Hospitals and health systems nationwide continue to navigate uneven financial pressures that weighed on performance in late 2025 and continued to strain financial results at the start of 2026, according to the Q4 Strata Performance Trends report.
Key findings include:
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Non-labor expense growth outpaced labor expense growth for more than a year, with the gap widening on both a total and per adjusted discharge basis by the end of 2025.
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Drug expenses increased at a substantially faster rate than medical supply expenses, significantly contributing to the recent acceleration in non-labor expense growth.
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Outpatient revenue growth continued to exceed inpatient revenue increases, reflecting long-running shifts in care delivery to outpatient settings.
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Health systems placed heightened emphasis on workforce stability, increasing compensation and benefits to attract and retain staff even as productivity levels remain relatively steady.
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Organizational hiring patterns show a clear prioritization of patient-facing roles, with growth in front-line staffing juxtaposed with reductions in management.
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Health system operating margins dipped into the red to start the new year, decreasing to negative 0.6% as month-over-month revenue decreases outpaced expense declines.