Hospitals that provide gender-affirming care for minors are facing growing federal pressure that could force service closures or put major revenue streams at risk. Today, the Trump administration proposed new federal rules that would bar hospitals from offering gender-affirming care to patients under 18 or risk losing Medicare and Medicaid funding, according to multiple media reports.
The proposed action comes from the Department of Health and Human Services and builds on executive orders and guidance issued earlier this year. If finalized, the rules would apply nationwide, regardless of state law, and would significantly affect pediatric specialty care, academic medical centers and children’s hospitals.
Hospitals in Maine are among the first publicly grappling with the implications. Maine Public reported that health system leaders are reviewing whether they can continue offering gender-affirming care for youth if federal reimbursement is threatened, even though such care remains legal under state law. Administrators told the outlet that the financial risk could be untenable for many systems, particularly rural and safety-net hospitals that rely heavily on federal funding.
Nationally, the administration has framed the policy as a patient safety measure. HHS officials argue that gender-affirming care for minors lacks sufficient evidence and have warned hospitals that participation in Medicare and Medicaid is contingent on compliance with federal conditions of participation. A recent HHS fact sheet explicitly states that hospitals could face enforcement actions or funding loss for continuing such care.
Healthcare executives are now caught between conflicting legal and regulatory obligations. While some states require coverage or access to gender-affirming care, federal regulators are signaling that compliance with state law will not protect hospitals from federal penalties. Legal experts quoted by Chief Healthcare Executive note that hospitals could face years of litigation if they challenge the policy, with no guarantee of continued reimbursement during that time.
Advocacy groups and LGBTQ health organizations have sharply criticized the proposal, arguing that it undermines clinical autonomy and could worsen access to mental health and specialty care for vulnerable populations. Others warn that the policy could have spillover effects, including difficulty recruiting pediatric specialists and reputational risk for health systems operating in competitive markets.
The proposed rules are not yet final, but the signal from Washington is clear. Federal enforcement risk is now a central strategic consideration for hospital leaders overseeing pediatric and specialty service lines.
Key takeaways for hospital and health system leaders
• Conduct an immediate assessment of revenue exposure tied to Medicare and Medicaid for any service lines that could fall under the proposed rules.
• Engage legal counsel to evaluate conflicts between federal requirements and state laws, including potential liability and compliance pathways.
• Prepare internal and external communications plans for clinicians, staff, patients and community stakeholders.
• Monitor the federal rulemaking process closely and consider submitting formal comments or joining industry-led legal challenges.
• Coordinate with state hospital associations and national trade groups to align advocacy strategies and share risk mitigation approaches.