Hospitals struggle with rising costs, falling patient volumes: report
ILLINOIS, UNITED STATES — United States hospitals entered 2026 under mounting financial pressure as rising costs, growing bad debt and declining patient volumes squeezed margins, according to a new report from Kaufman Hall.
The National Hospital Flash Report: January 2026 Data revealed that hospitals’ financial performance got off to a “shaky start” in January with bad debt and charity care climbing 8% year over year.
At the same time, patient volumes dropped across inpatient, outpatient and emergency care settings, weighing on already fragile revenues.
“Overall structural costs are poised to go up,” said Erik Swanson, managing director and data and analytics group leader at Kaufman Hall.
“Hospitals will need to be strategic about where to allocate resources and how to manage spending in what could be a challenging economic environment,” Swanson added.
Falling volumes, rising costs strain provider margins
The report points to a broad-based slowdown in patient activity. Discharges fell 2% year over year in January, while average length of stay declined 3%. Emergency department visits dropped 5%, contributing to weaker revenue performance across health systems.
The dip in volumes was partly attributed to fewer elective procedures following the holiday season and shifts in payer mix. For providers, the combination of lower utilization and a higher share of uninsured or underinsured patients is compounding financial strain.
Meanwhile, expenses continue to rise. Total costs per calendar day increased 5% year over year, with supply costs up 5% and drug expenses rising 7%. Labor costs, a long pressure point for hospitals, also climbed 5%, with the report noting a “big increase” in workforce-related spending.
These trends are forcing hospital leaders to reassess operating models, particularly as reimbursement fails to keep pace with inflationary pressures.
Coverage gaps and operational shifts reshape strategy
Hospitals are also grappling with a growing uninsured population, driven in part by policy changes, including Medicaid cuts under Donald Trump and the expiration of enhanced Affordable Care Act subsidies. As coverage declines, uncompensated care is rising, further eroding margins.
Large health systems are already bracing for financial impact. HCA Healthcare said it expects to lose up to $900 million this year due to subsidy rollbacks, while Tenet Healthcare projected a $250 million hit.
For providers, the environment is accelerating a shift toward cost discipline and operational efficiency. Many are reevaluating administrative overhead, with some turning to outsourcing partners for functions such as revenue cycle management (RCM), billing and back-office support to stabilize cash flow and reduce fixed costs.
While outsourcing is not a cure-all, it is increasingly viewed as part of a broader response strategy as hospitals, clinics and health systems navigate sustained financial headwinds and prepare for what could be a prolonged period of economic uncertainty.
