FREDONIA, N.Y. — New York is investing heavily in a new rural hospital in Western New York, but Gov. Kathy Hochul says changes to federal healthcare policy could put additional financial strain on hospitals throughout the state.

Hochul visited Fredonia Thursday to showcase $124 million in state funding for the new Northern Chautauqua Hospital, a facility scheduled to open in 2029. The state contribution accounts for more than half of the project’s overall price tag.During the visit, however, Hochul broadened the discussion beyond the hospital under construction, warning that the future of healthcare in New York could face significant challenges.

“The state has had to step in after literally one year ago when the big, ugly, horrible bill was passed and withheld $10 billion in health care money from the state of New York,” Hochul said. “That is a big hit.”

According to Hochul, rural hospitals are dealing with a combination of reduced reimbursements, increasing operating expenses, staffing shortages and ongoing challenges in attracting doctors, nurses and other healthcare workers.

She said provisions affecting Medicaid and health insurance in the federal legislation frequently called the “One Big Beautiful Bill” by President Donald Trump and his supporters could make those existing problems worse.

Republicans, however, highlight another part of the legislation: the $50 billion Rural Health Transformation Program. The initiative will distribute money to states over five years with the goal of strengthening healthcare systems in rural areas.

New York was awarded more than $212 million through the program during its first year.

State Sen. George Borrello, a Republican whose district includes Fredonia, said that funding should be part of any discussion about how the federal legislation will affect rural healthcare.

“There is $50 billion for rural hospitals in the bill that she was bashing,” Borrello said.

Still, the two amounts serve different purposes and cannot be viewed as a simple dollar for dollar tradeoff.

The federal rural health funding is not intended primarily to compensate for Medicaid reimbursements or replace other healthcare funding that New York officials say could be reduced under different parts of the legislation.

The Centers for Medicare and Medicaid Services instead describes the Rural Health Transformation Program as an effort to modernize healthcare delivery in rural communities. Its priorities include primary care, technology, workforce development and alternative approaches to delivering care.

That difference has become a key point in the political dispute over the federal healthcare changes and their eventual consequences for rural hospitals.

While Hochul is warning that New York could lose billions through changes involving Medicaid and broader health coverage, the federal government is also providing new funding specifically aimed at reshaping and strengthening rural healthcare systems.

Borrello said New York should also examine issues within its own Medicaid system, particularly the rates providers receive for treating Medicaid patients.

“They all talk about one main thing: Medicaid,” Borrello said of hospitals and other providers in his district. “They all say the same thing, ‘Our Medicaid rates are below the cost of care.’”

The competing arguments point to a larger question for rural communities throughout New York: Can the new federal transformation funding give hospitals enough support to withstand the additional financial challenges that state officials anticipate?

The new hospital planned for Fredonia could provide an early measure of how New York ultimately navigates those competing pressures and approaches rural healthcare in the years ahead.

The 133,000-square-foot facility is planned to include 20 private medical, surgical and observation beds, a 17-bay emergency department, three operating rooms, three procedure rooms and 47 examination rooms serving primary and specialty care patients.

Hochul has said the hospital’s partnership with Kaleida Health gives her confidence that the facility will be financially sustainable once it begins serving patients.

Northern Chautauqua Hospital remains on track for an expected opening in 2029.