Gaps widen between high- and low-performing medical practices, hospitals
CHICAGO – November 12th, 2025 – For the first time since the COVID-19 pandemic, the median investment a medical group makes—or subsidy—per provider has plateaued, according to the quarterly Physician Flash Report from Kaufman Hall, a Vizient company. Median investment/subsidy per provider was $237,911 in Q3 2025, a slight change from $239,338 in Q2 2025.
Investment/subsidies per provider—which represent net patient service revenue minus total expense and are divided by provider full-time equivalents, or FTEs—have been trending upwards over the last few years. In Q3 they ranged from $141,371 on the lower end to $325,634 on the higher end. Labor as a percentage of total expenses remains high, at 84.2%.
“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,” said Matthew Bates, Managing Director and Physician Enterprise Service Line Leader with Kaufman Hall. “The differentiation between practice performance is significant, and demonstrates that it is possible to strategically contain labor costs.”
Advanced practice providers (APPs) also continue to grow as a proportion of the provider workforce. Data show a consistent shift to APPs across primary care and specialties.
In September, hospitals’ operating margin, a measure of profitability, remained stable according to Kaufman Hall’s latest National Hospital Flash Report. Kaufman Hall’s adjusted year-to-date operating margin was 2.9%, a slight increase over the previous month. However, data show that hospital performance is uneven, with margins ranging from 14.7% for hospitals in the top quartile to -1.8% for hospitals in the bottom quartile.
“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. “Patient volumes are increasing while margins hold steady. Hospitals need to think about how to manage increased volumes despite flat margins. There will be more demand for emergency departments and inpatient care, and the ability of hospitals to manage patient throughput will be increasingly important.”
Analysts say drug expenses continued to put pressure on hospitals in September. Experts note that increased use of more advanced pharmaceuticals, in part, are a contributing factor.
Kaufman Hall’s National Hospital Flash Report draws on data from more than 1,300 hospitals from Strata Decision Technology, LLC. The Physician Flash Report draws on data based on more than 200,000 providers, also from Strata.
About Kaufman Hall, a Vizient Company
Kaufman Hall, a Vizient company, provides management consulting solutions to help society’s foundational institutions realize sustained success amid changing market conditions. Since 1985, Kaufman Hall has been a trusted advisor to boards and executive management teams, helping them incorporate proven methods, rigorous analytics, and industry-leading solutions into their strategic planning and financial management processes, with a focus on achieving their most challenging goals.
Kaufman Hall services use a rigorous, disciplined, and structured approach that is based on the principles of corporate finance. The breadth and integration of Kaufman Hall advisory services are unparalleled, encompassing strategy; financial and capital planning; performance improvement; treasury and capital markets management; mergers, acquisitions, partnerships, and joint ventures; and real estate.
CONTACT: Toby Howard, (571) 201-7409, THoward@MessagePartnersPR.com