AHA Report Shows Trends Impacting Hospital Financial Stability
On April 30, the American Hospital Association (AHA) released a report on the challenges facing American hospitals. The Cost of Caring: Challenges Facing America’s Hospitals in 2025 outlines the financial burden that intensified expenses have placed on hospitals in recent years.
The key trends reported by AHA are:
- Labor costs dominate hospital expenses
- Medicare reimbursements continue to lag behind inflation
- Total hospital expenses grew 5.1 percent, outpacing the overall inflation rate of 2.9 percent
- Higher utilization and acuity, especially among patients with chronic conditions, are driving hospital costs
Also of note is the Medicare Advantage (MA) practice of some plans extending observation stays to avoid admitting patients as inpatients is worsening. This practice shifts the financial burden onto hospitals. At the same time, the average length of inpatient stays for MA patients grew substantially compared to Traditional Medicare, but reimbursements from MA plans fell. Delays in discharging due to prior authorization requirements or insufficient post-acute provider networks within MA plans, contribute to the problem.
Additionally, the report pointed out the impact of tariffs on hospital costs. According to the AHA, changes in U.S. trade policy are creating additional uncertainty. Tariffs on critical goods could worsen shortages, disrupt patient care, and raise hospital costs. Notably, nearly 70 percent of medical devices marketed in the U.S. are manufactured overseas.
“This report should serve as an alarm bell that a perfect storm of rising costs, inadequate reimbursement, and certain corporate insurer practices are jeopardizing the ability of hospitals to deliver high-quality, timely care to their communities,” said AHA President and CEO Rick Pollack in a statement. “With so much at stake, policymakers must recommit to preserving access to hospital care as a national priority.”
