Article
What the April numbers show
The National Hospital Flash Report released June 18, based on data from more than 1,300 hospitals, put the average April operating margin at 2.5%. That is up from 2.3% in March and 2.1% in February, but well below the 3.5% hospitals posted in May 2025. Year to date, margins are down 4 percentage points from the same period last year.
The squeeze is not about demand. Net operating revenue per calendar day rose 8% from April 2025, with inpatient revenue up 6% and outpatient revenue up 9%. Discharges per day grew 2% year over year, and average length of stay fell 2%. Expenses, however, grew 7%, eating most of the revenue gain.
Non-labor costs are now the driver
Labor, long the focus of cost programs, rose a relatively modest 4%. Non-labor expenses rose 9%. Within that, drug expenses rose 9% and supply expenses 7%. The report attributes drug and labor growth to both higher prices and higher use as the patient population ages, and it notes that expense growth continues to outpace inflation.
At the same time, bad debt and charity care rose 22% from a year earlier and 52% since 2023, reflecting shifts in payer mix and coverage and a growing uninsured population. That combination of rising input costs and more unpaid care leaves little room for error.
Where leaders can act
- Drug spend. Review high-cost drug utilization with pharmacy and medical staff leaders, tighten formulary management and confirm that site-of-care and biosimilar opportunities are being used.
- Supply contracts. Revisit pricing tiers and committed volumes, and standardize physician preference items where clinicians agree on equivalent products.
- Purchased services. Audit outside contracts, which can grow without the scrutiny applied to headcount.
- Revenue integrity. With uncompensated care climbing, invest in eligibility screening and financial counseling so eligible patients are enrolled in coverage before balances become bad debt.
What to tell the board
Volumes and revenue are healthy, but they are not translating into margin. Boards should expect management to explain cost growth by category, not in total, and to show which non-labor initiatives are funded and when savings will appear. A 2.5% margin offers little cushion for capital needs or for payer and policy changes later in the year.
Archive entry for Jun 19, 2026, added Nov. 11, 2026.