TOWNSHEND-The smallest hospital in Vermont is not going anywhere.
One provision of The One Big Beautiful Bill Act (H.R.1), which President Donald J. Trump signed into law on July 4, constrains state Medicaid financing and eligibility.
Experts warn that cuts to the Medicaid program threaten the financial stability of rural hospitals across the country. Becker's Hospital Review, a media source for health care decision-makers, estimates that 760 hospitals nationally will be at risk of closure.
According to the Congressional Budget Office's latest cost estimates, the new law reduces federal Medicaid spending by $793 billion and would increase the number of uninsured people in the U.S. by 7.8 million.
But while tiny Grace Cottage Hospital, with its 19 beds, will be affected by the bill, it will certainly not be in danger of closing anytime soon, said CEO Olivia Sweetnam.
"I wouldn't say Grace Cottage is in danger of closing," Sweetnam told The Commons. "I will say that we anticipate that H.R.1 is going to be very difficult."
That's because the hospital has "about a 20% population of Medicaid patients," she said.
The new law anticipates savings through more onerous requirements on Medicaid patients, who are covered because of poverty or disability status, to prove their eligibility for the program.
The cuts come from savings anticipated from patients failing to file paperwork correctly or on time, thus disqualifying themselves from the health care coverage and creating savings.
Grace Cottage is already setting up systems that will guide Medicaid patients as they work through this anticipated new paperwork, Sweetnam said.
Like most of America's rural hospitals, Grace Cottage is struggling. The reasons are many and complex, and include the constantly rising cost of health insurance, pharmaceuticals, and staffing. They also include the unreliability of federal reimbursements.
While Medicare, another federal health insurance program for people over 65, reimburses 99% of the cost of care, Medicaid reimburses less than half, Sweetnam said. Commercial insurance generally reimburses at least for the cost of the received care.
Essentially, Medicaid is government-provided health care. For people with lower incomes, Medicaid funds programs like Vermont's Dr. Dynasaur, which supports children; it also supports people with disabilities and the elderly.
According to economist and columnist Paul Krugman, Medicaid is "a program for the poor and near-poor. ... No doubt there's waste and fraud in Medicaid, as there is in any system created and run by human beings. But overall Medicaid provides essential health care relatively cheaply. Once you adjust for the relatively poor health of the average Medicaid recipient - chronic illness can make you poor - Medicaid appears to have significantly lower costs than private insurance."
Grace Cottage, which was founded in 1949, is an independent, nonprofit critical-access hospital and rural health clinic. Its budget, submitted to the Green Mountain Care Board this month, projects expenditures for the next fiscal year of approximately $32 million.
"My experience before coming to Vermont was working at a small, critical-access hospital in a huge health care system down in the Gulf South area of Louisiana," Sweetnam said. "It's a big, massive health care system that had a lot of negotiating power, especially with commercial payers.
"It's very different when you're a stand-alone, critical-access hospital," she said.
"As you would imagine, you don't have much negotiating power as it relates to the amount of money that you're going to receive, the rate increases - that type of thing," Sweetnam said. "So I think for critical-access hospitals, especially independent, small rural hospitals, it's a much different experience."
Being a nonprofit helps, Sweetnam said.
"That's the reason why we have the critical-access hospital designation," Sweetnam said. "We have what's called a cost report, where we get a certain amount of money back from the federal government because we're not here to make a profit. We're here to serve the community."
Sweetnam said that "my goal, my job, is to steward our resources and be exactly what our community needs. And I personally think that, at Grace Cottage, we do an excellent job of that. We provide exactly what the community needs from us, and nothing more and nothing less. So I am proud we've managed to survive."
It may be difficult to understand hospitals in emotional terms, but Grace Cottage is almost universally beloved by its constituents. Its Wish List, published regularly in its newsletter, galvanizes people to purchasing action. Anything from new bedside tables to a new microbiology incubator - if the hospital asks for it, a patient or a patient's family will jump in to donate it.
"We are incredibly lucky and grateful," Sweetnam said.
It's all about the care patients receive, she observed.
"Personally, I have worked in hospitals for my entire career, and it feels so different here," she said, noting the "level of kindness and compassion" in the Grace Cottage community, from patients to employees.
"There's really no hierarchy," Sweetnam said. "Everyone uses their first name in addressing each other. I think all of our staff feel so loved and cared for by each other that I think the patients feel it when they're here."
This kindness and compassion extends to the nurses, the housekeeping staff, the dietary staff, and the environmental service staff, Sweetnam said.
"So they all can really focus on the patient and what that patient needs," Sweetnam said. "And every patient is unique. The nurses are not so task-focused. Of course, we've got many tasks we have to complete in a day, but I really do feel like they look at a patient and see that person holistically."
With that culture, "we are able to do a really wonderful job on the fundraising and philanthropy side," she said.
'Lean and scrappy'
The hospital is trying to raise $21.3 million to build a new primary care clinic and replace the crowded and ancient former private home that is now being used as one. Nearly 500 businesses and individuals have contributed to the building fund, which has already raised $14 million.
In fact, while this story was being reported, Charma Bonanno, the senior director of development, marketing, and community relations, said her office received a $250,000 donation to the fund.
The hospital is close to getting its Act 250 permits for construction now.
Grace Cottage also practices belt-tightening as a way of life, Sweetnam said. For one thing, it belongs to a purchasing club, the New England Cooperative, so it can take advantage of bulk pricing.
For another, the hospital, which reported 213 employees in 2024, is not hiring to fill open positions.
"Part of our strategic plan in 2025 was around increasing access to our clinic, but also reducing expenses where we can and where it is appropriate," Sweetnam said. "Part of that was really looking closely at every backfill position.
"Thankfully, we've not had to do any layoffs, and we don't anticipate having any layoffs," she said.
"In addition, many of our executive team level have multiple jobs," Sweetnam said. "I'm the CEO, but I'm also the chief nursing officer. Our chief operating officer is also the [chief information officer]. And our chief medical officer is still an active health care provider. So we are very lean."
Grace Cottage has to be "lean and scrappy," Sweetnam said.
"That's how we always have been," she said.
"We did have a difficult fiscal year '24, but in '25 we are very much recovering. It's been a really strong year for us so far, so we're not at risk for closing. We feel very like we're in a strong position," Sweetnam added.
"But, you know, with H.R.1, the ultimate outcomes remain to be seen," she said.
This News item by Joyce Marcel was written for The Commons.