Hospital finances improve in Q1

According to Kaufman Hall's latest National Hospital Flash Report, hospital finances improved in the first quarter (Q1) of 2025 compared to the same period in 2024. Data for the report was collected from more than 1,300 hospitals nationwide

In April, hospitals' current year-to-date (YTD) operating margin index was 3.3% when including health system allocations for shared services and 6.9% when excluding the allocations — representing a 6% increase in YTD operating margin compared to Q1 2024. 

"Hospital performance from January to April outpaced the first four months of 2024, largely driven by patient volume and hospital efficiency," said Erik Swanson, managing director and data and analytics group leader at Kaufman Hall.

Compared to Q1 2024, hospitals reported a 7% increase in daily net operating revenue in Q1 2025. This increase was largely due to growth in both inpatient and outpatient revenues, as well as a 3% increase in net patient service revenue per adjusted discharge.

When it came to patient volumes, hospitals saw a 4% increase in daily discharges, a 5% increase in adjusted daily discharges, a 3% increase in daily ED visits, and a 1% increase in daily operating room minutes from Q1 2024 to Q1 2025. The average length of stay decreased by 1% during this same period.

Hospitals face new financial pressures

Although hospitals have seen their finances improve over the last year, they are still facing significant financial pressures, including from potential medical and pharmaceuticals tariffs and possible cuts to Medicaid and the Affordable Care Act through a recent budget bill.

"Tariffs have the potential to add a layer of complication to [hospitals'] ability to get all of those medical goods, the drugs and the devices that they need to deliver care," said Akin Demehin, VP of quality and patient safety policy at the American Hospital Association.

"We especially worry about the potential impacts to vulnerable and to rural health care providers who already are operating on thin margins, and for whom changes in the cost of those kinds of goods could have a disproportionate impact," Demehin added.

In May, the House passed a budget bill called the One Big Beautiful Bill Act, which includes several healthcare provisions that could significantly impact Medicaid, Medicare, and the Affordable Care Act.

According to the Congressional Budget Office, changes in the bill could lead to 10.9 million people becoming uninsured by 2034, including 7.8 million people with Medicaid coverage. The bill would also add $2.4 trillion to the nation's deficit over roughly the next decade.

Currently, the bill is in the Senate, with Republicans aiming to pass the bill before July 4 or at the very least by the time the government reaches its borrowing limit, which is expected to be sometime around August. If the bill clears the Senate, it will be sent back to the House where House members will either pass the bill as is or try to reconcile their differences with the Senate.