What's Happening?
Hospitals and health systems across the United States are experiencing significant increases in non-labor expenses, primarily driven by tariffs and ongoing challenges with payer reimbursement. According
to Kaufman Hall's 2025 Health System Performance Outlook report, nearly 60% of surveyed organizations reported non-labor cost increases of 6% to 10% over the past year. The report highlights that 83% of respondents have taken steps to quantify the financial impact of tariffs. Additionally, hospitals are facing workforce retention issues, with many institutions raising wages, offering bonuses, and utilizing advanced practice providers to address staffing challenges. The report also notes that payer reimbursement pressures, including high claim denial rates, are impacting financial stability, with 44% of hospitals identifying high denial rates as a significant challenge.
Why It's Important?
The rising costs and reimbursement challenges faced by hospitals have broad implications for the U.S. healthcare system. Increased expenses can lead to higher healthcare costs for patients and may strain hospital resources, potentially affecting the quality of care. The financial pressures could also impact hospital operations, leading to workforce reductions or changes in service offerings. As hospitals strive to maintain financial resilience, these challenges highlight the need for policy interventions to address tariff impacts and streamline reimbursement processes. The situation underscores the importance of strategic planning and operational adjustments to ensure long-term sustainability in the healthcare sector.
What's Next?
As hospitals continue to navigate these financial challenges, they are likely to focus on strengthening their operational footing to enhance resilience. This may involve further adjustments in staffing models, increased reliance on advanced practice providers, and strategic financial planning. Hospital leaders will need to closely monitor labor trends and payer reimbursement policies to adapt to changing conditions. Additionally, potential policy changes related to Medicaid and other reimbursement frameworks could influence hospital strategies moving forward. The healthcare industry may also advocate for policy reforms to mitigate the impact of tariffs and improve reimbursement processes.
