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 Health Capital Topics 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 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).