Hospital operating margins fell 5% nationally in the first five months of 2026 compared to the same period a year earlier, according to Kaufman Hall’s “National Hospital Flash Report.”
The decline played out unevenly across geographies and bed sizes, and that stands in contrast to the results posted by the industry’s largest nonprofit systems and its dominant for-profit chain.
Here are 10 things to know.
1. National hospital operating margins declined 5% year over year through May. The Kaufman Hall National Hospital Flash Report tracked operating margin performance from January through May 2026 against the same five-month window in 2025. The national figure of -5% reflects broad pressure across hospital types as both revenue and expenses are on the rise.
2. The West took the steepest regional hit. Among the five regions tracked, the West posted the sharpest year-over-year decline at -12% — more than double the national average. The Midwest and Great Plains each fell 7%, and the Northeast and Mid-Atlantic declined 6%.
3. The South was the only region to outperform the national average. At -4% year over year, the South’s decline was the most modest of any region and the only one to come in better than the national figure of -5%. That relative resilience may reflect differences in Medicaid exposure, population growth and hospital mix across the region.
4. Small hospitals are losing more ground than their midsize peers. Hospitals with 25 or fewer beds saw operating margins fall 6% year over year. Those with 25 to 99 beds fared slightly worse at -7%. The 100-to-199-bed category declined 5%, and the 300-to-499-bed segment posted a -4% change — broadly in line with the national average.
5. The 200-to-299-bed tier showed the most resilience. Among all bed-size categories tracked, hospitals in the 200-to-299-bed range posted the smallest year-over-year decline at just -1%. While still a negative figure, the results show the lower impact for mid-sized hospitals.
6. Hospitals with 500 or more beds are the outliers. The only bed-size segment to post a year-over-year gain was the largest: hospitals with 500 or more beds improved 11% compared to the same period last year. The divergence reflects scale advantages in labor, payer negotiation and administrative infrastructure that smaller hospitals cannot replicate.
7. CommonSpirit Health posted a $743 million operating loss through three quarters. The Chicago-based system reported a -2.4% operating margin through the first three quarters of its fiscal year 2026 — 1.4 percentage points worse than the same period in 2025. Leadership cited revenue yield pressures, lower case mix and acuity, collection performance challenges and payer mix shifts. CommonSpirit’s exit from Conifer Health Solutions contributed to a $3.4 billion net loss in the third quarter.
8. Providence returned to positive operating margin territory. The Renton, Wash.-based system reported a 1.5% operating margin in the first quarter of 2026, a 5 percentage point improvement year over year. The system dropped agency contract labor costs 79% year over year in the quarter — a significant reduction for a system that, like most large nonprofits, has spent the past several years working down travel staffing dependence. Providence’s financial strategy is centered on sustaining positive margins while deploying capital for growth and exploring divestitures and strategic partnerships.
9. Ascension is improving but remains in the red. The St. Louis-based system posted a -1.1% operating margin through the first nine months of its fiscal year 2026, a 1.2 percentage point improvement from the same period a year ago. The system reported a $203 million net loss for the nine-month period. Ascension has significantly reduced its hospital footprint in recent years, from 139 hospitals in 2022 to 90 today.
10. HCA’s 12% margin underscores the for-profit gap. The Nashville, Tenn.-based HCA system posted a 12% operating margin in the first quarter of 2026, generating $2.29 billion in operating income — down slightly from $2.33 billion in the same quarter last year. The 0.7 percentage point year-over-year decline was modest relative to the steeper drops posted across the nonprofit sector, and HCA’s margin remains more than 10 percentage points above the national average tracked by Kaufman Hall.
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