Dive Brief:
Hospitals are managing series of cost, workforce and reimbursement challenges as they navigate uncertainty at the close of 2025 and beyond, according to a new report from Kaufman Hall.
Health systems are attempting to mitigate the impact of tariffs and increasingly expensive supplies, according to Kaufman Hall’s 2025 Health System Performance Outlook report. At the same time, hospitals are trying to retain clinical staff and outsource other functions, according to the report.
Only 30% of hospital leaders surveyed expect balance sheets to improve in 2026, while 30% expect them to lower and 40% projected little change. The split highlights how uncertain health systems feel about the future, especially from recent regulatory changes in the “Big Beautiful Bill” and the likely expiration of Affordable Care Act subsidies.
Dive Insight:
Hospitals have been under pressure to strengthen their balance sheets as rising expenses and looming healthcare policy changes threaten to upend how they deliver care.
In particular, health systems are hoping to mitigate the impact of President Donald Trump’s tariffs, which have been making the supplies that hospitals purchase, like needles and catheters, more expensive.
Nearly 60% of respondents to the Kaufman Hall’s survey said that non-labor costs had increased between 6% and 10% over the past year. Some hospitals pointed to tariffs, which Trump rolled out on a number of countries worldwide in April, as a contributor to the strain.
Labor expenses are also a pain point for health systems, as the sector’s difficulties with high contract labor rates and workforce retention were exacerbated by the coronavirus pandemic. Labor expenses per calendar day are up 5% through September 2025 compared to the same period in 2024, according to Kaufman Hall.
In response to rising costs, many hospitals have set up work groups to try to better respond to tariffs, Kaufman Hall found. Hospitals are also trying to rightsize their staffing, by outsourcing non-core functions while trying to recruit and retain clinical workers.
More than 80% of hospitals said they were raising starting salaries and offering signing bonuses to attract new members of their clinical teams.
Besides expenses, capacity also remains a significant challenge, according to survey respondents. Difficulty accommodating high patient volumes can drive up costs and negatively impact patient care.
Rising acuity, an aging population and more complex patients are leading to longer lengths of stay in both emergency departments and inpatient settings, according to the report. Almost 80% of respondents said holdups in the emergency department were the most significant constraint to capacity.
Nearly two-thirds of respondents hold biweekly meetings to identify discharge problems, according to Kaufman Hall.
Hospitals also continue to grapple with care denials from payers. Respondents said the most pressing issues came from breakdowns in eligibility, authorization and benefits verification. Still, delays in response times from payers and ineffective denial tracking further compound the problem, according to the report.
In response, hospital and physician leaders are strengthening authorization workflows and forming joint committees with payers to troubleshoot recurring issues. However, respondents said structural insurer changes, better advocacy and more investment in prevention would be required to stop improper denials, rather than relying on appeals down the line.
Kaufman Hall surveyed leaders from more than 100 hospitals and health systems for the report. Most respondents were hospital executives or in finance roles.
