Hospitals face 2026 with 'new normal' of rising expenses and shifts in revenue mix

CHICAGO - February 10^th, 2026 - Hospital operating margins-a key measure of profitability-remained stable in December, according to the latest National Hospital Flash Report, from Kaufman Hall, a Vizient company. Kaufman Hall's adjusted year-to-date operating margin closed out 2025 at 1.3%.

Analysts note that while average margins were stronger in 2025 than in prior years, key indicators bear watching. Expenses rose across the board, bad debt, uninsured patients and charity care increased, and more revenue came from public rather than private payers.

"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. "Demand in outpatient services is on the rise, and hospitals without an outpatient footprint will struggle."

Providers' Productivity Up, Reimbursement Down

Kaufman Hall's latest quarterly Physician Flash Report shows providers are working more but compensation and reimbursement are not keeping pace.

Provider productivity, as measured by work relative value units (wRVUs) per full-time employee, has grown 7% since 2023. Provider compensation, meanwhile, increased 6% in the same period. Reimbursement decreased 1% since 2023, as measured by net patient revenue per provider wRVU.

Data show that the median investment-or a practice's subsidy of a physician-continues to go up, reaching $315,358 in Q4 2025, a 4% increase since 2023. Labor as a percentage of total expenses continues to remain high at 84.4%.

"The amount of downstream revenue that a provider needs to generate to cover a practice's investment is increasingly unsustainable in this current financial environment," said Matthew Bates, Managing Director and Physician Enterprise Service Line Leader with Kaufman Hall. "Providers are working more but are being paid less for their work. Patient demand is up, yet reimbursement is falling."

Assuming a median operating margin of 1.3%, as reflected in the National Hospital Flash Report, Kaufman Hall experts note that at a median subsidy per provider of $236,290, providers would have to generate $17 million in downstream revenue to support their subsidy.

Kaufman Hall's National Hospital Flash Report draws on data from more than 1,300 hospitals from Strata Decision Technology, LLC. The Physician Flash Report draws on data based on more than 200,000 providers, also from Strata.

About Kaufman Hall, a Vizient Company

Kaufman Hall, a Vizient company, provides management consulting solutions to help society's foundational institutions realize sustained success amid changing market conditions. Since 1985, Kaufman Hall has been a trusted advisor to boards and executive management teams, helping them incorporate proven methods, rigorous analytics, and industry-leading solutions into their strategic planning and financial management processes, with a focus on achieving their most challenging goals.

Kaufman Hall services use a rigorous, disciplined, and structured approach that is based on the principles of corporate finance. The breadth and integration of Kaufman Hall advisory services are unparalleled, encompassing strategy; financial and capital planning; performance improvement; treasury and capital markets management; mergers, acquisitions, partnerships, and joint ventures; and real estate.

FOR IMMEDIATE RELEASE: Tue., Feb. 10, 2026

CONTACT: Toby Howard, (571) 201-7409, [email protected]