Hospital margins showed modest improvement in March, though financial performance remains below 2025 levels as rising expenses and unfavorable payor mix continue to pressure providers, according to Kaufman Hall’s latest National Hospital Flash Report.

The Chicago-based healthcare consulting firm, part of Vizient, reported that adjusted year-to-date operating margins reached 1.7% through March, up from 1.3% in February.

Hospitals also reported increases in adjusted discharges compared with the same period last year, while patient days rose only slightly. Kaufman Hall said the figures suggest hospitals are continuing efforts to shorten length of stay and shift care toward outpatient settings.
Even with the month-over-month gains, hospitals continue to face lower overall operating margins than in 2025, alongside increases in bad debt, charity care and drug spending.

“Hospitals continue to see the effects of payor mix erosion and cost pressures,” Erik Swanson, managing director and data and analytics group leader at Kaufman Hall, said in a statement. “Proactive steps to strategically allocate resources and manage spend, through areas such as length of stay, outpatient care and growing expenses, will continue to be key.”

A separate quarterly Physician Flash Report from Kaufman Hall found physician enterprise productivity continued to increase in the first quarter. Provider work relative value units per full-time employee rose 3% year over year, reflecting sustained demand for care services.

The report also examined physician practice expense trends, finding labor costs accounted for 84.6% of total expenses. Compensation for physicians and advanced practice providers represented 71% of total costs, while support staff expenses accounted for 13.6%.

Advanced practice providers now make up 40% of the workforce measured in the report, prompting many organizations to reassess staffing and care delivery models.

“Physician practices have a significant opportunity to evaluate and evolve care team models to better align with the current landscape,” Matthew Bates, managing director and physician enterprise service line leader at Kaufman Hall, said in a statement.

The hospital report analyzed data from more than 1,300 hospitals collected by Strata Decision Technology. The physician report included data from more than 200,000 providers.

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