Financial performance among hospitals and medical groups is becoming more polarized, according to new data from Kaufman Hall’s Q3 2025 Physician and Hospital Flash Reports.

While median subsidy per provider has remained relatively flat for the first time since the pandemic, the spread between high- and low-performing organizations continues to grow.

The median provider subsidy, defined as net patient service revenue minus total expenses per full-time provider, stood at $237,911 in the third quarter, down slightly from $239,338 in Q2. Subsidies ranged widely, from $141,371 to $325,634 per provider. Labor costs remain a major contributor, accounting for 84.2% of total expenses.
“While the median subsidy last quarter held relatively flat, a closer look at the data show that this trend is likely driven by higher performing practices that are better able to manage costs and grow revenue,” said Matthew Bates, managing director and physician enterprise service line leader at Kaufman Hall. “The differentiation between practice performance is significant, and demonstrates that it is possible to strategically contain labor costs.”

The data also show a continued increase in advanced practice providers (APPs) across both primary care and specialty practices.

Hospital data from the same reporting period reflect similar disparities. Kaufman Hall’s National Hospital Flash Report showed an adjusted year-to-date operating margin of 2.9% in September, a slight improvement from the prior month. However, margins ranged from 14.7% among top-quartile hospitals to -1.8% among those in the bottom quartile.

“The gap between strong performers versus struggling hospitals continues to widen,” said Erik Swanson, managing director and data and analytics group leader at Kaufman Hall. “Hospitals need to think about how to manage increased volumes despite flat margins.”

Rising drug costs also contributed to ongoing financial strain, with increased use of advanced pharmaceuticals identified as a pressure point.

The reports are based on data from more than 1,300 hospitals and 200,000 providers, sourced from Strata Decision Technology.

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