Rising Drug Costs Add to Financial Challenges for U.S. Hospitals and Health Systems as Policy Changes Loom

Two New Strata Reports Highlight Mounting Expense Pressures and Potential Impacts of Tariffs, Medicaid Changes

CHICAGO — Sept. 3, 2025 — Hospitals across the country are grappling with soaring drug costs that show no signs of slowing, according to two new reports from Strata Decision Technology. Organizations that treat the sickest patients face the steepest increases — a trend that could intensify as proposed federal pharmaceutical tariffs take effect. 

Looking first at specific service lines, the cancer service line saw one of the largest increases in inpatient drug expenses per case, with the metric jumping 65.4% year-over-year (YOY) to close the second quarter in June. The normal newborn service saw the highest increase at 69.7% over the same period, according to the Q2 Strata Performance Trends report. 

Among different types of institutions, academic medical centers and safety net hospitals — which both handle many of the most complex patient cases — saw total drug expense increases of 16% and 15% from June 2024 to June 2025, respectively. Across all hospital types, the quarterly report also found that those with higher patient complexity, as measured by case-mix index, saw expenses spike as much as 23% in a single month this spring compared to a June 2024 baseline. 

Nationally, the median increase in total drug expense was 9.8% across all hospitals from June 2024 to June 2025. The trend continued with the start of the third quarter, with the median increase in total drug expense rising 9.5% YOY in July, according to Strata’s Monthly Healthcare Industry Benchmarks

U.S. hospitals and health systems are contending with these rising costs against a backdrop of policy uncertainty. The Trump administration has announced plans to impose pharmaceutical import tariffs of up to 200% within the next 18 months. At the same time, industry analysts predict proposed changes to Medicaid could reduce coverage for millions of low-income Americans. Such measures, layered on top of already steep expense growth, could place unprecedented financial pressure on healthcare organizations. 

As of the latest data from July, operating margins for health systems nationally remained narrow but relatively stable. According to the monthly report, the median year-to-date (YTD) health system operating margin dipped slightly to 0.9% in July, down from 1.2% in June but still close to 1%, consistent with levels since January. Analysis in the quarterly report found that Days Cash on Hand — a key measure of liquidity — held steady at a national median of 128 in June, but safety net hospitals remain at risk. While these institutions improved their cash reserves over the past year, they are more exposed to policy changes that could reverse those gains. 

“Hospital performance in Q2 and early Q3 reflects both resilience and risk,” said Steve Wasson, Chief Data & Intelligence Officer at Strata Decision Technology. “Organizations are holding steady for now, but rising drug expenses combined with looming policy changes are a one-two punch that could quickly erode financial stability. Healthcare leaders need to prepare for significant uncertainty in the months ahead.” 

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About the Data

The reports use data from Strata’s StrataSphere® and Comparative Analytics database. Comparative Analytics offers access to near real-time data drawn from more than 152,000 physicians from over 10,000 practices and 139 specialty categories, and from 500+ unique departments across more than 1,8000 hospitals. Comparative Analytics also provides data and comparisons specific to a single organization for visibility into how their market is evolving. StrataSphere is a unique and comprehensive data-sharing platform that helps providers leverage the power of a network that represents approximately 25% of all provider spend in U.S. healthcare. 

About Strata Decision Technology

Strata Decision Technology provides a cloud-based platform for software and service solutions to help organizations better analyze, plan, and perform in support of their missions. With the combination of Syntellis Performance Solutions’ Axiom solutions, more than 2,300 organizations rely on Strata to provide their financial analytics, planning, and performance solutions. Strata has been named the market leader for Business Decision Support for 18 consecutive years. By uniting these two industry leaders, Strata continues to deliver market-leading solutions and world-class service, with an increased focus on accelerating innovation. For more information, please go to www.stratadecision.com.   

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Media contact:

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