Less than five years ago, hospitals and health care workers were hailed as heroes. It’s a supreme irony, considering that most healthcare professionals I know approach their work with deep humility and selflessness. Yet, today, members of the health care community are often cast as zeroes—or even worse, as villains.
This change in attitudes reflects a genuine frustration with the state of healthcare in the U.S.—a frustration that I, too, deeply share.
With more than 20 years in healthcare, now having the honor of serving as CEO of a major New York health system, my lifelong passion has been to make healthcare better, safer and much more accessible for all. Having started my career as an emergency room trauma physician, with vivid memories of both 9/11 and the COVID-19 crisis, I witnessed firsthand the power of constructive collaboration. That is why I am optimistic that we can fix what is wrong with our nation’s healthcare system.
However, all of us—physicians, private insurers, government regulators, policy makers and, above all, the patients—will only achieve meaningful change by working together.
It is essential that all stakeholders come together for the benefit of all who need our care. Let’s begin by elevating awareness of the fundamental issues at hand.
Problem 1: The accountability gap between insurers and hospitals
While hospitals strive to provide high-quality, comprehensive care, insurers too often deploy aggressive utilization management practices designed to delay or deny payments for medically necessary treatments. Recent data provided by the American Hospital Association reveal that nearly 15% of all claims submitted to private payers are initially denied, and more than half of denied claims (54.3%) by payers are ultimately overturned. Such inefficient practices burden hospitals with unnecessary administrative costs while delaying care for patients.
Prescription:
Policymakers need to step in and step up to adopt and enforce stricter regulations while increasing transparency to hold insurers accountable for timely and fair payments. Hospitals are publicly rated on safety and quality, yet insurers face no comparable accountability. Creating a similar rating system for insurers would foster greater fairness and transparency in the healthcare industry.
Healthcare systems also must step up their efforts to reduce avoidable hospital admissions. Treating patients in lower-acuity settings like urgent care practices instead of emergency departments, leveraging telehealth visits and offering proactive care management for chronically ill patients would all create sound alternatives to hospitalization. This would greatly reduce total healthcare costs, both for governmental and private payers, all while delivering appropriate care to patients.
Problem 2: The unsustainable financial model—and the need for systemic reform
Medicaid and Medicare reimbursement rates often fall far below the actual cost of care. The gap is absorbed by hospitals, particularly those serving low-income and Medicaid-dependent populations.
Chronic under-reimbursement creates financial instability, threatening hospitals' ability to survive and provide essential services. When health systems close, “care deserts” are created, further fueling a dystopian mix of runaway costs and declining outcomes.
To offset Medicaid losses, hospitals rely on supplemental programs like disproportionate share hospital (DSH) payments and the 340B Drug Pricing Program. However, federal budget pressures place these critical programs at risk, endangering hospitals and the vulnerable populations they support.
Prescription:
Policymakers must prioritize raising Medicaid and Medicare reimbursement rates to reflect the true cost of care. Currently, Medicare reimburses only 89 cents, and Medicaid only 70 cents, for every dollar of care provided by New York’s hospitals, resulting in significant and unsustainable underfunding. At the same time, hospitals must focus on preventing mismanagement to ensure financial sustainability. Government payers should partner with health care systems to establish a universal set of quality measures focused on meaningful outcomes, rather than repetitive process metrics.
When the Centers for Medicare & Medicaid Services leads, private insurers often follow suit. By eliminating ineffective measures and shifting to performance-based reimbursement, policymakers can streamline resources, reduce administrative burdens and improve long-term healthcare outcomes.
Problem 3: The unfounded perception that hospitals prioritize profits
By law, all hospitals in New York state must operate as nonprofits, creating an uneven playing field as they are forced to compete against for-profit organizations, including insurer-owned and private-equity-backed physician practices and ambulatory centers. Policymakers must rectify this imbalance by implementing regulations that address these disparities and ensure fair competition, protecting the sustainability of nonprofit hospitals and their ability to serve their communities.
In 2024, 50% of New York state hospitals operated with negative margins—and the median operating margin for hospitals was zero—largely due to insufficient Medicaid and Medicare reimbursement rates.
Prescription:
It is imperative that hospitals, payers and both state and federal governments work cohesively to safeguard our healthcare system from the impeding “fiscal cliff.” The unsustainable cost curve can only be rectified by bending the disease curve. We must shift our payment model toward a more proactive approach primary care, preventive screenings and AI-driven genomics.
We also need to start thinking of ZIP codes as well as gene codes. We can address the social determinants of healthcare—such as food insecurity, housing, transportation and literacy—by building programs to address these shortfalls, ultimately reducing the prevalence of chronic diseases and the substantial costs they incur.
Moving forward. Together.
I know I stand alongside a community of exceptionally talented clinical and administrative professionals who are determined to strengthen our nation’s healthcare system. I am committed to working collaboratively with all stakeholders to confront our collective challenges. The most urgent priority is to engage in meaningful conversations with policymakers and payers, united by one clear goal: improving the well-being of our communities.
Placing blame serves no one and hinders progress. Instead, let us unite, take responsibility and critically assess how our actions—or inactions—might be contributing to the systemic issues we face.
Patrick O'Shaughnessy, D.O., is president and CEO of Catholic Health of Long Island.