Health system leaders faced challenges in 2025 like rising financial strain, ongoing workforce challenges and mounting capacity constraints, according to Kaufman Hall’s “2025 Health System Performance Outlook.”
The report surveyed leaders from 103 hospitals and health systems across the U.S., with 60% serving in executive roles, 16% in finance and representation from quality and operations as well. Ninety-six percent of respondents work in single hospitals or hospital-based systems, with the remainder from health plans. By area type, 20% were rural, 36% urban and 44% suburban.
The report also highlighted operational realities that shaped 2025 performance and could continue to influence health system strategy into 2026.
Here are eight things to know:
1. Non-labor expenses continue to increase. Nearly 60% of systems saw non-labor expenses increase between 6% to 10% this year, with 83% taking measures to quantify tariff impacts.
2. Supply chain AI adoption remains limited. More than half of organizations, 52%, report no use of AI in supply chain operations, despite increasing pressure to reduce waste, improve visibility and improve financial resiliency. However, the largest AI focus areas are 22% logistics and distribution efficiency, 20% demand forecasting and 17% supplier performance.
3. Labor constraints forced health systems to rethink both staffing and recruitment in 2025. At least 70% of health systems are working to optimize staffing, including adjusting staffing targets and reevaluating spans of control. Many are also turning to outsourcing in services, with 65% outsourcing food and nutrition, 58% outsourcing revenue cycle, 58% outsourcing IT and 58% outsourcing environmental services. Workforce recruitment efforts remain strong, with 83% of organizations raising starting wages, 81% offering signing bonuses amid competitive labor markets and 64% offering increased remote and hybrid work schedules.
4. Many organizations struggle to offer timely access. Ninety-one percent of leaders say they cannot consistently see patients within a timely manner, 42% report patients are waiting too long for appointments and 48% have mixed performance results.
“Many healthcare organizations are leaning more heavily on physicians to support patient access,” the report said. “Three-fourths of respondents report subsequent increasing subsidies, while only 45% say downstream margins are sufficient to offset these costs.”
5. APP value is inconsistent across systems. While 42% of leaders say advanced practice providers clearly add value, an equal share report highly variable performance, underscoring a need for standardized, team-based care models.
“The number of APPs is expected to double within the next decade, forcing health systems to rethink how they integrate these clinicians into the workforce,” the report said. “Incorporating APPs into perioperative care, new patient intakes and routine follow-up, for example, makes it possible for physicians to work at the top of their license and improves patient access.”
6. Emergency department boarding is a top capacity constraint. Seventy-seven percent of respondents cited ED holds as their most significant bottleneck, with 73% saying capacity issues lead to ED boarding.
7. Denials top managed care challenges. When questioned about significant managed care challenges, 44% of respondents pointed to high denial rates and administrative burden, with 30% pointing to reimbursement rates not aligning with increasing costs and 11% citing struggles renegotiating commercial contracts.
8. The financial outlook remains uncertain. Only 30% of respondents expect cash balances to improve over the next 12 months, with 30% predicting lower levels and 40% seeing minimal change.
“The wide split highlights the relative uncertainty health systems have about the future, citing the competitive landscape; regulatory changes including the One Big Beautiful Bill, ACA tax subsidies and tariffs, reimbursement, and operational and workforce challenges,” the report said. “Interviewees say they’ve also slowed down on capital spending and are closely monitoring regulatory changes to Medicaid. Ensuring adequate access to external working capital solutions can help bolster liquidity, especially in times of uncertainty.”
Lance Robinson, managing director and operations improvement practice leader at Kaufman Hall, told Becker’s that the report reinforces several core areas health systems should continue refining, such as strengthening supply chain relationships, evaluating purchased services, improving patient progression to reduce length of stay and addressing front-end billing breakdowns that drive denials.
“Being in position to sustain some of those headwinds is going to be important; don’t take your eye off the ball,” he said. “The ‘no regret’ is proactively managing your cost structure [and] doubling down, because you don’t know what’s around the bend.”
