Hospital executives have spent years fielding accusations about their industry’s role in driving up U.S. healthcare costs, pressure that sharpened in April when four health system CEOs testified before a House committee as lawmakers pressed them on pricing, consolidation and site-of-care payment disparities.
House Ways and Means Committee Chairman Jason Smith, R-Mo., framed the debate plainly in his opening remarks, contending that hospitals with more than 100 beds operate at higher profit margins than Delta Air Lines, Target or Disney, and that hospital prices have risen 300% over the past two decades.
Becker’s connected with three current and former health system CEOs on where that framing falls short — and where hospitals should do better.
For Wright Lassiter III, president and CEO of Chicago-based CommonSpirit Health, the attribution problem starts with where patients encounter the bill.
“The disconnect begins with the visibility of costs: Hospitals are where patients may encounter the largest expense of their healthcare journey, even though many of the forces driving those costs originate elsewhere in the system,” he said. “Hospitals are the most resource-intensive setting in healthcare, making them a focal point in the affordability debate. Patients see the hospital bill, the facility charge and the cost of a procedure.”
The fixed cost of maintaining that infrastructure, which hospitals must keep available around the clock regardless of patient volume, is embedded in the cost of every service delivered, though it is overshadowed by patients’ direct encounters, Mr. Lassiter said.
Barry Arbuckle, PhD, executive chairman and former CEO of Fountain Valley, Calif.-based MemorialCare, framed hospitals as cost aggregators rather than cost originators.
“The disconnect is that the bill often originates with the hospital, but that doesn’t mean the hospital is keeping that dollar,” he said. “Hospitals effectively aggregate costs across the system for drugs, physicians, and insurance administration while carrying the highest fixed-cost obligation: 24/7 emergency coverage, trauma capability, ICU capacity and safety-net care.”
Many of those costs are mandated or regulated, or passed through from drug companies and medical device suppliers, Dr. Arbuckle added. The typical hospital operates on low single-digit margins, he said, a contrast he drew against the pharmaceutical industry, which he said tends to operate at profit margins of 15% to 25% or higher. Rising uncompensated care, increased claim denials and the administrative cost of chasing payment have pushed many hospitals toward what he called an “extremely challenging financial future.”
Michael Waldrum, MD, CEO of Greenville, N.C.-based ECU Health, challenged what he described as a growing narrative that hospitals are the primary cost driver.
“In reality, costs are shaped by the disease burden of a population, the environment in which people live and the effectiveness of the interventions available to help them,” he said. “As disease burden increases, so does demand for services — and the cost of providing them.”
He added that policymakers too often pursue one-size-fits-all solutions that fail to account for structural differences between urban and rural providers, and that policies designed for one can undermine care access in the other.
What hospitals absorb
Each executive described cost exposure that they said goes unacknowledged in the affordability debate.
At CommonSpirit, roughly 2 in 3 patients are covered by Medicare or Medicaid, programs that frequently reimburse below the cost of care. In fiscal 2025, the system provided $680 million in traditional charity care and absorbed an additional $1.8 billion in unreimbursed Medicaid costs.
“Hospitals absolutely should be held accountable for the costs within their direct control,” Mr. Lassiter said. “But the affordability conversation is incomplete and misleading when it examines hospital costs in isolation, without also considering systemic factors like government under-reimbursement, inflation, payer denials and administrative complexity, and the cost of maintaining access to care in communities that might otherwise go without.”
About 70% of ECU Health’s payer mix comes from government programs, Dr. Waldrum said. The system serves a population that is older, sicker and more reliant on Medicare and Medicaid than many urban markets. At the April hearing, Dr. Waldrum said ECU Health expects a $30 million reimbursement decrease in 2028 under HR 1 that compounds to roughly $1 billion in cuts over 10 years.
Brian Donley, MD, CEO of New York City-based NewYork-Presbyterian, added context on the depth of the underpayment problem in written testimony from the April hearing. He testified that Medicaid covers approximately 70 cents on the dollar at his system and Medicare covers less than 90 cents of the cost of care. Medicare Payment Advisory Commission data cited in Dr. Donley’s testimony showed hospital Medicare margins were -12.1% in fiscal 2023 and are projected to reach only -10% in fiscal 2026. In addition, drug costs at NewYork-Presbyterian grew 25% in 2025.
Payer friction and administrative burden
Beyond government underpayment, all three executives who spoke to Becker’s pointed to the relationship between hospitals and commercial payers as a substantial cost driver.
CommonSpirit has approximately $3.3 billion in annual billed charges associated with claims that are initially denied. While many are ultimately appealed and paid, the process requires what Mr. Lassiter called “a massive clinical and administrative infrastructure that contributes nothing to patient care.”
At the April hearing, Mr. Lassiter told lawmakers that CommonSpirit carries $4.3 billion in unpaid Medicare Advantage claims, with nearly $1 billion more than 150 days past due. Processing a Medicare Advantage claim costs 25% more than a traditional Medicare claim, he added. Regulatory burden adds another $1 billion in annual costs at the system.
Dr. Waldrum told lawmakers at the hearing that 20% of every healthcare dollar goes toward administrative burden. He cited approximately 3,700 Medicare Advantage plan options, each with different reporting and runoff rules, as a major source of strain on rural clinics.
At NewYork-Presbyterian, 160 employees work exclusively on managing prior authorization claims and an additional 60 are dedicated solely to appealing coverage denials, Dr. Donley said in written testimony. In New York, roughly 25% of inpatient hospital claims are initially denied by commercial insurers; 66% of those denials are eventually overturned, resulting in full or partial payment.
“Layer on rising uncompensated care, increased denials and the growing amount of time hospitals spend chasing payment, and many hospitals face an extremely challenging financial future while still serving as the community’s backstop,” Dr. Arbuckle said.
What hospitals should own
Mr. Lassiter and Dr. Arbuckle each acknowledged areas where the industry falls short.
“Hospital leaders must be candid about the fact that healthcare remains too expensive and often too complicated and difficult for patients to navigate,” Mr. Lassiter said. “This is not just about facing criticism; it’s about leading change.”
He pointed to unwarranted variation in how care is delivered and what it costs, billing that is frequently confusing for patients and administrative structures in large organizations that have grown too layered. Systems do not always move quickly enough to standardize best practices, eliminate duplication or translate scale into a simpler and more affordable patient experience, he said.
“Large health systems like CommonSpirit have a professional and ethical responsibility to demonstrate that scale creates meaningful value for patients and communities,” Mr. Lassiter said. “That means leveraging our shared capabilities to improve quality, reduce unnecessary costs, strengthen care coordination and preserve access to essential services. Scale should be used to simplify care and extend critical resources, not inadvertently add complexity or cost.”
CommonSpirit has achieved more than $3 billion in cost savings since its 2019 formation, Mr. Lassiter added, but said that progress does not relieve the system of the obligation to keep improving.
Dr. Arbuckle attributed part of the affordability crisis to a fragmented system hospitals did not create but have been slow to address.
“For too long, hospitals have tolerated a fragmented system that is complex and difficult to navigate, leading to duplicative care, avoidable ED visits and unpredictable billing,” he said. “That fragmentation has absolutely contributed to the affordability crisis we’re facing.”
The site-of-care argument
One area Dr. Arbuckle said hospital leaders should address directly — and one that drew sustained attention at the April hearing — is site of care.
At the hearing, Rep. David Kustoff, R-Tenn., cited CMS data showing a facility fee for a colonoscopy runs $656 at an ambulatory surgery center compared to $1,222 at a hospital. Rep. Jodey Arrington, R-Texas, noted biopsies average $150 at physician offices versus $800 at hospitals.
Dr. Arbuckle said hospital leaders should embrace a concept he called the acuity adjustment.
“If care can be delivered in a lower-cost setting in a safe and high-quality manner (which is well documented), government and commercial health plans should not pay a higher price,” he said. “However, if certain clinical conditions of the patient necessitate that the test or procedure be done in a setting with access to critical equipment, clinical expertise, and higher levels of care, that site should be compensated accordingly.”
Blunt site-neutral policies fail to account for legitimate clinical complexity, including comorbidities, drug allergies and age extremes, that can determine the appropriate care setting, he argued. MemorialCare has expanded to more than 220 outpatient locations to offer care in lower-cost settings when clinically appropriate, and the system aligns incentives through accountable care models that reward outcomes over volume, Dr. Arbuckle said.
Rural healthcare’s distinct case
Dr. Waldrum argued that the cost debate, as currently framed, fails to account for the structural differences between urban and rural providers, and that policies designed for one can undermine care access in the other.
“For rural health systems like ECU Health, affordability and access are inseparable,” he said. “We serve a population that is older, sicker and more reliant on Medicare and Medicaid than many urban markets.”
In rural communities, a hospital is not just the inpatient facility. It serves as the emergency department, the primary source of specialty care, a major employer and often the largest provider of government-paid and uncompensated care in the region. That 24/7 obligation creates a cost structure unlike anything found in high-volume urban markets, Dr. Waldrum said, and hits rural providers with fewer resources and thinner margins.
ECU Health cross-subsidizes maternity units in five remote rural locations using academic medical center revenue, Dr. Waldrum said at the hearing. Closures in those settings are linked to worse maternal health outcomes and force pregnant patients to travel farther for care.
“AI will not deliver a baby,” Dr. Waldrum said at the hearing. “And so I pay doctors and nurses and drug companies to catch one baby, or maybe two babies a day. … We know that if we close those units, more moms and babies die in rural America.”
For Dr. Waldrum, the more productive policy question shifts the framing entirely.
“The conversation must evolve from one of asking, ‘Why are hospitals so expensive?’ to one of, ‘How should we finance essential healthcare infrastructure such that access to high-quality and affordable healthcare is preserved in rural communities?'” he said.
Mr. Lassiter outlined the path forward as a shared obligation.
“Meaningful and lasting progress will require government, payers, providers, pharmaceutical companies and other stakeholders across the industry to make affordability, efficiency and access truly shared priorities,” he said.
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