Hospitals see stable margins, but performance lags 2025

For the report, Kaufman Hall analyzed data from over 1,300 hospitals collected by Strata Decision Technology.

In June, hospitals reported an operating margin index of 4.5%, a 6% increase from the median operating margin in May. Hospitals saw a 5% month-over-month increase in daily net operating revenue, as well as a 6% increase in gross operating revenue, including a 2% increase in inpatient revenue and an 8% increase in outpatient revenue.

However, the calendar year-to-date operating margin index was 2.5%, a 6% decrease compared to the first half of 2025. Financial performance also varied across hospitals, smaller and rural facilities experiencing the greatest strain due to thin cash reserves.

Commentary

Although operating margins have remained largely stable, hospitals are also facing challenges with care costs, including absorbing more uncompensated care.

According to HealthLeaders, the data in the report suggests that hospitals avoid relying on volume growth alone to improve their financial performance. As payer mix shifts and bad debt increases, leaders should prioritize revenue cycle operations, identify coverage and financial risk early, and examine where uncompensated care is concentrated in different service lines and patient populations.

Hospitals should also focus on supply and drug utilization, purchasing, and service line strategies to combat the rise in non-labor expenses instead of cutting costs in areas that could negatively impact operations or access.

Because of ongoing demand volatility, "'banking on simple volume growth alone' is not going to be a consistently winning strategy" for health systems, said Vidal Seegobin, VP of provider growth and operations at Advisory Board.

To help leaders better understand recent trends in hospital volumes, this expert insight unpacks data behind falling hospital volumes and explains three strategies leaders should focus on before their growth plans break.

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"As volumes decouple from margins, health systems need to find their comparative advantage: the margin-generating services where they can outcompete others in their market," said Sebastian Beckmann, managing director of quantitative insights at Advisory Board. "To do so, they need to get more granular and more nimble in their strategic planning, combining internal and market data to find market gaps or opportunities on an ongoing basis."