by Michael Koeninger
The headline number from mid-2026 is technically encouraging: hospital revenue is growing.
But revenue figures have a way of obscuring what’s actually happening on the margin line and right now the picture underneath is considerably more complicated.
Expense growth is running close behind revenue growth; the payor mix has worsened materially as federal Marketplace subsidies expired, and a growing share of patients are deferring procedures they would otherwise be scheduling.
For hospital finance teams, the 2026 story is really about the distance between topline performance and bottom-line stability.
Revenue Is Growing, But Expenses Continue to Eat It Away
Strata Decision Technology’s May 2026 benchmarks show not-for-profit health systems posting a year-to-date operating margin of 0.4%, with individual hospitals improving operating margins by 0.2 percentage points year over year — a real gain, though one that still leaves very little financial cushion.
That gap between system and hospital-level numbers is worth flagging.
Health system consolidated financials don’t always reflect what’s happening at the individual hospital, particularly when enterprise-level administrative costs aren’t fully pushed down to the facility. It’s a distinction that matters when trying to locate where the real financial pressure sits.
Gross operating revenue increased 5.9% year over year, with inpatient up 5.7% and outpatient up 6.1%. These are strong numbers.
The challenge is that expenses grew nearly as fast. Total hospital expenses climbed 5.5%, driven primarily by:
- Supplies: +4.0%
- Labor: +3.9%
- Pharmaceuticals: +3.3%
Inflationary pressure has eased somewhat since the post-pandemic peak, but the spread between revenue and expense growth has narrowed to the point where most hospitals are operating with very limited financial slack.
The Payor Mix Is Moving in the Wrong Direction
The more significant story developing this year involves the ACA Marketplace. When enhanced federal subsidies ended, enrollment fell by nearly 3 million people.
The working assumption among many health system finance teams was that those individuals would find their way into employer coverage, Medicaid, or some other product. The Q2 earnings calls largely told a different story.
A substantial portion of those patients became uninsured while continuing to seek care, a pattern that’s now visible in the actual financials.
HCA Healthcare reported Marketplace admissions declining 15%, with approximately 22,000 patients shifting into self-pay status rather than transitioning to other coverage. The impact was direct: second-quarter income before income taxes declined by approximately $400 million.
Tenet Healthcare saw comparable pressure.
Marketplace admissions were down 13.5%, resulting in approximately $65 million in lost revenue. Community Health Systems also reported a sharp increase in self-pay, prompting leadership to revise portions of its 2026 financial guidance.
For not-for-profit hospitals, the aggregate effect showed up in uncompensated care, which increased 9.3% year over year.
The care is being delivered. What’s shifted is who ultimately absorbs the cost, and increasingly, the answer is the hospital.
Patients Are Delaying Elective Procedures
Orthopedic cases provide an instructive window into what’s happening with elective procedures more broadly.
When a patient’s deductible has gone up and household finances are tighter, a hip replacement tends to get postponed. That calculus is now showing up across multiple service lines.
HCA reported emergency surgeries increasing even as elective inpatient cases declined. CHS confirmed similar softness in orthopedic and certain cardiac procedures.
Leadership across these systems pointed to a consistent set of pressures: more patients now lack insurance, deductibles have risen in both Marketplace and employer-sponsored plans, and the broader economic uncertainty of 2026 has made significant out-of-pocket spending feel riskier than it otherwise would.
Even cardiac procedures aren’t immune. Patients are postponing cardiology visits and recommended screenings that would, under different financial circumstances, typically lead to intervention.
Importantly, most organizations are still seeing growth in clinic visits, imaging studies, and outpatient evaluations. Patients haven’t stepped back from the healthcare system; the deferral is happening between the initial evaluation and the higher-cost procedure that follows from it.
Outpatient Volumes Pause While Inpatient Demand Holds Up
The not-for-profit outpatient picture adds another layer worth watching.
After years of consistent growth, outpatient volumes fell 1.8% year over year and dropped 8.4% in the single month from April to May. This is a notable reversal. Emergency department visits also declined modestly.
Whether that reflects seasonal variation, a utilization shift linked to the insurance disruptions described above, or some combination remains unclear. The timing makes the latter difficult to dismiss entirely.
Inpatient volumes, by contrast, grew 2.4% year over year, which partially offset the outpatient softness on the revenue line.
Demand for Acute Care Remains Strong
Despite all of the near-term margin pressure, the long-term demand thesis remains intact, and the systems with capital are responding accordingly.
HCA, Tenet, and CHS all pointed to the same structural tailwinds on their earnings calls: population growth, an aging demographic, and rising rates of chronic disease.
HCA’s expansion plans make that conviction concrete. The system is planning to add roughly 1,000–1,200 inpatient beds and 250–300 new outpatient sites.
Tenet made a parallel case for the demand environment. Surgical volumes softened slightly, but revenue per case in its USPI ambulatory segment grew approximately 6.3%, reflecting a deliberate shift toward higher-acuity procedures and the revenue quality that comes with it.
CHS echoed the broader picture: clinic visits, orthopedic imaging, and diagnostic testing volumes are all growing at a healthy pace.
The friction, in other words, isn’t at the front door of the healthcare system. It’s in the interval between an initial evaluation and the higher-acuity procedure that follows. The gap is where the financial performance of the current moment is ultimately being decided.
Bottom Line
Taken together, the 2026 data reflects a structural gap between where revenue growth is landing and where it needs to be to actually strengthen hospital financial performance.
The 5.9% topline gain looks solid until you account for expenses running nearly as fast, uncompensated care up 9.3% as millions of newly uninsured patients continue seeking care, and a meaningful share of elective procedures being deferred rather than canceled outright. This is still affecting current-period revenue, just more gradually.
The underlying demand is real. Patients are showing up for evaluations, imaging, and diagnostic work, and the demographic and chronic disease trends that major systems are committing capital against are not going away.
What hospitals are navigating is the distance between that first-touch engagement and the reimbursable, higher-acuity services that actually move the financial needle. By reducing the economic friction that’s keeping patients from proceeding to the next step of care, closing the gap is the central operational challenge of the current environment.
Are you ready to strengthen your hospital’s performance? Connect with our healthcare consulting team to explore practical strategies for improving operations, financial performance, and long-term sustainability.
Michael Koeninger, Senior Manager
