Dive Brief:
- Hospitals’ finances have been largely strong this year, but their future performance is precarious and could be threatened by headwinds like heightened expenses, according to a report published Monday by consultancy Kaufman Hall.
- Net operating revenue per calendar day increased 8% for the year to date through July in 2025 compared with last year. But total expense per calendar day increased 7% during the same period, according to Kaufman’s analysis.
- Non-labor expenses are contributing to the increased strain on hospitals. Supply expense per calendar day rose 9% for the year to date compared with last year, while drug costs are up 10%.
Dive Insight:
Overall, median operating margin for the year so far increased 4% compared with the same period in 2024, and patient volumes are trending up, according to the report. Discharges per calendar day rose 4% in the year to date compared with 2024.
However, some metrics — like growing bad debt and charity care — hint at looming financial pressures. Bad debt and charity care per calendar day is up 10% for the year to date, suggesting hospitals are providing more care that won’t be reimbursed.
“While performance has generally been strong this year, profitability has decreased slightly over the past few months,” Erik Swanson, managing director and group leader of data and analytics at Kaufman Hall, said in a statement. “This points to potential challenges for hospitals and health systems to weather future uncertainty.”
Providers are facing several major policy changes that could spell financial strain. For example, President Donald Trump’s sweeping tariffs could add new costs for a range of medical supplies and devices.
Hospitals are also anticipating financial disruption in the wake of the One Big Beautiful Bill Act, Republicans’ wide-ranging reconciliation package passed in July that included historic cuts to the safety-net insurance program Medicaid.
The law decreases federal healthcare spending by more than $1 trillion over the next decade, and will lead to an additional 10 million uninsured Americans, according to an analysis by the Congressional Budget Office.
Additionally, more generous financial assistance for people who buy insurance on the Affordable Care Act marketplaces is set to expire at the end of the year, contributing to heightened premiums for beneficiaries and pushing some to lose coverage.
A growing number of uninsured patients would likely hit providers’ revenue and drive up uncompensated care costs — a particular challenge for cash-strapped rural hospitals and facilities that serve more low-income patients.
