Average nonprofit hospital margins improved slightly in March but remain sluggish compared to 2025, according to Kaufman Hall’s most recent “National Hospital Flash Report.”
The firm, a Vizient company, gathered data from 1,300 hospitals and released findings May 18.
Five things to know:
1. Average hospital operating margins hit 2.9% in March, up from 1.8% in February and 2% in January, but still well below the 6.3% recorded in December. Margins rose 2 percentage points year over year, though they remain down 9 percentage points year to date compared to 2025 — a sign that the recovery, while real, is incomplete.
“Operating margins improved month-over-month but remain below 2025,” the report noted. “While bad debt and charity care declined month-over-month, gross revenue continues to outpace net, highlighting eroding payor mix.”
2. The charity care burden eased in the near term but remains historically elevated. Bad debt and charity care per calendar day increased 18 percentage points year over year in March, though they fell 5 percentage points from February. Since 2023, bad debt and charity care have risen 46 percentage points and are up 18 percentage points as a percent of gross operating revenue.
3. Revenue growth was a bright spot in the report. Net revenue per calendar day increased 8 percentage points year over year and 5 percentage points month to date compared to 2025, driven primarily by outpatient activity — up 12 percentage points year over year. Inpatient revenue grew 7 percentage points over the same period.
“March was the best month for hospitals in 2026 so far, despite mixed volumes,” the report noted. “Year-over-year discharges rose while patient days grew slightly, indicating increased focus on improving average length of stay and continued shift to outpatient care.”
4. Expense growth largely tracked revenue, rising 7 percentage points month over month and year to date compared to 2025. Supply expenses per calendar day jumped 11 percentage points year over year while drug expenses grew 10 percentage points. Labor costs showed more restraint, up just 4 percentage points month over month and year to date compared to 2025.
“Favorable improvements across the board are likely correlated to the decrease in average length of stay,” the report stated. “However, drug expenses remain a primary driver of expense growth year-to-date.”
5. Regional performance varied considerably. Here is the breakdown for year-over-year change in March:
- West: 23 percentage point drop
- Midwest: Flat
- South: 5 percentage point growth
- Northeast / Mid-Atlantic: 3 percentage point growth
- Great Plains: 11 percentage point drop
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