There are more than 340 million people in the U.S. who rely on only 1.1 million physicians. While the system is facing deficits of numerous types of professionals and roles, physicians’ centrality in primary and specialty care makes this mismatch a key problem.
The U.S. healthcare system operates too often on the principle that you must know someone to receive timely care. This is not a new dynamic, but it is increasingly unacceptable. A healthcare system underpinned by who you know is a broken one, driving disparate and inequitable outcomes. The limited supply of physicians also contributes to models that can raise other problems for patients, such as expensive concierge care.
The problem is poised to worsen as more physicians retire. As of 2021, nearly half of practicing physicians were over the age of 55, meaning more than two in five active physicians will hit retirement age within the next decade. Many begin scaling back their hours earlier, with some moving to part-time practice in their 40s. The coming exodus of experienced physicians will leave a gap that the system is unprepared to fill.
Despite the urgency of the physician shortage, the model for training new doctors remains rigid, outdated and costly. There are excellent medical schools in the United States, but the education takes too long to complete and is inaccessible to many. About 28,000 students graduate from U.S. medical schools each year and the median debt for the medical school class of 2024 stands at $205,000. The country urgently needs more doctors, yet the process of producing them remains inefficient and unchanged.
2. Access is everything. Much political attention is given to the Affordable Care Act, insurance coverage and healthcare funding mechanisms. These debates often overlook a very real issue in healthcare: access.
Seeing a doctor isn’t just about having insurance — it’s about getting an appointment. The average wait time for a new patient visit is now 26 days, a reality many politicians do not experience firsthand. In addition to being well-connected and in positions of power, members of Congress have access to their own physician care team that provides flu shots, writing prescriptions, and offering routine exams, consultations and diagnostics for a fee. This service ensures lawmakers receive expedited care, which is unavailable to most Americans.
So when lawmakers discuss cutting billions in healthcare spending, pay close attention to what they define as “waste.” The core issues — long wait times, provider shortages, ED overcrowding and lack of skilled nursing or rehab beds for discharge, boarding and bottlenecks in the system — remain unaddressed.
3. It will take technology plus solving the shortages to make this work. Technology solutions without more doctor and provider solutions will not solve the problem of supply and demand. Tech is often an incremental game-changer, not a transformative change-maker. Artificial intelligence, automation, EHR optimization, virtual care programs and remote patient monitoring can enhance efficiency, but they don’t change the fundamental need for more physicians and providers. Without meaningful workforce expansion, technology is no panacea — it’s a patch on a widening gap.
4. Margins remain tight. By the end of 2024, hospitals had a median operating margin of 4.9% for the year, which was one of financial and operational stabilization for many after financial turbulence triggered by the COVID-19 pandemic. At the same time, the median margin marks a tenuous advantage: too many hospitals — about 40% — continued to lose money from operations in 2024.
Labor costs remain one of the most pressing challenges, as a limited talent pool drives compensation expectations that far exceed reimbursement rates. Physicians saw a 2.8% cut in pay under the 2025 Medicare physician payment rule effective Jan. 1 — a move the American Medical Association has described as “death by a thousand cuts.”
Health systems have few options in response — some are turning to layoffs and closures. Even strong institutions like Mass General Brigham announced two rounds of layoffs early in the year, citing an anticipated $250 million budget gap within two years.
Other hospitals are shuttering departments and scaling back services, with labor and delivery units among the hardest hit. These closures have significant implications for maternal health access, particularly given Medicaid’s role in covering about 40% of births in the U.S. Potential changes to the program, as recently raised by lawmakers, could further destabilize maternity care, compounding an already fragile situation.
5. In 2023, Medicare and Medicaid spending combined made up 39% of total national health expenditures, with each program’s spending increasing by about 8% for the year. Medicare spending rose to $1.03 trillion, while Medicaid spending reached $872 billion. Over the past decade, Medicare spending has grown by approximately 76%, and Medicaid spending has nearly doubled.
Hospitals are watching government reimbursement eclipse commercial payments as 10,000 Americans become Medicare-eligible daily. At University of Pennsylvania Health System, CEO Kevin Mahoney noted its payer mix flipped from 60% commercial and 40% government reimbursement in 1996 to 63% government-paid in 2024. In 2022, Medicare covered just 82 cents per dollar spent by hospitals.
In the 2024 election, both candidates missed a big opportunity by failing to frame healthcare as an economic issue. The Medicare Hospital Insurance trust fund, which funds Medicare Part A benefits, is projected to be depleted by 2036. Meanwhile, Medicare Advantage — which has surged in popularity from covering 19% of Medicare beneficiaries in 2007 to 54% in 2024 — faces ongoing scrutiny for waste and questionable practices. While politicians focus on gas prices and grocery bills, they ignore the looming healthcare funding crisis — a reckoning that may not be as immediate as inflation, but is just as consequential.
6. Changing the payment system doesn’t cure the core supply and demand problem. The relationship between funding, access, demand and supply is a complex one. The payment system is often discussed but not the solution for the core problem of too few healthcare providers. Neither fee-for-service reimbursement nor value-based reimbursement will change that. One thing that can change, however, is the $83 billion that health systems spend annually on administrative burdens — hiring staff to navigate prior authorizations, denials and insurer demands.
7. The payers have immensely more power than the providers. The negotiating imbalance continues to grow in favor of the payers, the largest being up to 10 times the size of the largest health systems. Four payers are among the largest 20 companies by revenues, with two among the top six (UnitedHealth Group was ranked No. 4 on the 2024 Fortune 500 list while CVS Health, parent of Aetna, ranked No. 6) in the U.S.
8. Medicare Advantage is more than half of Medicare. As of 2024, 32.8 million people — 54% of Medicare beneficiaries — are enrolled in a Medicare Advantage plan.
Although Medicare Advantage has grown in popularity, it faces scrutiny over wasteful spending and questionable business practices. Investigations revealed an estimated $7.5 billion in questionable risk-adjustments for 2023, while Senate findings indicate major insurers prioritized profits over patient care through aggressive prior authorization practices, often denying necessary post-acute care services to seniors.
Hospitals have grown frustrated, citing slow payments and excessive prior authorization hurdles. Dozens of health systems have terminated MA contracts in recent years, with some opting out entirely. “Medicare Advantage has its advantages for beneficiaries — it has enhanced benefits, and there’s no question that’s very attractive. But it’s only attractive until they get denied a prior authorization or when they’re waiting to be discharged to a post-acute facility, and the algorithms used by the insurer suggest they’re not appropriate to be discharged,” Rick Pollack, CEO of the American Hospital Association, told Becker’s.
In an administration that has prioritized reducing wasteful government spending, the level of scrutiny directed toward Medicare Advantage remains unclear. During the Senate Finance Committee confirmation hearing for HHS Secretary Robert F. Kennedy, Jr., the program was mentioned five times compared to 80 mentions of Medicaid. One of its few references came when Mr. Kennedy shared his own personal satisfaction with his enrollment in a Medicare Advantage plan. Meanwhile, Mehmet Oz, MD, the nominee for CMS administrator, has previously advocated for “Medicare Advantage for all,” signaling potential policy favorability.
9. Physician ownership of practices, hospitals and surgery centers faces a long squeeze. The pressures for physician ownership are long-term and ultimately driven as much by supply, life balance concerns and economic issues as regulations.
Physician-owned hospitals have dwindled to just 250, largely constrained by federal regulations, but they haven’t disappeared entirely. Meanwhile, physician-owned ambulatory surgery centers remain a force to reduce costs.
On the practice side, large independent groups are holding their ground, leveraging scale and negotiation power. Smaller physician-owned practices face mounting challenges, squeezed by rising overhead, administrative burden and reimbursement pressures. For many doctors, the choice to remain independent is increasingly weighed against work-life balance and financial security, making hospital employment or private equity-backed groups more attractive.
10. EDs are a pressure point for the healthcare system. Emergency departments can tell the story of American healthcare. We see this anecdotally and statistically. Nationwide, the average ED visit lasted 2 hours and 42 minutes from April 2022 through March 2023, according to CMS data. In some areas, times are significantly worse — such as Washington, D.C., where it takes patients more than five hours on average.
Several factors drive these delays. Many patients rely on EDs due to limited access to primary care, a challenge that will likely worsen. By 2033, the U.S. could face a shortfall of up to 55,000 PCPs, leaving 100 million Americans struggling to access timely care. Mental health and substance use-related ED visits have steadily risen, particularly among youth, further straining overwhelmed departments. ED boarding — where admitted patients remain in the ER due to a lack of inpatient beds — exacerbates inefficiencies.
Beyond provider shortages, the ED is inherently nonlinear, with constant interruptions, shifting priorities, and a mix of minor ailments and critical emergencies. Triage teams must continuously reallocate scarce resources, balancing urgent cases against a backlog of lower-acuity patients in an already strained system.
11. The big retailers have taken a step back in healthcare. In 2024, Walgreens, Walmart and CVS stepped back from the provision of healthcare by closing some or all clinics. The retreats were primarily due to financial challenges, including rising labor costs and a shortage of healthcare professionals, which made it difficult to sustain their clinics. It all comes back to the core problem of too few physicians. Each company offered beautiful health hubs that offered convenience to patients, but too few physicians to staff them.
The collapse of these clinics reinforces a hard lesson: be wary of the illusion of improved access without actually increasing provider supply. While retail health clinics offer the promise of greater convenience, they cannot solve the deeper shortages in primary and specialty care.
12. Washington, D.C., tends to make noise about the impact of private equity in healthcare. Lawmakers periodically pursue scrutiny of private equity’s involvement in healthcare, but the issue risks serving as a political red herring for an unproductive Congress. Pricing, competition and quality of care linked to private equity-backed organizations warrant scrutiny, but lawmakers’ attention is also needed toward many additional pressing healthcare issues affecting larger pieces of the industry’s pie.
13. There is a fine line between innovation and overstatement. Innovation is essential in healthcare, yet new solutions also risk being overhyped as transformative cure-alls without fully acknowledging the trade-offs they introduce.
Telehealth serves as a valuable utility, but it functions more as an operational tool than a true access creator or patient perk. AI has the potential to ease clinical workflows and reduce cognitive burdens for an already overextended workforce, yet it also introduces new challenges, from added administrative costs to the need for greater oversight.
GLP-1s are undeniably impactful — their role in weight loss presents significant possibilities for a country grappling with obesity and chronic disease. However, regulatory and funding challenges remain unresolved. Pharmaceutical innovation remains critical, but the broader implications of R&D subsidization demand scrutiny. The U.S. continues to shoulder much of the financial burden for drug development while other nations benefit from lower costs — an imbalance that raises tough but necessary questions.
Each breakthrough introduces not just solutions, but also new challenges. Clear-eyed understanding of trade-offs is a must. Excitement about innovation is warranted, but hyperbole serves no one.
14. Health systems are increasingly haves and have-nots. Two financial realities exist simultaneously in healthcare today: too many hospitals are operating at a loss while the highest-performing hospitals continue to strengthen their position.
Top-performing hospitals are pulling further ahead and setting a higher standard for excellence. Meanwhile, nearly half of all hospitals are losing money from operations, with the lowest-performing hospitals facing operating margins between -4% and -19%.
This gap underscores the need for greater precision when discussing health systems. Not all operate under the same financial pressures, nor do they serve the same patient populations. Ownership structures, market concentration and care models vary widely, making broad generalizations minimally useful.
Despite these differences, one challenge is universal: costs are outpacing reimbursement. Labor expenses are up 5% year-over-year, while supply and drug costs have each risen 9%, making reinvestment in operations, workforce, and infrastructure increasingly difficult. Even as patient volumes grow, revenue does not necessarily follow.
15. A return to big profit specialties by systems. As health systems resume capital expansions and strategic developments that were delayed or disrupted by the COVID-19 pandemic, their investment choices speak volumes. We are seeing a strong return to the most profitable service lines, driven not only by growing patient demand but also by a deliberate strategy to strengthen high-margin specialties that enhance market share and financial stability.
Leading the charge are oncology, cardiology and cardiovascular care, orthopedics and spine, and transplant programs. Health systems are investing heavily in these areas, expanding into new markets, upgrading facilities, and reintroducing the ‘centers of excellence’ model to attract patients and referrals.
