{"id":146356,"date":"2026-04-13T18:56:11","date_gmt":"2026-04-13T22:56:11","guid":{"rendered":"https:\/\/medcitynews.com\/?p=146356"},"modified":"2026-04-13T18:56:13","modified_gmt":"2026-04-13T22:56:13","slug":"hospital-margins-finance","status":"publish","type":"post","link":"https:\/\/medcitynews.com\/2026\/04\/hospital-margins-finance\/","title":{"rendered":"Hospital Margins Squeeze as Costs Outpace Revenue Growth"},"content":{"rendered":"\n

Hospitals\u2019 financial positioning is somewhat stable but still under significant pressure, mainly from rising costs and reimbursement issues, according to data<\/a> released last week by Kaufman Hall<\/a>.<\/p>\n\n\n\n

The consulting firm analyzed data from 1,300 hospitals across the country and found that hospitals\u2019 year-to-date operating margins reached 1.9% in February \u2014 up from 1% the previous month but well below the 3.7% margin with which the sector ended 2025. The figures were adjusted to account for hospitals\u2019 allocations of shared services costs.<\/p>\n\n\n\n

On average, hospital margins are improving compared to the worst of the pandemic years, but they\u2019re remaining fragile and inconsistent across organizations, noted Erik Swanson, managing director at Kaufman Hall.<\/p>\n\n\n\n

\u201cGenerally speaking, we\u2019re observing levels of underperformance relative to last year. Expenses and input costs remain high and there are mixed results with volumes. Bad debt and charity deductions are also higher than they have been last year, which is also creating some margin pressure,\u201d he stated.<\/p>\n\n\n\n

Growth in expenses continues to outpace or closely track revenue, limiting hospitals\u2019 margin improvement. During February, hospitals\u2019 daily net operating revenue grew by 5% from the previous month and 4% from the prior year \u2014 but expenses increased by 5% from January and 6% from the previous year.<\/p>\n\n\n\n

Non-labor expenses \u2014 for drugs, supplies and purchased services \u2014 are rising especially fast, the report showed.<\/p>\n\n\n\n

As the country\u2019s population ages, hospitals are seeing more and more elderly patients with chronic conditions, a group with typically higher levels of acuity, Swanson noted. <\/p>\n\n\n\n

\u201cDrug expenses in particular are quite high, and this is due to both higher acuity patients requiring more specialty pharmaceuticals and the increased prices of these medications,\u201d he remarked. \u201cOther costs experienced large rises last year too, like purchased services, and these have not fallen and typically remain quite sticky.\u201d<\/p>\n\n\n\n

The report also noted the nation\u2019s wide variation in hospital performance depending on the organization\u2019s size, geography and market position. <\/p>\n\n\n\n

In Swanson\u2019s opinion, having a strong payer mix is one of the characteristics that separate high-performing hospitals from struggling ones.<\/p>\n\n\n\n

\u201cThose with greater commercial populations outperform those without the same payer mix strength. Populations with higher levels of under- or uninsured patients also come with a host of other socioeconomic determinants that can challenge hospitals,\u201d he declared.<\/p>\n\n\n\n

The data is also clear that hospitals with greater levels of outpatient revenue outperform those without, he added.<\/p>\n\n\n\n

Most of hospitals\u2019 ambulatory services are producing positive margins, so organizations with stronger outpatient footprints will do better. Swanson pointed out that this is a double-edged sword though \u2014 as care expands further into outpatient settings, it\u2019s leaving hospitals with higher acuity patients.<\/p>\n\n\n\n

This not only challenges hospitals with populations that are generally older and sicker, but it also means that many patients coming into the hospital rather than an ambulatory site may be those with other confounding determinants of health, he explained.<\/p>\n\n\n\n

\u201cThis leads to more expensive medications, used more often, along with greater intensity of resource needs spanning from labor to non-labor,\u201d Swanson said.<\/p>\n\n\n\n

Overall, he thinks the data points to a hospital industry that is holding onto modest financial stability while navigating sweeping structural shifts in cost and care delivery.<\/p>\n\n\n\n

Photo: Jackyenjoyphotography, Getty Images<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Hospitals are still on quite fragile financial footing if you look beneath the surface, according to new Kaufman Hall data. Rising costs, uneven patient volumes, and ongoing reimbursement and payer mix pressures continue to limit the sector\u2019s financial recovery.<\/p>\n","protected":false},"author":31620,"featured_media":146358,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"om_disable_all_campaigns":false,"featured_image_focal_point":[],"homepage_placement":"top","homepage_placements":{"top":true,"featured":true,"sidebar":false},"homepage_alternative_layout":false,"featured_categories":[48,51659],"hide_from_feed":false,"footnotes":""},"categories":[48,51659],"tags":[45277,44790,46663,44659,45276],"class_list":["post-146356","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-hospitals-channel","category-providers","tag-expenses","tag-hospital-finance","tag-hospital-finances","tag-kaufman-hall","tag-operating-margins"],"acf":[],"yoast_head":"\nHospital Margins Squeeze as Costs Outpace Revenue Growth - MedCity News<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/medcitynews.com\/2026\/04\/hospital-margins-finance\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Hospital Margins Squeeze as Costs Outpace Revenue Growth - MedCity News\" \/>\n<meta property=\"og:description\" content=\"Hospitals are still on quite fragile financial footing if you look beneath the surface, according to new Kaufman Hall data. 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