What's Happening?
According to Kaufman Hall's 2025 Health System Performance Outlook report, hospitals are experiencing significant increases in non-labor costs, workforce retention issues, and reimbursement challenges.
Nearly 60% of surveyed organizations reported non-labor cost increases of 6% to 10% over the past year, largely due to tariffs and reimbursement difficulties. Workforce optimization remains a priority, with hospitals focusing on staffing strategies, including raising wages and offering bonuses. The report also highlights the pressures from payer reimbursement, such as claim denials and administrative burdens. These challenges are compounded by rising bad debt and charity care, which are expected to continue into 2026.
Why It's Important?
The financial pressures faced by hospitals have significant implications for the healthcare industry. Rising non-labor costs and workforce challenges can strain hospital resources, potentially affecting patient care quality and access. The ongoing reimbursement issues further complicate financial stability, making it crucial for hospitals to strengthen their operational resilience. As hospitals navigate these challenges, there may be broader impacts on healthcare delivery, policy, and patient outcomes. The need for effective cost management and workforce strategies is critical to ensuring the sustainability of healthcare systems.
What's Next?
Hospitals are likely to continue focusing on strengthening their financial and operational strategies to address these challenges. This may involve further investment in workforce optimization and exploring new reimbursement models. As the industry adapts to these pressures, there could be increased collaboration between hospitals and payers to develop more sustainable financial practices. Additionally, monitoring labor trends and demographic shifts will be essential for hospital leaders to anticipate and respond to future challenges effectively.
