Hospitals and health systems are gearing up to tackle significant financial challenges in 2026, with a focus on cost control and workforce optimization. According to data released by Kaufman Hall this month, workforce pressures remain the primary financial hurdle for hospitals, with labor constituting approximately 70% of operating expenses. Many organizations are pursuing strategies aimed at staffing optimization to address this ongoing issue.
A notable trend highlighted by Lance Robinson, managing director at Kaufman Hall, is the increasing interest in outsourcing non-core activities. “More than half of hospitals are looking at the potential outsourcing of non-core activities,” Robinson stated. This shift is particularly evident in areas such as food service, revenue cycle management, and human resources. As hospitals face record turnover rates and retirements, many are raising salaries and offering sign-on bonuses to attract and retain clinicians.
As hospitals adapt to these workforce challenges, they are also re-evaluating care models. Robinson emphasized the movement towards team-based staffing and investments in technology, such as ambient AI. These technologies aim to reduce administrative burdens, enabling clinicians to work more efficiently and focus on patient care.
Revenue Cycle and Supply Costs Add to Financial Strain
In addition to workforce issues, hospitals continue to grapple with difficulties in their revenue cycle management. Denials represent a significant pressure point, often stemming from front-end issues like prior authorization and eligibility errors. Robinson pointed out that hospitals should enhance coordination between revenue cycle teams and clinical staff to minimize errors before claims are submitted.
Inadequate documentation by physicians is another major contributor to claim denials, highlighting the need for improved clinical documentation practices. Furthermore, hospitals are facing additional challenges from underpayments and payer escalation processes, which demand considerable staff time and resources. As insurers shift more administrative work onto providers, hospitals are increasingly reliant on efficient, technology-driven processes to manage these pressures without escalating costs.
Supply costs also pose a serious concern, with year-over-year increases of 6-10% continuing into 2026. Hospitals are encountering uncertainties linked to tariffs, which complicate budgeting and financial forecasting. Although the exact impact of tariffs versus general inflation remains unclear, Robinson noted that larger health systems are responding by intensifying value analysis, engaging physicians in product selection, and negotiating better terms with group purchasing organizations (GPOs) and distributors.
Strategic Focus for All Hospital Sizes
Health systems with greater scale generally have better resources to handle these financial pressures, benefiting from stronger balance sheets and enhanced bargaining power. Nevertheless, Robinson pointed out that smaller and standalone hospitals have viable options for managing costs, particularly by tightening operations and focusing on efficiency.
“There’s a lot they can still do, and they’ve proven that they can do it,” he remarked. Regardless of size, hospitals must be strategic about their investments and approaches to cost control. As financial performance becomes increasingly linked to execution rather than merely market position, the healthcare sector faces a pivotal year ahead.
The landscape of hospital management is shifting, with an emphasis on adapting to workforce challenges and financial pressures. As organizations prepare for 2026, strategic planning and efficient operations will be critical to navigating these complexities and ensuring sustainability in an evolving healthcare environment.