Kaufman Hall recently released its first report, analyzing the 2025 hospital financial data, and the consulting firm found that the hospital started with a steady performance this year.
The report examined financial data from more than 1,300 hospitals since January. In January, the hospital's monthly work margin was 4.4%, up from 3.7% the previous month and up from 2.1% overall record in 2024.
Erik Swanson, managing director of Kaufman Hall, said the patient volume was large – neither hospitalized nor outpatients showed signs of slowing down. He noted that this helps hospitals in terms of revenue, but they continue to fight the cost pressure.
He noted that as the years progress, the costs of drugs, supply and purchase of services are rising, which could have an impact on hospital profit margins.
“As our population ages, as hospitals become care for increasingly keen patients, these pressures will only increase,” Swanson said.
He explained that the increased acuity of hospitalized patients – due to the aging population of the country and the shift in transferring lower care to outpatient settings – can lead to increased reimbursement, but rising drug costs and utilization often undermine profitability.
Hospitals can do something to solve the rising costs.
Swanson notes, for example, hospitals could join group procurement organizations and use some size to get better pricing contracts. They can also consolidate the differences in their suppliers and consider general and biosimilar replacements for certain high-cost drugs.
Swanson noted that better discharge plans are also important.
“Management of accommodation is a lot. How do we ensure that patients stay for the right time so that these goods and supplies are not used more than they need?” he said.
Swanson added that accurate clinical documentation is also crucial to ensure that the hospital is properly reimbursed to make the complexity of the care it provides.
He also highlighted the widening gap between the highest and lowest performing hospitals.
Swanson notes that high-performance hospitals often take a holistic approach to assessing service lines and focus on high-profit areas such as high-profit areas such as cardiology, orthopedics and oncology, which are better for financial stability.
However, smaller and rural hospitals often lack the flexibility to make such strategic shifts because they provide essential but lower repair care, which makes financial rehabilitation even more challenging.
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