Challenges Facing Hospitals in 2025 and Beyond

Cost, Workforce, and Reimbursement Issues

Hospitals are grappling with a multitude of challenges related to costs, workforce management, and reimbursement as they approach the end of 2025, according to a recent report by Kaufman Hall. The “2025 Health System Performance Outlook” highlights that health systems are striving to alleviate the effects of tariffs and rising supply costs. Additionally, hospitals are focused on retaining clinical staff while opting to outsource various functions.

Financial Outlook and Survey Insights

The report reveals a concerning outlook among hospital leaders, with only 30% anticipating an improvement in balance sheets by 2026. Conversely, 30% expect a decline, while 40% predict minimal changes. This divide underscores the uncertainty health systems face, particularly in light of recent regulatory changes stemming from the “Big Beautiful Bill” and the impending expiration of Affordable Care Act subsidies.

Pressure on Balance Sheets

Impact of Tariffs and Rising Expenses

Hospitals are under significant pressure to enhance their financial stability as increasing expenses and potential healthcare policy shifts threaten care delivery. A key concern is the impact of tariffs instituted by former President Donald Trump, which have raised the costs of essential supplies such as needles and catheters. Nearly 60% of survey respondents reported that non-labor costs rose by 6% to 10% in the past year, with many citing tariffs as a contributing factor.

Labor Costs and Staffing Challenges

Labor expenses are another critical issue for health systems, worsened by the pandemic’s effects on workforce retention and high contract labor rates. According to Kaufman Hall, labor costs per calendar day have increased by 5% through September 2025 compared to the previous year. In response, many hospitals are forming work groups to address tariff impacts and are actively working to adjust staffing levels. Over 80% of hospitals have raised starting salaries and introduced signing bonuses to attract clinical staff.

Capacity Challenges and Patient Care

High Patient Volumes and Emergency Department Constraints

Capacity remains a significant challenge for hospitals, particularly as they struggle to accommodate high patient volumes. This situation can inflate costs and adversely affect patient care. The report indicates that rising acuity levels, an aging population, and increasingly complex patient needs are resulting in extended stays in emergency departments and inpatient settings. Almost 80% of survey participants identified delays in emergency department processing as the primary constraint on capacity.

Addressing Care Denials from Payers

Hospitals continue to face significant challenges with care denials from insurance providers. Survey respondents highlighted issues related to eligibility, authorization, and benefits verification as the most pressing concerns. Delays in payer response times and inadequate denial tracking exacerbate these challenges. In response, hospital and physician leaders are working to improve authorization workflows and are establishing joint committees with payers to address recurring issues. However, a majority of respondents believe that fundamental changes in insurer structures and increased investment in preventive care are necessary to effectively combat improper denials.

Survey Methodology

Kaufman Hall conducted a survey involving leaders from over 100 hospitals and health systems for this report. The majority of respondents held executive or finance positions within their organizations.