Hospital Finances Held Steady
In First Month of 2025
In the first month of 2025, hospital revenue and expenses both increased, balancing each other out and resulting in continued steady financial performance for hospitals, according to Kaufman Hall’s January 2025 National Hospital Flash Report. This article reviews the report and the current state of hospital operations.
In the first month of 2025, hospital revenue and expenses both increased, balancing each other out and resulting in continued steady financial performance for hospitals, according to Kaufman Hall’s January 2025 National Hospital Flash Report.[1] Revenues grew more quickly in the inpatient setting, as more patients were treated in the hospital and emergency department than in outpatient settings.[2] While expense increases were largely driven by drug costs, the rate of that growth has significantly slowed.[3] This article reviews the report and the current state of hospital operations.
The National Hospital Flash Report, a monthly report authored by healthcare management consulting firm Kaufman Hall (which is owned by Vizient, a healthcare data and improvement company), samples hospital data collected over the previous three years from over 1,300 hospitals, of all sizes and types, across the U.S., collected by Strata Decision Technology.[4]
Hospitals’ median monthly operating margin index in January 2025 was 8%, the highest margin of the last 12 months.[5] On the revenue side, hospitals experienced increases across a wide swath of metrics in January compared to December 2024, including increases in:
- Discharges per calendar day (5% increase);
- Adjusted discharges per calendar day (2% increase);
- Equivalent patient days per calendar day (6% increase);
- Adjusted patient days per calendar day (4% increase);
- Average length of stay (2% increase);
- Operating room minutes per calendar day (2% increase);
- Inpatient revenue (8% increase);
- Outpatient revenue (3% increase); and
- Net operating revenue (1% increase).[6]
Further, bad debt and charity as a percentage of gross revenue decreased by 6% year-over-year.[7]
On the expense side, total expense per calendar day increased 1%, due in large part to the growth in labor expenses (2%) and drug expenses (1%), which remain high compared to pre-pandemic levels.[8]
For the first time, the January 2025 report included hospital margin performance as well as all allocations for the cost of shared services received from the hospital’s respective health system, e.g., corporate office expenses.[9] The median monthly operating margin index, under this measurement, was 4.4% in January 2025, an increase over December 2024’s 3.7% rate as well as the 2.1% rate for the 2024 calendar year.[10]
In a statement following the release of the report, Erik Swanson, managing director and group leader of data and analytics at Kaufman Hall, stated that:
“January was a relatively stable month for hospitals, as more people received care due in part to seasonal challenges like flu and other respiratory diseases. Hospitals are also experiencing more rapid revenue growth from inpatient than outpatient services. Expenses are also rising, driven primarily by drug costs, though the rate of cost growth has slowed.”[11]
In a subsequent interview with Healthcare Finance News, Swanson added that:
“Hospitals are seeing some relief from extreme cost spikes, but drug and supply chain expenses continue to be a major concern. Many organizations are joining group purchasing organizations, seeking generic substitutions, or exploring biosimilar drugs to control spending.”[12]
On the revenue side, recent increases in bad debt and charity care, possibly as a result of the post-COVID-19 Medicaid disenrollments, are problematic, with Swanson advising that “Hospitals need to prepare for potential further increases depending on changes in Medicaid policy.”[13]
Hospitals have been especially slow to financially recover from the COVID-19 pandemic.[14] As recently as November 2024, Kaufman Hall reported decreases in hospital patient volumes across emergency department and outpatient visits, with adjusted discharges per calendar day decreasing 4% during the month, while expenses remained high.[15] While the January 2025 figures are encouraging, hospitals would be well-served to remain vigilant in their operations, with an eye toward state and federal regulatory changes that may decrease revenues and/or increase costs (e.g., Medicaid cuts).
Hospital-related stock prices have increased over 3% since the end of 2024,[16] signifying increased investor demand and positive sentiment regarding the industry’s prospects. This, together with Kaufman Hall’s findings may indicate favorable trends for the valuation of hospitals and hospital services.
This article was previously published by HCC, Health Capital Topics, Volume 18, Issue 3, March 2025, and is republished here by permission.
[1] “National Hospital Flash Report” Kaufman Hall, January 2025, available at: https://www.Kaufman Hall.com/sites/default/files/2025-03/KH_NHFR-Report-Jan-2025-Metrics.pdf (Accessed 3/24/25).
[2] Ibid.
[3] Ibid.
[4] “National Hospital Flash Report” Kaufman Hall, January 2025, available at: https://www.Kaufman Hall.com/sites/default/files/2025-03/KH_NHFR-Report-Jan-2025-Metrics.pdf (Accessed 3/24/25); “Hospitals kick off 2025 with modest operating margin gains, high inpatient revenue” By Dave Muoio, Fierce Healthcare, March 18, 2025, https://www.fiercehealthcare.com/providers/hospitals-kick-2025-modest-operating-margin-gains-high-inpatient-revenue (Accessed 3/25/25).
[5] “National Hospital Flash Report” Kaufman Hall, January 2025, available at: https://www.Kaufman Hall.com/sites/default/files/2025-03/KH_NHFR-Report-Jan-2025-Metrics.pdf (Accessed 3/24/25); “Hospital Margins Stable to Start 2025 Due to Offsetting Rise in Volume, Expenses” By Jay Asser, HealthLeaders, March 24, 2025, https://www.healthleadersmedia.com/ceo/hospital-margins-stable-start-2025-due-offsetting-rise-volume-expenses (Accessed 3/24/25).
[6] “Hospital Margins Stable to Start 2025 Due to Offsetting Rise in Volume, Expenses” By Jay Asser, HealthLeaders, March 24, 2025, https://www.healthleadersmedia.com/ceo/hospital-margins-stable-start-2025-due-offsetting-rise-volume-expenses (Accessed 3/24/25).
[7] “Healthcare M&A activity signals shaky financial recovery” By Jacqueline LaPointe, TechTarget, January 14, 2025, https://www.techtarget.com/revcyclemanagement/news/366617976/Healthcare-MA-activity-signals-shaky-financial-recovery (Accessed 3/24/25).
[8] “Hospital Margins Stable to Start 2025 Due to Offsetting Rise in Volume, Expenses” By Jay Asser, HealthLeaders, March 24, 2025, https://www.healthleadersmedia.com/ceo/hospital-margins-stable-start-2025-due-offsetting-rise-volume-expenses (Accessed 3/24/25); “Increased patient volumes stabilize hospitals’ financial performance” By Nathan Eddy, Healthcare finance, March 24, 2025, https://www.healthcarefinancenews.com/news/increased-patient-volumes-stabilize-hospitals-financial-performance (Accessed 3/25/25).
[9] “National Hospital Flash Report” Kaufman Hall, January 2025, available at: https://www.Kaufman Hall.com/sites/default/files/2025-03/KH_NHFR-Report-Jan-2025-Metrics.pdf (Accessed 3/24/25); “Hospital financial performance stable as volumes rise” By Jacqueline LaPointe, Rev Cycle Management, March 18, 2025, https://www.techtarget.com/revcyclemanagement/news/366620902/Hospital-financial-performance-stable-as-volumes-rise#:~:text=Hospital%20financial%20performance%20was%20offset,hospital%20expenses%2C%20especially%20drug%20costs.&text=Hospital%20financial%20performance%20remains%20stable,high%20expenses%2C%20Kaufman%20Hall%20reports. (Accessed 3/25/25).
[10] “National Hospital Flash Report” Kaufman Hall, January 2025, available at: https://www.Kaufman Hall.com/sites/default/files/2025-03/KH_NHFR-Report-Jan-2025-Metrics.pdf (Accessed 3/24/25); “Hospitals kick off 2025 with modest operating margin gains, high inpatient revenue” By Dave Muoio, Fierce Healthcare, March 18, 2025, https://www.fiercehealthcare.com/providers/hospitals-kick-2025-modest-operating-margin-gains-high-inpatient-revenue (Accessed 3/25/25).
[11] “Hospital Performance Remains Stable as Greater Volume and Expenses Contribute to Financial Balance” Kaufman Hall, March 17, 2025, https://www.Kaufman Hall.com/news/hospital-performance-remains-stable-greater-volume-and-expenses-contribute-financial-balance (Accessed 3/24/25).
[12] “Increased patient volumes stabilize hospitals’ financial performance” By Nathan Eddy, Healthcare finance, March 24, 2025, https://www.healthcarefinancenews.com/news/increased-patient-volumes-stabilize-hospitals-financial-performance (Accessed 3/25/25).
[13] Ibid.
[14] “Healthcare M&A activity signals shaky financial recovery” By Jacqueline LaPointe, TechTarget, January 14, 2025, https://www.techtarget.com/revcyclemanagement/news/366617976/Healthcare-MA-activity-signals-shaky-financial-recovery (Accessed 3/24/25).
[15] “Healthcare M&A activity signals shaky financial recovery” By Jacqueline LaPointe, TechTarget, January 14, 2025, https://www.techtarget.com/revcyclemanagement/news/366617976/Healthcare-MA-activity-signals-shaky-financial-recovery (Accessed 3/24/25); “National Hospital Flash Report: November 2024 Data” Kaufman Hall, January 9, 2025, https://www.Kaufman Hall.com/insights/research-report/national-hospital-flash-report-november-2024-data
[16] Difference in stock price 12/31/2024 to 3/26/2025 for HCA Healthcare, Inc., Universal Health Services, Inc., Tenet Healthcare Corporation, and Community Health Systems, Inc.
Todd A. Zigrang, MBA, MHA, FACHE, CVA, ASA, ABV, is president of Health Capital Consultants, where he focuses on the areas of valuation and financial analysis for hospitals and other healthcare enterprises. Mr. Zigrang has significant physician-integration and financial analysis experience, and has participated in the development of a physician-owned, multispecialty management service organization and networks involving a wide range of specialties, physician owned hospitals, as well as several limited liability companies for acquiring acute care and specialty hospitals, ASCs, and other ancillary facilities.
Mr. Zigrang can be contacted at (800) 394-8258 or by e-mail to tzigrang@healthcapital.com.
Jessica Bailey-Wheaton, Esq., is vice president and general counsel for Heath Capital Consultants, where she conducts project management and consulting services related to the impact of both federal and state regulations on healthcare exempt organization transactions, and provides research services necessary to support certified opinions of value related to the fair market value and commercial reasonableness of transactions related to healthcare enterprises, assets, and services.
Ms. Bailey-Wheaton can be contacted at (800) 394-8258 or by e-mail to jbailey@healthcapital.com.
