Rising expenses, workforce costs are among hospital leaders' top concerns

CHICAGO - December 10^th, 2025 - Non-labor expense increases, workforce retention and optimization, and payer reimbursement pressures are some of the key challenges faced by hospitals and health systems according to Kaufman Hall, a Vizient company's 2025 Health System Performance Outlook report.

Almost 60% of respondents reported non-labor expense increases between 6% and 10% over the past year. Organizations noted that tariffs and payer reimbursement challenges were leading factors, and 83% of respondents have taken steps to quantify the tariffs' impact.

"While non-labor expenses are no doubt putting financial pressure on organizations, the 2025 findings may reflect broad inflationary pressure rather than abnormal spikes," said Lance Robinson, Managing Director and Operations Improvement Practice Leader with Kaufman Hall. "Data from research we conducted a few years ago found similar trends, and with more cost pressures likely ahead, this points to the continued need for hospitals to strengthen their financial resiliency."

At least 70% of survey respondents are focused on optimizing their workforce. Many organizations have increased wages, expanded signing and retention bonuses, adjusted staffing models, and invested in engagement strategies to remain competitive. Hospitals are leaning on advanced practice providers (APPs), with 42% of respondents noting their value. However, the deployment of APPs across and within organizations was highly variable. This points to the need for hospitals and health systems to find better clinical integration strategies for APPs to maximize value.

Payer reimbursement-claim denials, Medicaid pressures, and legislative uncertainty-were also reported as key concerns. Forty-four percent of hospitals surveyed cited high denial rates and administrative burden as top challenges with managed care organizations.

"Heading into 2026, leaders should be strengthening their operational footing to position themselves for long-term resilience," noted Robinson.

The 2025 Health System Performance Outlook report analyzes the performance improvement and cost transformation efforts of hospitals and health systems. This year's results are based on a combination of survey and interview responses from 103 hospital and health system leaders from across the country.

National Hospital Flash Report

Hospital volumes remained strong in October-with adjusted discharges per calendar day up 5% year-to-date compared to 2024-but net patient service revenue per adjusted discharge declined 3% month over month, according to Kaufman Hall's latest National Hospital Flash Report. Data from the report echo key findings from the 2025 Health System Performance Outlook.

"Bad debt and charity care have been consistently rising, a trend that is likely to continue into 2026 given both natural demographic shifts and the forthcoming Medicaid policy changes," said Erik Swanson, Managing Director and Data and Analytics Group Leader with Kaufman Hall. "Hospital leaders should also closely track labor trends. The number of full-time employees is down while labor efficiency is up, indicating tight staffing levels and potential workforce burnout."

Kaufman Hall's National Hospital Flash Report draws on data from more than 1,300 hospitals from Strata Decision Technology, LLC.

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.

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