Rising costs, fragmentation, and administrative complexity are not system failures but predictable outcomes of long-standing financial and policy incentives.

For decades, U.S. healthcare has been described as dysfunctional—too expensive, too complex, and too fragmented to deliver consistent outcomes. But framing the system as “broken” misses a more uncomfortable truth.

American healthcare is producing exactly the outcomes its financial incentives, regulatory structures, and market dynamics encourage.

A System Optimized for Revenue Flow, Not Health Outcomes

U.S. healthcare is not a single system but a network of hospitals, physician groups, payers, employers, vendors, and regulators—each responding rationally to how they are paid and measured.

Fee-for-service reimbursement still dominates much of the landscape, rewarding volume, intensity, and documentation rather than long-term outcomes. Even as alternative payment models expand, they largely sit on top of legacy reimbursement structures rather than replacing them entirely, according to Centers for Medicare & Medicaid Services (CMS) analyses.

Fragmentation Is Not an Accident

Administrative complexity is often labeled waste. In practice, it is a rational response to fragmented payment, compliance, and liability requirements.

Hospitals maintain large billing and compliance teams not by choice, but necessity. Clinicians document extensively not because technology failed, but because payment and audit frameworks demand proof.

“We don’t build complexity for fun. We build it to get paid,” a hospital CFO said during a recent American Hospital Association (AHA) financial leadership forum.

Why Reform Efforts Keep Stalling

Healthcare reform efforts frequently underestimate how deeply embedded financial incentives are. Price transparency does not instantly change negotiated payer contracts. Payment reductions do not eliminate fixed labor or infrastructure costs.

Government Accountability Office (GAO) evaluations of alternative payment models consistently show incremental gains—but rarely the structural transformation promised in policy debates.

Technology Didn’t Break Healthcare—It Exposed It

Health IT was expected to simplify care delivery. Instead, it exposed underlying structural realities.

• EHRs digitized documentation burdens rather than eliminating them
• Analytics revealed inefficiencies without authority to resolve them
• AI is now exposing workflow fragmentation at enterprise scale

Technology didn’t create dysfunction. It made it visible.

What Healthcare Leaders Are Confronting Now

Increasingly, executives are reframing the challenge. The question is no longer how to “fix” healthcare, but what would need to be redesigned—financially and operationally—for different outcomes to emerge.

That shift implies tradeoffs: fewer services in some markets, different risk models, and long-term transition rather than quick fixes.

What This Means for Healthcare Leaders

Labeling U.S. healthcare as “broken” suggests that repair is straightforward. Recognizing that it is operating exactly as designed implies something far more challenging.

Meaningful change will require incentive redesign, not surface-level optimization. It will demand operational realism instead of policy slogans, and long-term transition strategies rather than short-term patches.

The system is not chaotic. It is consistent. And that consistency—more than dysfunction—is what makes transformation so difficult.