Northern Arizona Healthcare Halts Expansion Plans Amid Financial Strains
Northern Arizona Healthcare (NAH) has put a hold on its ambitious plans to develop a new Flagstaff Medical Center, citing a myriad of economic pressures that have made the project untenable for the time being. Despite acknowledging that their current facility no longer meets the growing demands, NAH must reassess its approach in light of current financial challenges.
The healthcare provider attributes the delay to several financial hurdles, including reduced reimbursement rates from insurance companies and Medicaid, as well as rising expenses for labor, medical equipment, and medications. A significant factor contributing to the financial strain is the expected annual $50 million loss due to Medicaid cuts outlined in the One Big Beautiful Bill signed by President Donald Trump the previous year.
“Those cuts are scheduled to take effect in 2027 and compound over the following years, ultimately amounting to hundreds of millions of dollars,” according to a media release from NAH. The organization’s board and leadership are slated to continue discussions on how to address the mounting healthcare needs of the region given the limitations of their current facilities during board meetings throughout 2026 and beyond.
Previously, NAH had been exploring three potential sites for the new medical center, information on which was expected to be shared in early 2026. However, these options have been scrapped. “We are not moving forward with those three sites,” an NAH spokesperson confirmed to KNAU. “We are not considering any other locations at this time.”
Despite the setback, NAH is still evaluating the possibility of using existing property near Fort Tuthill or expanding at the current Hospital Hill site. “The board has not made a decision to renovate,” stated a spokesperson, leaving the timeline for revisiting the project uncertain.
In a previous attempt nearly three years ago, voters in Flagstaff rejected a proposal for a new hospital and a Health Village near Fort Tuthill, which would have included commercial and residential developments alongside medical offices. Moving forward, NAH CEO Dave Cheney has confirmed the exclusion of the “village concept” from any future plans, regardless of the location.
While the idea of building on the current site remains an option, Cheney emphasized the challenges it presents, noting that such a move would necessitate a temporary closure of the hospital. This would require patients from northern Arizona to seek medical care elsewhere during the construction period. “I’m not willing – unless the community tells me to – to shut this hospital down for two-and-a-half years while we knock everything down, close services,” Cheney stated during a summer forum.
Arizona Governor Katie Hobbs has voiced concern over the Medicaid cuts passed by House Republicans, warning they could further limit healthcare access across rural Arizona and on tribal lands.
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