37% of hospitals still losing money

By Laura Dyrda / February 27, 2025

Thirty-seven percent of U.S. hospitals are still losing money despite big initiatives to recover from the COVID-19 pandemic, according to Kaufman Hall.

Hospital and health system C-suites have been identifying ways to cut costs and become more productive, relying less on expensive contract labor and instead growing a talent pipeline from within. They've also incorporated digital technologies and artificial intelligence to support the workforce and become more efficient. But inflation and rising salaries have kept expenses high and reimbursement increases haven't kept up.

Last year, Kaufman Hall reported 40% of hospitals were losing money; the three percentage point drop shows slow progress toward financial stability but the 37% of hospitals still losing money are faced with tough decisions. In recent weeks, multiple hospitals have announced layoffs or restructures; others are ending service lines or outsourcing administrative functions.

Kaufman Hall has also followed the chasm between high and low performing hospitals, which continues to grow. Even as some hospitals reduce staff, others are providing widespread raises and bonuses. They're investing in AI-driven technologies to boost the workforce and streamline operations, giving them a further advantage over poorly performing hospitals.

The average hospital margin last year was 4.9% by the end of December, buoyed by a 7.8% average margin for the last month of the year, according to Kaufman Hall's "National Hospital Flash Report." Operating revenue per calendar day was up 9% year over year, with both inpatient and outpatient revenue growing in the high single digits. Expenses per calendar day grew 6% year over year, with supply and drug expenses per calendar day each rocketing 9%.

Observation days as a percentage of patient days dropped 13%, reflecting the work hospitals have been doing to make patient flow more efficient.

Hospital C-suites are focused on increasing revenue streams as supply ghosts and expenses are expected to continue increases. They're also looking for ways to combat physician burnout and improve quality care as well as retention. Value-based care is also accelerating, and hospitals are finding ways to provide more care at home or outside the main campuses.

"Navigating these challenges requires a balanced approach that prioritizes financial sustainability, clinician well-being, and technological advancement while maintaining our core focus on delivering high-quality patient care. Success in 2025 will depend on our ability to innovate, adapt, and implement data-driven solutions across all aspects of healthcare delivery," Ebrahim Barkoudah, MD, system chief and regional chief medical officer at Springfield, Mass.-based Baystate Health, told Becker's late last year.