Hospitals’ operating margins improved from March to April but generally remain under siege as expenses rise and shifts in coverage, per Kaufman Hall’s latest monthly benchmark data.
The firm outlined an increase in its sector-wide single-month operating margin index from 3% to 3.4% (both inclusive of health system allocations for the cost of shared services).
On a calendar year-to-date basis, the index rose to 2.5% through April—an improvement considering the sector’s weak opening in January amid storms and low respiratory activity, but still well below the 3.6% operating margins logged across 2025.
The advisory firm’s report highlighted hospitals’ “mixed performance on key volume indicators, staffing challenges and expense growth” to explain the first four months of 2026’s middling margins.
Daily net operating revenue and gross operating revenue respectively rose 1% and 2% month to month. Inpatient revenues dipped by 1% while outpatient revenue increased 3%. Net patient service revenue declined 3% per adjusted discharge, but remained flat per adjusted patient day.
On the expense side, daily total expense increased 2% month to month, split between a 1% rise in labor expense and 3% increase in non-labor expense. However, per adjusted discharge, total expense dipped 2%, with labor expenses falling 3% and non-labor expenses dropping 2%.
On a year-to-date basis, hospitals’ daily net and gross operating revenues, as well as total expenses, are all up 7% compared to early 2025. Per adjusted discharge, net patient service revenue and total expense are both up 5%, with non-labor expenses notably rising by 8%.
Here, Kaufman Hall noted that hospitals’ expense growth has been outpacing broader inflation “driven by both cost and utilization as the population ages, underscoring the importance of strategic spend management across the board.”
As for those “mixed” volumes, daily discharges were flat month to month and down 1% year to date, whereas adjusted discharges (which include outpatient activity) rise 3% from March and by 2% compared to early 2025. Average length of stay has declined across both measures while daily operating room minutes have increased. Year-to-date, daily ED visits have dipped by 2% year over year.
Continuously eroding payer mix was the firm’s other callout in this month’s report. Daily bad debt and charity rose 5% from March to April, and as a percentage of hospitals’ gross operating revenue increased 3%. Their four-month rises are even more stark, with those jumping 22% and 13% compared to early 2025.
“Year-over-year climbs in bad debt and charity care reflect broader shifts in payer mix, shifts in coverage, and growth in uninsured populations, requiring hospitals to proactively adapt and manage long-term revenue risks,” the firm warned.
Kaufman Hall’s reports pull data from more than 1,300 nationwide hospitals as collected by Strata Decision Technology.