Last month, Garnet Health announced job reductions and the closure of two outpatient services: pulmonary rehab and diabetes education—programs Dunlavey said provided excellent care but had become unsustainable to operate.

“The unfortunate consequence is that when programs can’t support the cost of their operations, it presents hospital leaders with very, very difficult decisions,” he said.

Preparing for What’s Ahead
Dunlavey said the Garnet Health leadership team is accelerating its strategic planning process in response to the law’s passage.

“We normally have a strategic planning cycle set to start in mid-2026,” he said. “We’ve decided it’s time for us to get together now and talk about what initiatives we need to pursue to remain sustainable and preserve as many services as we can.”

The ripple effects of the Medicaid changes are expected to unfold more fully in 2026, Dunlavey added, particularly if uninsured patients begin showing up in greater numbers to emergency departments.

“Hospitals do not—and legally cannot—turn anyone away who needs care,” he said. “But hospitals also cannot support a growing volume of unreimbursed visits.”

Staff and Community Concern
Dunlavey noted that while patients haven’t expressed widespread concern yet, Garnet Health employees are already feeling the strain. At a recent anniversary lunch, he said, the top issue on employees’ minds was the future of Medicaid.

“Our staff understand our community and the vulnerability of the population we serve,” said Dunlavey. “The concern over Medicaid cuts really feels like the straw that broke the camel’s back.”

Despite the uncertainty, he emphasized that Garnet Health remains committed to the region.

“These are unprecedented times,” he said. “Five years ago we were in the middle of a pandemic. We spent the years after trying to regroup. And now we’re facing billions of dollars in cuts to Medicaid. It’s a challenge, but we are committed to doing everything we can to continue to serve the community.”

For more information, visit garnethealth.org.

Garnet Health is a financial supporter of Radio Catskill.

Correction: This story was updated July 24 to clarify that Garnet closed two outpatient services last month.

Image: Garnet Health Medical Center – Catskills in Harris, NY. (Credit: Garnet Health)