Were Critical Access Hospitals Caught in the Texas Medicaid Freeze? The Rule Says Yes

Key Takeaways

Three Texas Medicaid programs missed their federal approval and stopped paying on September 1, 2026. The biggest is CHIRP, more than $9.1 billion of the more than $9.8 billion that was held up (HFMA, September 15, 2026)
The same thing happened in 2021, to the same three programs. That hold lasted about seven months. Hospitals lost more than $7 million a day then. This year the estimate was $27 million a day (Texas Hospital Association)
The Texas rule that decides who CHIRP pays names your designation. It covers a hospital “designated by Medicare as a Critical Access Hospital” (1 TAC 355.8052). Qualifying is not the same as being enrolled and getting paid
Of the stories we read, one named a small hospital: Kimble County Hospital District, and only because Moody’s cut its credit rating. The story never called it a Critical Access Hospital
Medicare pays these hospitals on a cost basis. That is a Medicare rule, and it does nothing for you when a Medicaid program stops paying
CMS approved CHIRP for September 2026 to August 2027 in a letter dated September 16, and the approved program document still names Critical Access Hospitals in the rural class. We found no published word on when, or whether, hospitals are paid for September 1 to 17 (HHSC CHIRP page)

What Texas Medicaid Payments Stopped on September 1, 2026?
Were Critical Access Hospitals Part of CHIRP When the Payments Stopped?
Does Medicare Paying Your Costs Protect You When Medicaid Stops?
Did Any News Story About the Freeze Name a Critical Access Hospital?
Has Texas Lost These Medicaid Payments Before?
What Did CMS’s September 16 Approval of Texas CHIRP Settle, and What Is Still Open?
What to Do This Week
Frequently Asked Questions

Updated October 7, 2026: added what the CMS approval letter says and what it leaves open.

Texas hospitals went seventeen days without a set of Medicaid payments worth billions of dollars a year. It stopped on September 1. CMS signed its approval on September 16, and the governor announced it on September 17. If you run a Critical Access Hospital in Texas, you would want to know whether your hospital was one of the ones that stopped getting paid. None of the news reports said. The state rules do.

What Texas Medicaid Payments Stopped on September 1, 2026?

Texas pays hospitals extra through Medicaid using programs it calls directed payment programs. The federal government has to approve them every year. This year the approval did not come through before the state’s new fiscal year began on September 1, so three of those programs stopped paying.

The biggest is CHIRP, the Comprehensive Hospital Increase Reimbursement Program. It is more than $9.1 billion of the more than $9.8 billion that was held up. The other two are TIPPS, which pays physician groups, and RAPPS, which pays rural health clinics.

The money does not start with the state. Local taxing districts charge hospitals a fee and send it to the state. The state uses that money to bring in federal matching funds. So it starts as a local charge on hospitals, not as a state tax, and that is the part the federal government is arguing about.

CMS put two objections in a letter dated September 3. It wants the federal tests on that hospital fee applied to inpatient and outpatient services separately, and Texas applies them to a hospital’s total revenue instead. CMS also questioned how local governments are grouped together into districts to collect the fee.

Four numbers get quoted in this story and they do not mean the same thing.

Number	What it actually counts	Where it comes from
More than $9.8 billion	All three programs, for the state fiscal year that began September 1	HFMA, September 15, 2026
More than $9.1 billion	CHIRP alone, the hospital program	HFMA, September 15, 2026
$27 million a day	An estimate of what hospitals statewide were losing, not a count	Texas Hospital Association, via Texas Tribune, August 31, 2026
Nearly $12 billion	What the governor’s office said on September 17 the approval covers, across five kinds of provider	Governor’s office, via Texas Tribune, September 17, 2026

The last number covers five kinds of provider and the first covers three programs, which is where most of the roughly $2 billion gap between them comes from. Texas runs five of these programs. The two that pay nursing homes and behavioral health providers were not among the three that stopped, and in 2022 those two were worth about $1.3 billion between them. We could not find current figures published for each program, so the gap does not close exactly.

Seventeen days at $27 million a day is about $459 million. That is our own math on a statewide estimate, not what any one hospital lost.

Were Critical Access Hospitals Part of CHIRP When the Payments Stopped?

Yes. The rules that decide who CHIRP pays name Critical Access Hospitals directly. It takes three steps to get there, and you can check each one yourself.

Rule	What it says	What that means
1 TAC 353.1306(d)(1)	Lists the six kinds of hospital CHIRP pays. The second is rural hospitals	Rural hospitals are in the program
1 TAC 353.1306(b)(9)	Does not define rural hospital. It points to another rule, “a rural hospital as defined in 355.8052 of this title”	You have to go one rule further
1 TAC 355.8052(b)(35)	Defines rural hospital three ways, and one is a hospital “designated by Medicare as a Critical Access Hospital”	Your designation is named in the rule

Here are the three ways. A hospital counts as rural if it sits in a county of 68,750 people or fewer by the 2020 census. Or if Medicare has designated it a Critical Access Hospital, a Sole Community Hospital or a Rural Referral Center, and it sits outside a metro area. Or if it has 100 beds or fewer, holds one of those three designations, and sits inside a metro area.

This year’s program document, the one CMS approved on September 16, defines its rural class the same three ways. It names a hospital “designated by Medicare as a Critical Access Hospital” in the same words.

There is older evidence that these hospitals really do take part. A Texas Hospital Association paper looked at 394 hospitals in CHIRP and counted 77 Critical Access Hospitals among them. It also found that without these programs, “baseline negative adjusted margins in small, rural, and critical access hospitals would fall 1-2%.”

Two things to keep in mind. That count is from 2022, so it may look different now. And qualifying under the rule is not the same as getting the money. CHIRP pays through Medicaid health plans, so your hospital has to be signed up for the program and in the plan’s network.

Does Medicare Paying Your Costs Protect You When Medicaid Stops?

No. Cost based payment is a Medicare rule, and it has nothing to do with what Medicaid pays you.

Medicare pays a Critical Access Hospital its allowable cost plus one percent, less the two percent sequestration cut that has applied since April 2013. But every state decides on its own what Medicaid pays these hospitals, and in Texas part of that comes through the programs above.

Texas has 93 critical access hospitals, going by federal data current to April 2026. Texas also has federal rural health transformation money arriving, though what that money is allowed to pay for is a narrower list than most coverage suggests.

On cash in the bank, the smallest hospitals are not the thinnest. Chartis puts the national median at 29 days of cash on hand for rural and community hospitals, and 98 days for Critical Access Hospitals. Medicaid is close to ten percent of revenue at a typical rural hospital, and that is a national number rather than a Texas one.

Seventeen days is short next to a 98 day cushion. The hold in 2021 ran about seven months, more than twelve times longer, and that is the version worth planning against. Days cash on hand measures how long a hospital could run with no money coming in at all, so it is a rough yardstick here rather than an exact one. Losing one payment stream is not the same as losing everything.

Did Any News Story About the Freeze Name a Critical Access Hospital?

One story did, and it never used those words.

We read the coverage published while the payments were stopped: two reports from the Texas Tribune, plus HFMA, KTRE and The Bond Buyer. Every hospital they named was a big one: Harris Health in Houston, Children’s Health and Children’s Medical Center in Dallas, University Medical Center in Lubbock, and UT Health and Christus in East Texas. HFMA named no hospital at all.

The Bond Buyer was the exception. On September 8 it reported that Moody’s had cut Kimble County Hospital District’s rating one notch, to Baa3. Moody’s pointed to the district’s “very small operating scale, with combined operating revenue of approximately $13.5 million.” That district runs Kimble Hospital in Junction, a 15 bed Critical Access Hospital designated in 2000.

That story never uses the words Critical Access Hospital, and it never connects the downgrade to the stopped payments. So a hospital the size of yours did appear in the news, but only as a credit rating. Nobody asked whether CHIRP had been paying it.

We found no statement from the Texas Organization of Rural and Community Hospitals about the payments stopping or starting again. Its chief executive, John Henderson, did speak to The Bond Buyer during those weeks, but about a different report on rural hospitals at risk of closing. The group does not publish a dated news page, so we cannot say for certain that it stayed quiet.

Everything else was about what might happen. Hospitals said they “would be forced to” make cuts “if these delays continue.”

The closest anyone came to talking about rural hospitals and this freeze together was John Hawkins, who runs the Texas Hospital Association, speaking to KTRE.

“We’re especially concerned about rural hospitals, the thin margins that they’re operating with, the fact that they usually have a higher Medicaid population than a lot of the other hospitals in the state.”

He was describing a worry, not something that had already happened.

Has Texas Lost These Medicaid Payments Before?

Yes, and it looked a lot like this one. The Texas Hospital Association’s own paper describes it.

CMS “withheld approval of three DPPs, CHIRP, TIPPS, and RAPPS, from September 2021 through March 2022 due to a dispute over Texas’ method of financing the nonfederal share of payments.”

Same three programs. Same argument about where the state’s share of the money comes from. That one lasted about seven months. This one lasted seventeen days.

What changed is the daily number. In 2021 the association said “hospitals lost more than $7 million per day.” This year the estimate was $27 million a day. That is close to four times as much, for the same argument over the same programs. None of the coverage we read put those two numbers side by side.

The same paper warns that “any future interruption, disallowance, or disapproval of DPPs, similar to the lapse that occurred in SFY 2022, would prove destabilizing.”

What Did CMS’s September 16 Approval of Texas CHIRP Settle, and What Is Still Open?

It settled this year’s money and left the argument open. CMS signed the approval letter on September 16, and the governor’s office announced it the next day. The letter and Texas’s written answers to CMS are posted on the HHSC CHIRP page.

This year’s money is approved. The letter covers CHIRP for September 1, 2026 through August 31, 2027, up to about $9.15 billion.

CHIRP is capped, and Texas trimmed its request to fit. CMS says a federal law passed in July 2025 stops CHIRP from growing past about $9.15 billion, which is last year’s approved total. Texas had asked for about $9.25 billion. In August, CMS told Texas to come back under the cap.

Texas cut its request by about $105.7 million, a little over one percent. Texas cut a quality award, a bonus payment for meeting quality measures, from 95 percent to about 93.7 percent of what commercial insurers pay. Only urban and children’s hospitals can earn it this year, according to this year’s program document. So the trim came from a part of CHIRP that rural hospitals cannot earn this year.

The letter does not approve how Texas raises its share. In its words, it “does not constitute approval of any specific Medicaid financing mechanism” behind the state’s share. In Texas, that mechanism is the local hospital fee described above. In its September 9 answers to CMS, Texas pointed out that every CHIRP approval letter since March 2022 carried “substantially similar language.” So that sentence is not new.

Texas says what is new is that CMS made approval depend on settling the fee objections first. On September 3, CMS wrote that the two objections “must be resolved before the proposal can be approved.” Texas answered that this stood “in stark contrast to CMS’ past practices.” Nothing HHSC has posted says the objections were resolved before CMS signed on September 16.

As of September 3, the two sides were still negotiating. CMS said then that the two sides were still working on a written agreement, called an MOU. CMS had drafted it, Texas had sent back edits, and CMS was helping Texas with the fee calculations. We found nothing published after September 16 that says where those talks stand.

The argument is older than this year’s freeze. CMS received a change to last year’s CHIRP on November 3, 2025. CMS approved it on September 16, 2026, more than ten months later.

The next regular legislative session starts January 12, 2027. CMS asked for the state laws that set up the fee districts. Texas told CMS those laws have not changed. It added: “The Texas legislature meets biennially and will not reconvene for a regular legislative session until January 12, 2027.”

A cut is scheduled from 2028. The letter says programs like CHIRP must follow a “phase down” in every program year starting on or after January 1, 2028. The federal law itself, section 71116(b), says the payment “shall be reduced by 10 percentage points each year.” The cuts continue until the total payment rate for a service reaches a federal limit. For a state like Texas that did not expand Medicaid, that limit is 110 percent of the Medicare rate.

CHIRP’s year starts every September 1. On our reading of that wording, the first CHIRP year the cut would touch is the one starting September 1, 2028. The cap and the cut apply because CMS found that CHIRP “likely qualified for the temporary grandfathering period” under that law. CMS calls that finding preliminary and says its policies “will be finalized as part of notice and comment rulemaking.”

Two questions are still open.

We could not find out whether hospitals get paid for September 1 to 17. The approved program year begins September 1, 2026, but no published document we read, from CMS or the state, says when or whether money for those days reaches hospitals.

We found no statement on when the money will arrive. Anna Stelter runs policy at the Texas Hospital Association. Before the approval came through, she estimated that a claims backlog would take at least 90 days to clear.

“Even if we get an approval soon, there will be a claims backlog that takes at least 90 days to clear. And the bigger the claims backlog, the longer it takes to catch up.”

These programs are approved one year at a time. September 16 settled this year’s money. Nothing we read shows it settled the argument, and CHIRP needs a new approval for the year starting September 1, 2027.

Our Take

The reporting on this was accurate, and it was written for the whole state, which means it was written about the big systems where most of the money goes, which is why every hospital named in it was a large one. A hospital with 25 beds reading it had no way to tell whether the story included them. The answer was in the state rules the whole time. You just had to follow one rule to another. The more useful thing to know is that this is the second time in five years, and the daily number is close to four times what it was last time. These programs get approved one year at a time. The September 16 letter approved one year of money. In the last documents we could find, Texas and CMS were still working through the fee objections.

What to Do This Week

Find out whether your hospital is enrolled in CHIRP. Ask your finance lead, and ask which class you are in. The rule already says your designation qualifies, so that part is settled. What decides whether money reaches you is being enrolled and being in the health plan’s network.
Ask what September’s payment looked like. If you are in the program, find out whether your finance team is treating the gap as late money or as lost money. Those are two different lines on a cash forecast.
Write down anything you paused. Hiring, agency use, overtime approval, a piece of equipment. No hospital said any of this publicly, so your own notes may be the only record you get.
Pull the last eight weeks of overtime by nurse. If a cost conversation is coming, that is the table you will be asked for. Better to have it before the meeting than to build it during one.
Put three dates in your calendar, so your finance lead can plan around when this money could change. The Texas Legislature next meets in regular session on January 12, 2027, and Texas has told CMS the state law behind the hospital fee has not changed. The next CHIRP year starts September 1, 2027, and it needs a new federal approval. This year’s approval came after the year had already started. The federal phase-down applies to program years starting on or after January 1, 2028, which on our reading means the CHIRP year starting September 1, 2028.

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Frequently Asked Questions

Q: Does a Critical Access Hospital qualify for CHIRP?

Under the rule, yes. CHIRP pays a rural hospital class, and Texas rule 1 TAC 355.8052(b)(35) says a rural hospital includes one that Medicare has designated a Critical Access Hospital. Qualifying is not the same as being enrolled, so check your own status with your finance lead.

Q: Why did Medicaid payments stop in Texas on September 1, 2026?

Three directed payment programs did not get their federal approval before the state’s fiscal year started. CMS objected to how Texas applies the federal tests on the hospital fee, and to how local governments are grouped into districts to collect it.

Q: Has this happened to Texas before?

Yes. CMS held up the same three programs from September 2021 through March 2022, over the same argument about where the state’s share of the money comes from. Hospitals lost more than $7 million a day then. This year the estimate was $27 million a day.

Q: Will hospitals be paid for the days the payments were stopped?

We could not find out. No document we found says when or whether money for September 1 to 17 reaches hospitals. The Texas Hospital Association had said a claims backlog would take at least ninety days to clear.

Q: Is the Texas Medicaid funding dispute settled?

No. CMS approved this year’s CHIRP on September 16, 2026, but the letter says it does not approve how Texas raises its share of the money. As of September 3, CMS said the two sides were still working on a written agreement, called an MOU, over the two fee objections. We found nothing published after September 16 that says where those talks stand. CHIRP needs a new approval for the year starting September 1, 2027.

Sources

HFMA, by Nick Hut, September 15, 2026. The three withheld programs, the $9.1 billion CHIRP share, and the September 3 CMS letter. hfma.org
The Texas Tribune, by Terri Langford, September 17, 2026. The approval announcement and the unclear transfer timing. texastribune.org
The Texas Tribune, by Terri Langford, August 31, 2026. The daily estimate and the Anna Stelter backlog quote. texastribune.org
Texas Administrative Code, 1 TAC 353.1306, effective April 2, 2025. The six classes at (d)(1) and the cross reference at (b)(9). law.cornell.edu
Texas Administrative Code, 1 TAC 355.8052, effective March 25, 2025. Subsection (b)(35), the rural hospital definition. law.cornell.edu
Texas Hospital Association, Medicaid Directed Payment Programs whitepaper, Dobson DaVanzo and Associates, 2022. The five program table, the 2021 to 2022 hold, the $7 million per day figure, the 394 participants, and the margin findings. tha.org
Rural Health Information Hub, Critical Access Hospitals guide. Cost plus one percent and the 2013 sequestration cut. ruralhealthinfo.org
Rural Health Information Hub, Texas State Guide, federal data current to April 2026. The count of 93. ruralhealthinfo.org
Chartis, “2026 Rural Health State of the State,” February 10, 2026. The cash medians and the net revenue figure. chartis.com
KTRE, by Emma Burns, September 2026. The Hawkins quote on rural margins. ktre.com
The Bond Buyer, by Karen Pierog, September 8, 2026. The Moody’s downgrade of Kimble County Hospital District. bondbuyer.com
Superior HealthPlan, Directed Payment Program provider FAQ. The CHIRP in network requirement. superiorhealthplan.com
CMS approval letter for SFY 2027 CHIRP, signed by John Giles, September 16, 2026, with the approved SFY 2027 CHIRP preprint. The program year, the approved total, the financing disclaimer, the cap, the 2028 phase-down sentence, the rural class wording and who can earn the quality award. Posted by HHSC as the “Approved SFY 2027 CHIRP Pre-Print Package as of 9/16/2026.” hhs.texas.gov (package download: hhsc.texas.gov)
Texas Health and Human Services Commission, Texas Response to CMS Round 4 Questions for SFY 2027 CHIRP Pre-Print, September 9, 2026. CMS’s questions of June through September, the $9,254,513,046 request and the trim, the two fee objections, the MOU talks and the Legislature date. hhs.texas.gov
CMS approval letter for the SFY 2026 CHIRP amendment, September 16, 2026. The November 3, 2025 submission date. hhs.texas.gov
Public Law 119-21, section 71116, signed July 4, 2025. The 10 percentage point yearly reduction and the 110 percent of Medicare limit. congress.gov

A note on who wrote this. We build nurse scheduling software for critical access hospitals in Texas. Nothing we sell would have changed anything about this freeze, and we are not going to pretend otherwise. If you want to know what we actually do, start with how it works, or read our background pages on critical access hospital scheduling and AI nurse scheduling.

Pradeep Pandey is the co-founder of SimpleScheduleAI, an AI-native nurse scheduling service built for Critical Access Hospitals in Texas. He serves as Deputy General Manager of Operations at Apollo Hospitals and holds an MBA from IIM Trichy. LinkedIn →