AHA: Hospitals' total expenses rose by 7.5% in 2025

Hospitals’ total spending rose 7.5% last year amid patient volume increases, persistent wage pressure and a jump in drug spending, according to industrywide numbers shared by the American Hospital Association in its annual “Costs of Caring” report. 

The lobbying group’s analysis, largely built on industry benchmark data from Strata Decision Technology and other sources, showed that the year-over-year total expense  included a 5.6% increase in workforce spending (accounting for 60% of total expenses), a 9.9% increase in supplies (19% of total) and a 13.6% bump in drug spending (9% of total). 

The spending increases are accompanied, and are at least partially explained by, an uptick in the quantity of care hospitals delivered—inpatient volumes rose 5.3% while outpatient volumes grew 9.8%. 

The AHA also went on to highlight data from years prior (2019 through 2024) indicating that hospital case-mix index rose by about 5%, meaning that hospitals had been treating sicker, more care-intensive patients in the run-up to 2025’s spending increases. Based the group’s annual member survey data, the AHA estimated about 36% of cost growth across the five-year window was tied to volume increases, 19% to patient acuity and the remaining 45% by input expenses like staff and supplies. 

The AHA contrasted the 2025 increases and prior years’ trends against last year’s 3.3% increase in hospital prices. It noted that hospital care has generally maintained its roughly one-third share of the country’s total health spending, and referenced analyses attributing much of the bump in recent years to utilization and acuity. 

“In other words, despite hospitals facing higher labor and input costs, treating more patients with greater clinical complexity, and maintaining essential, always-on services that communities depend on, they have managed to keep price increases below the increases in their input costs,” the report (PDF) reads. “However, this mismatch between expenses and revenue leaves hospitals increasingly at risk of being able to maintain the full spectrum of services on which communities rely.”

Despite that conclusion, the report does not directly compare the rising expenses to hospitals’ total revenues (which would also increase with greater volumes) or operating margins—though other industry analyses suggest the sector has weathered a slight year-over-year decline in the latter.

Rather, the AHA outlined the negative margins hospitals incur in specific service lines, such as behavioral health (-25.5%), burns and wounds (-19.1%), and infectious disease (-12.9%). The group noted that 56.1% of all hospital costs are tied to these service lines “where reimbursements fall short, or is less than, the cost to deliver care,” and that the payment shortfalls are felt across public and commercial insurers alike. 

Additionally, the AHA’s report stressed another drag on hospital finances—almost $18 billion collectively spent in 2025 on overturning claims initially denied by payers, per Premier. The AHA added that its most recent annual survey suggests hospitals spent $43 billion in 2025 on collecting payments from insurers, and noted that in 2024, the average hospital employed 64 administrative and billing staff to tackle the issue. 

“Rising costs for labor, supplies, drugs and administrative burdens caused by corporate insurers, combined with caring for sicker patients, have created challenges for hospitals and health systems,” AHA President and CEO Rick Pollack summarized in an accompanying press release. “These strains are jeopardizing hospitals’ ability to provide around-the-clock care and services that patients and communities need.”