Kaufman Hall's latest hospital report finds outpatient growth and positive margins offset by rising costs, higher-acuity inpatient mix, and payer pressures.
Hospitals closed out 2025 with operating performance that suggests greater stability, yet underlying pressures are contributing to a complex financial picture, according to Kaufman Hall’s latest National Hospital Flash Report.
The analysis, drawing on data from more than 1,300 U.S. hospitals, found that financial performance in the past year settled into what analysts described as a “new normal,” characterized by continued volume growth balanced with ongoing challenges tied to payer mix and rising costs.
The median hospital operating margin on a calendar year-to-date basis remained positive at 1.3% through December, inclusive of all allocations for the cost of shared services received from health systems. The monthly operating margin, meanwhile, hit 5% including allocations.
Kaufman Hall noted that while margins were stronger in 2025 than in previous years, hospitals are still dealing with headwinds.
“With some data suggesting a lingering ‘new normal’ for hospitals, healthcare organizations need to be very strategic about diversifying services and managing expenses to build financial stability,” said Erik Swanson, managing director and data and analytics group leader at Kaufman Hall, in a statement. “Demand in outpatient services is on the rise, and hospitals without an outpatient footprint will struggle.”
Patient volumes continued a trend toward increased demand with discharges per calendar day up 1% year-over-year and daily adjusted discharges up 5%. Year-over-year growth in outpatient revenue per calendar day nearly doubled daily inpatient revenue, up 13% versus 7%, respectively. However, analysts highlighted that with a shift to outpatient settings, inpatient units are left treating a greater share of higher-acuity patients, raising the overall cost of care delivery.
Even as volume grew, many hospitals grappled with rising expenses. On a daily basis, total expenses (8%), labor expenses (4%), non-labor expenses (10%), supply expenses (13%), and drugs expenses (13%), and purchased service expenses (6%) all increased year-over-year.
Another concern in the December data is the persistent imbalance between gross and net operating revenue, which showed year-over-year growth of 11% and 8%, respectively. Kaufman Hall said this gap indicates an erosion in payer mix, with more revenue coming from government payers and uninsured patients, potentially weighing on hospitals’ bottom lines.
As hospitals pursue greater financial resilience and sustainability in 2026, Kaufman Hall’s report reveals that leaders must focus on expanding outpatient services, aligning service mix with demand, and managing rising costs across the board to navigate an evolving landscape.
Jay Asser is the CEO editor for HealthLeaders.
KEY TAKEAWAYS
The median year-to-date hospital operating margin reached 1.3% through December, demonstrating greater stability compared to prior years.
Outpatient revenue per day rose 13% year-over-year, outpacing inpatient growth, while inpatient units are treating higher-acuity cases that raise care costs.
Total expenses climbed 8% year-over-year, with supply and drug costs up 13%, while slower net revenue growth reflects a worsening payer mix.