Key provider performance metrics appear steady in aggregate but are showing stark differences between hospitals and practices at the top and bottom of their class, according to a pair of new reports from Kaufman Hall.
For hospitals, the firm’s operating margin index was 2.9% across nine months of 2025 (including health system allocations for the cost of shared services), a slight uptick from the 2.5% reflected through eight months. Splitting the report’s 1,300 nationwide hospitals into quartiles, however, showed a 14.7% year-to-date operating margin index among the top 25% of hospitals and a -1.8% year-to-date operating margin for the bottom quartile of hospitals.
“The gap between strong performers versus struggling hospitals continues to widen,” said Erik Swanson, managing director and data and analytics group leader with Kaufman Hall, said of the trend in a release.
Broadly speaking, the overall margin improvement from August to September stemmed from greater volumes and per-adjusted-admission revenue gains, and was partially mitigated by higher supply and drug costs, according to the firm’s monthly report. On a month-over-month basis, daily net operating revenue rose 4%, daily total expense rose 3% and daily adjusted discharges increased 2%.
“Hospitals need to think about how to manage increased volumes despite flat margins,” Swanson said. “There will be more demand for emergency departments and inpatient care, and the ability of hospitals to manage patient throughput will be increasingly important.”
As for practices, Kaufman Hall’s quarterly check-in highlighted, for the first time since the COVID-19 pandemic, a sequential decline in the median investment/subsidy per provider in medical groups. That metric—net patient service revenue minus total expense, then divided by provider full-time equivalents—was $237,911 in the third quarter, a 1% year-over-year increase but a minor dip from the second quarter’s $239,338.
Similar to hospitals, however, Kaufman Hall found a disparity within the report’s sample of 200,000 providers. The investment/subsidy per provider at the 25th percentile was $141,371 but $325,634 at the 75th percentile.
“While the median subsidy last quarter held relatively flat, a closer look at the data show that this trend is likely driven by higher performing practices that are better able to manage costs and grow revenue,” Matthew Bates, managing director and physician enterprise service line leader with Kaufman Hall, said in a release. “The differentiation between practice performance is significant, and demonstrates that it is possible to strategically contain labor costs.”
The report also outlined a 2% year-over-year increase in net patient revenue per provider full-time equivalent that lagged a 3% rise in total direct expense per provider full-time equivalent.
Productivity metrics also increased from the prior year and advanced practice providers comprised an increasingly higher proportion of the full provider workforce across primary care and specialties alike. The firm had found similar trends in its physician market report from the second quarter as well as a decline in ongoing support staffing levels.