Alameda Health System dodges layoffs for now amid cuts to Medicare

A plan to lay off 183 workers and eliminate critical mental health units within the Alameda Health System after cuts to Medicare threatened vital funding was put on hold Tuesday, bringing relief to those who thought they would lose their jobs in the coming days.

In an effort to mitigate cuts and identify untapped revenue to balance the system’s budget, the Alameda County Board of Supervisors unanimously voted to create a working group that will be tasked with helping to reduce an estimated $91.7 million deficit. The group includes Supervisors Nate Miley and Nikki Fortunato Bas and representatives of the system’s administration and health care workers’ union.

“AHS was prepared to make the changes that we believe necessary to have sustainability,” CEO James Jackson said to the Board of Supervisors on Tuesday. “What we’ve heard in the intervening time is that the supervisors and the county leadership is prepared to step in with us, and so we’re not having to resolve this by ourselves.”

The Alameda Health System Board of Trustees was scheduled to meet Wednesday evening to confirm delays in cuts, which stakeholders expected to happen. Alameda Health System is an independent public health authority governed by a nine-person body appointed by the Board of Supervisors. The Board of Trustees manages the system’s direction, quality of care, and financial sustainability, however, significant changes in workforce or public health policy requires approval from the county’s Board of Supervisors.

After Congressional Republicans passed the One Big Beautiful Bill last summer, the budget legislation was projected to result in $1 trillion in cuts to Medicare over 10 years and limit Medicare reimbursements for hospitals. In Santa Clara County, supervisors placed a sales tax on the ballot to raise money and backfill federal cuts to Medicare.

Planned reductions represented a “nuclear option” to health system administrators as 60% of its patients are Medicare beneficiaries. For workers, they represented a threat to critical health services, including programs for severe mental illness, outpatient physical therapy and access to plastic surgery for burn victims.

“It would mean, essentially, patient abandonment,” said Colette Cooper, a physical therapist at Wilma Chan Highland Hospital, the flagship hospital of Alameda Health System.

Had layoffs and department closures been approved, patients enrolled in those programs would have been pushed to alternative hospitals nearby that do not provide the long-term care or outpatient services that Alameda Health System programs provide, Cooper said.

“We’ve established care for them, and they are proposing cutting these services without a plan for continuity of care,” Cooper said. “We’re prioritizing post-ops and post-traumas, generally patients who really need care as urgently as possible. But there just aren’t places for these patients to go.”

Future care will be determined by how the system and workers resolve the structural deficit before July 1, 2026, when Medicare cuts go into effect.

Alameda Health System employees, administrators and supervisors floated three main ideas to address the deficit: enhance collections to raise revenue, eliminate positions for ineffective programs, and provide a more flexible credit line to Alameda Health System, known as a net-negative balance. Without making drastic changes, the system would surpass its debt limit by August, CFO Kim Miranda said.

“The county can only control what is under our purview,” Bas said. “Collaborative conversation and dialog is important, and that work group can help achieve that.”

The county’s decision on Tuesday was only a temporary reprieve from tough decisions still to come. California hospitals are expected to lose $30 billion in annual federal funding, impacting 3.4 million residents, according to the California Health Care Foundation.

“Alameda Health System’s fiscal situation remains the same today as it was last week,” Jackson said. “H.R. 1 (One Big Beautiful Bill) represents the largest roll-back of federal health care spending in history and poses an existential threat to health systems that depend on federal dollars to serve the most vulnerable.”