Executives from Northern Arizona Healthcare (NAH) briefed the Sedona City Council on Thursday about expected impacts of recent federal legislation on rural health systems and on NAH’s plans for expanding services in the Verde Valley.

Kyle Lathrop, NAH chief legal officer, said the new federal law ends certain pandemic-era marketplace subsidies, tightens Medicaid eligibility rules that may require demonstration of employment or active job searching and includes provisions that will lower Medicaid reimbursement for hospitals over a multi-year period. NAH estimates the changes will reduce revenue “in the millions” and said hospitals are revising billing, care models and administrative plans to reduce exposure.

“Some of this is going to come to light in the next year to 18 months,” Lathrop said, and added NAH’s financial impact estimates are preliminary: “What we know today is our best guess.” He described two especially restrictive elements of the law: new limits on provider assessments that helped fund Medicaid and a scheduled 10% annual reduction in managed-care payments that will move reimbursement closer to Medicare levels over five years.

NAH executives also described the $50 billion rural health transformation fund created by Congress. The money will flow to states and be awarded for projects designed to transform rural care delivery — telehealth, mobile units, workforce training and other capital or program investments rather than direct operational subsidies, they said. Rick Gray, Verde Valley service area administrator, said NAH is preparing multi-theme applications and hopes much of Northern Arizona will qualify as rural for the fund’s purposes. He noted the application timeline is tied to federal agency operations and may be delayed if the federal government is not fully functioning.

“Those funds are meant to help reshape how services are delivered — telehealth, mobile services, workforce development,” Gray said. “It is not meant to make up operational losses.”

NAH also updated the council on a planned $35 million cancer center in Cottonwood, approved recently by the NAH board. Gray said the center’s location follows patient concentration analyses showing about 80% of the system’s patients come from the Cottonwood area; NAH plans outreach in Sedona to shape what services remain locally once the Cottonwood center is operating. NAH representatives said the Emergency Department and diagnostic imaging will remain at the Sedona campus even after some cancer services move to Cottonwood.

Councilors pressed NAH on the distributional effects of federal changes and on which patient groups will be most affected. Lathrop said impacts will be widespread across NAH’s payer mix and that disruptions may surface when previously covered patients lose coverage or face higher out-of-pocket bills.

Public speakers and several councilors praised NAH’s local commitment. Resident Tim Perry criticized hospitals and the healthcare system broadly; other speakers and officials defended NAH’s local services and urged the system to keep community lines of communication open. NAH’s community relations manager, Jessica Drumm, said NAH will host public forums in the Verde Valley — including outreach in Sedona — about the Cottonwood cancer center and the federal changes.

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NAH pledged to continue community engagement, refine its financial projections and submit rural-transformation proposals to the state. Council members welcomed NAH’s commitment to keep an ED presence in Sedona and asked for ongoing updates as federal rules and the state application process evolve.