While average hospital margins ticked up from 1% in January to 1.9% in February, they are still well below 3%-plus margins hospitals reported in the second half of 2025, according to Kaufman Hall’s National Hospital Flash Report, released April 9.
“Cost pressures are driving a tenuous financial outlook,” the report states. “Hospital expenses are elevated in early 2026 compared to 2025, while revenues are pressured by an eroding payer mix and remain below sustainable levels.”
Five things to know:
1. Operating margins dropped 10% on average year over year, although they are up 14% over the first two months of 2023. There was a “significant variation” in hospital performance by region, geography and market position, the report authors noted. Here is a regional breakdown of the average year-over-year margin change in February:
- West: -21%
- Midwest: -9%
- South: -15%
- Northeast / Mid-Atlantic: -2%
- Great Plains: -12%
2. Net revenue per calendar day increased 5% month over month and 4% over February 2025, according to the report. Inpatient revenue was up 4% and outpatient revenue increased 7% year over year.
3. Expenses per calendar day grew faster than revenue, increasing 6% year over year. Supply and drug expenses per calendar day both increased 8% year over year while labor and purchased services expenses inched up by 4%.
4. Average patient volume dropped in February. Discharges per calendar day were down 2% year over year while ED visits dropped 5%. The average length of stay decreased 4% year over year and 6% compared with the first two months of 2023.
“Patient days have softened in early 2026 while the average length of stay remains relatively steady, reflecting both demographic shifts and changes in where care is delivered,” the report states.
5. Bad debt and charity care jumped 10% year over year in February, and is up 45% year to date compared with 2023.
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