Hospital margins are under pressure and the latest data shows the strain is not evenly distributed.

According to Kaufman Hall’s April 2026 National Hospital Flash Report, which draws on data from more than 1,300 hospitals nationwide, hospital finances are being squeezed from multiple directions at once. Expenses are running higher in early 2026 than they were a year ago. Revenues remain below sustainable levels, weighed down by an eroding payer mix. And patient volumes, while showing resilience in some service lines, have softened overall. Inpatient days are declining even as average length of stay holds steady.

Hospital performance is bifurcating sharply by size, geography, and market position. Large academic medical centers and health systems with 500 or more beds are holding up considerably better than smaller community and critical access hospitals, which are absorbing some of the steepest year-over-year margin declines on record. Regionally, the West is facing the most acute short-term pressure, while the South and Northeast show more stability in multi-year comparisons.

How margins are trending in early 2026

1. The median calendar year-to-date operating margin including allocations was 1.9% in February 2026, up from 1% in January — the lowest reading of the trailing 12-month period. Without allocations, the CYTD median came in at 5.5% in February, also up from 4.6% in January.

2. Looking at the monthly index, the single-month operating margin including allocations was 2.1% in February and 5.7% without allocations. That compares to a low of 1.0% in January and a peak of 6.4% in December 2025, the strongest single-month reading of the trailing year.

3. November 2025 was the weakest individual month in all of 2025, with a monthly operating margin of just 0.7% including allocations. The lowest CYTD operating margin of 2025 was 2.6%, recorded in April.

4. The peak CYTD operating margin in the trailing 12 months was 3.7%, recorded in December 2025 including allocations, and 7.3% without allocations.

5. Health system operating margins turned positive after two months in negative territory, according to Strata’s May Monthly Healthcare Industry Financial Benchmarks report. Health system margins increased from -0.3% in February to 0.4% in March. Strata’s report noted the slowly improving hospital margins indicate a “fragile recovery.”

Year-over-year and long-term national picture

6. The year-over-year comparisons tell a challenging story. National operating margin fell 13% comparing February 2026 to February 2025, while operating EBITDA margin dropped 12% over the same period.

7. Year-to-date, operating margin in early 2026 is essentially flat versus the same period in 2025. But zoom out and a recovery is visible: YTD operating margin is up 14% compared to the same period in 2023, and operating EBITDA margin is up 7% over that same three-year span.

Regional breakdown: where margins are and aren’t holding

8. Every region posted year-over-year operating margin declines in February 2026, but the depth of those declines, and the longer-term trajectory, varies considerably.

9. The West saw operating margin fall 21% year-over-year, the sharpest short-term decline of any region, and operating EBITDA margin fell 14%. Despite that, the region’s longer-term story is among the strongest: comparing YTD 2026 to YTD 2023, West operating margin is up 59% — the largest three-year gain of any region.

10. Midwest operating margin fell 9% year-over-year in February 2026, and fell 12% comparing YTD 2026 to YTD 2025. On a three-year basis, Midwest margins are up just 4% against YTD 2023, the smallest long-term recovery of any region.

11. The South posted a 16% year-over-year operating margin decline in February 2026, with operating EBITDA margin down 10%. The three-year view is more favorable: South operating margin is up 29% compared to YTD 2023.

12. The Northeast/Mid-Atlantic region reported the shallowest year-over-year decline, with operating margin down just 2%, though operating EBITDA margin fell a steeper 8%. On a three-year basis, the region’s operating margin is up 8% versus YTD 2023.

13. Great Plains operating margin fell 12% year-over-year and operating EBITDA margin fell 11%. The three-year comparison shows a 19% improvement in operating margin versus YTD 2023.

Performance by hospital bed size: a widening divide

14. The bifurcation of hospital performance is most stark when broken down by bed size. Smaller hospitals, particularly those in the 26–99-bed range, are absorbing the largest year-over-year margin hits, while the largest systems are the only category posting positive year-over-year growth.

15. Hospitals in the 0–25-bed category saw operating margin fall 22.8% year-over-year in February 2026, and decline of 17.3% comparing YTD 2026 to YTD 2025. Against YTD 2023, however, operating margin is up 17.2%, suggesting some recovery from the post-pandemic trough.

16. This size category is under the most acute pressure in the dataset. Hospitals with 26–99 beds posted a 23.9% year-over-year operating margin decline, the steepest of any bed size category. Operating EBITDA margin fell 21% over the same period. The three-year comparison offers some relief: operating margin is up 14.3% versus YTD 2023.

17. Hospitals with 100–199 beds saw a more moderate year-over-year operating margin decline of 2.9%, and a 3.8% decline comparing YTD 2026 to YTD 2025. 41. The three-year view shows operating margin up 6.7% versus YTD 2023.

18. Hospitals in the 200–299-bed range were one of only two size categories to post positive year-over-year operating margin growth, up nearly 1% in February 2026. Their three-year trajectory is also strong, with operating margin up 16% versus YTD 2023.

19. Hospitals with 300–499 beds saw a 5.3% year-over-year operating margin decline, and a significant 16.6% drop comparing YTD 2026 to YTD 2025. One bright spot: this group posted the strongest month-over-month swing of any bed size, with operating margin rising 13.6% from January to February 2026. The three-year comparison shows a 4.4% improvement versus YTD 2023.

20. The largest hospitals are clearly the strongest performers in this environment. Hospitals with 500 or more beds were the only other category, alongside the 200–299 group, to post positive year-over-year operating margin growth, up 3.1% in February 2026. Their three-year operating margin improvement of 23.9% versus YTD 2023 is the highest of any bed size, and 50. operating EBITDA margin is up 24.5% over that same span.

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