Hospital Margins Improve Thanks to Higher Volumes and Better Throughput — But Risks Remain 

Several hospitals in the U.S. have experienced a noticeable financial turnaround in the first four months of 2025, with operating margins increasing to an average of 3.3%, which is more than double the 1.4% reported in May 2024. Higher patient volumes and more efficient throughput have contributed to this growth, as per a new report by Kaufman Hall that analyzed data from 1,300 hospitals nationwide.  

What’s Driving the Improvement? 

As per the report, the two main contributors to the rise in margins are as follows: 

• Discharges per calendar day are up 3% year-over-year 
• The average length of stay is down 3% year-over-year 

These numbers reflect hospitals doing a better job of moving patients through the system more efficiently, especially as they tackle long-standing bottlenecks in patient transfer and discharge processes. 

The Managing Director at Kaufman Hall, Brian Pisarsky, noted that volume is just part of the equation, but to manage increased demand effectively is to improve throughput. The majority of the hospitals are now specifically focused on this challenge.  

Strategies That Are Working 

To cater to higher volumes without overburdening systems, hospitals are implementing a combination of strategies. Some of these are: 

• Embedding case managers in emergency departments 
• Creating ED-managed observation units to reduce unnecessary admissions 
• Conducting multidisciplinary rounds 
• Improving coordination across departments, from the ED to inpatient units, surgery, and transfer centers 

The results of these efforts have been visible. One hospital even reported a 10% increase in patient volume over the last year; however, their reduced length of stay allowed them to close a unit while still managing more patients effectively. 

Financial Challenges Still Loom 

Despite all these achievements, hospitals still remain fragile. Another managing partner at Kaufman Hall, Erik Swanson, warned that non-labor costs are the next major pressure point. 

In the first four months of 2025 and in comparison to 2024, labor cost growth slowed, and non-labor expenses rose by 8%. As the costs increase for goods, and continued supply chain disruptions could diminish the marginal gains that hospitals have worked hard to achieve. 

The Takeaway 

By increasing patient volumes and improving throughput, hospitals are making noticeable progress and are leading to stronger operating margins. However, with non-labor expenses rising fast, financial leaders in healthcare will need to stay alert. Operational efficiency, patient flow strategies, and cost containment across supply chains will remain top priorities for the rest of 2025. 

Shayne Bevilacqua, MBA, TRA, is the Principal and Owner of Professional Liability Insurance Group (PLIG) and Bevilacqua Insurance Group (BIG). As a Trusted Risk Advisor, Shayne works closely with healthcare providers and institutions to help them navigate financial exposures and liability risks. His strategic guidance ensures clients are prepared for operational challenges and protected against unexpected challenges.