Recently, some Washington think tanks have spread misleading narratives that willfully dismiss years of research showing the increasing financial challenges hospitals face and proposed policies that would create real threats to hospitals’ ability to operate.
Claims that hospitals are not facing widespread financial distress are simply not grounded in reality. Data shows that hospital costs continue to rise, with total expenses in 2025 growing at more than twice the rate of hospital price growth over the same period. In fact, hospital spending on drugs alone in 2025 was four times higher than the growth in hospital prices.
These costs extend to care, as hospitals are seeing increases in patient volume and more patients are dealing with multiple conditions and chronic diseases that require more complex care. Further complicating these impacts, Medicare and Medicaid together account for nearly half of all spending on the care provided at hospitals and health systems as of 2023. Yet despite covering such a large share of the patients hospitals treat, Medicare, for instance, only reimburses hospitals 83 cents for every dollar spent on enrollee care, according to AHA analysis of AHA Annual Survey data. Even MedPAC demonstrates that Medicare underpays hospitals, as shown by its latest recommendations. General inflation compounds the issue, rising 14% from 2022 to 2024, while Medicare’s net inpatient payment rates increased only 5.1%, deepening the effective payment cut. Overall, this translated to $130 billion in underpayments to hospitals by Medicare and Medicaid in 2023 alone.
Many large corporate insurers impose additional costly administrative burdens on doctors, nurses and administrative support staff through practices such as excessive prior authorization, which can require specialized staff, and contribute to physician burnout. These policies also result in delays in patient access to doctor-prescribed care or even outright denials of coverage. Insurers’ integration of AI into these processes in recent years has helped lead to a more than 20% increase in care denials for commercial claims between 2022 and 2023, with devastating effects on countless patients.
The picture is worse in rural communities, where a larger share of hospitals generally operate at a higher risk of financial distress than their urban and suburban counterparts. Some patients in rural communities are choosing Medicare Advantage, which can lead to delayed care, higher administrative costs, and lower reimbursements. This has contributed to the mounting financial challenges rural hospitals face. These burdens ultimately harm patient access to care when financial stressors force health systems to consider closing certain service lines to make ends meet, or worse, closing their doors entirely.
Instead of addressing these systemic funding issues for hospitals or the corporate insurer practices that continue to negatively impact patients and providers, these Washington think tanks are pushing policies that would drive more hospitals to the brink of closure. Policies such as site-neutral payments would slash federal reimbursements to hospitals by failing to account for the unique place hospitals occupy in the healthcare landscape, providing 24/7 care to anyone who comes through their doors, regardless of ability to pay, and ensuring communities have access to critical services such as neonatal and burn units, emergency departments and ICUs.
This year has seen increasing concern across the country about rising healthcare costs, but when searching for solutions, policymakers should listen to real Americans and address skyrocketing insurance premiums and harmful corporate insurer practices, instead of think tanks pushing policies that would lead to more hospital closures and put access to care further out of reach of patients.
To learn more about how hospitals are protecting access to care for America’s patients, click here.