U.S. hospitals saw financial performance stabilize in 2025, yet mounting revenue and payer-mix pressures continue to challenge long-term sustainability, according to the latest National Hospital Flash Report from Kaufman Hall.
The report, based on recurring monthly data from more than 1,300 hospitals tracked by Strata Decision Technology, describes 2025 as a “new normal” for hospital operations. While operating margins have modestly improved compared to prior years, structural financial headwinds tied to reimbursement rates and patient mix persist.
Higher Volumes, Limited Financial Lift
Patient volumes increased across service lines throughout the year, with outpatient care continuing to serve as a key growth driver. However, rising volumes have not translated into proportionate financial gains.
Hospitals are treating a growing share of higher-acuity patients, a shift that raises the cost of care delivery and intensifies pressure on operating expenses. At the same time, the gap between gross and net operating revenue remains a central concern.
The report highlights a persistent imbalance between billed charges and actual collections, compounded by rising levels of bad debt and charity care. This trend signals ongoing deterioration in payer mix, as hospitals care for more uninsured patients and a higher proportion of individuals covered by government programs that typically reimburse at lower rates.
Margins Stabilize, but Remain Fragile
Although average margins have steadied since the COVID-19 pandemic, financial stability remains uneven across the sector.
Erik Swanson, managing director leading Kaufman Hall’s data and analytics group, told Healthcare Finance News that disparities between higher- and lower-performing hospitals remain significant.
“While average margins have stabilized, the gap between the ‘haves’ and ‘have nots’ remains stark,” Swanson said. “At the median, operating margins are still tenuous and may not support adequate reinvestment.”
He emphasized that hospital and health system leaders must develop a clear strategic framework for long-term financial sustainability heading into 2026.
Strategic Imperatives for 2026
According to Swanson, higher-performing hospitals demonstrate agility in managing both revenue and expenses. Key strategies include:
- Expanding outpatient and ambulatory footprints
- Diversifying service offerings
- Actively managing service portfolios
- Centralizing purchased services to control costs
- Implementing value-based and bundled care arrangements
While hospitals cannot directly control external macroeconomic pressures — such as rising raw material costs or global trade volatility — they can take deliberate steps to mitigate their financial impact.
Swanson advised financial leaders to identify and prioritize service lines that are central to both mission and margin. He also encouraged adopting a system-wide portfolio approach that leverages emerging ambulatory and outpatient platforms.
Creative partnership models, he added, can help organizations address portfolio challenges while strengthening financial and patient outcomes.
“Portfolio challenges can be met creatively through different types of partnership models whereby the strengths of either party are leveraged for better financial and patient outcomes,” Swanson said.
