Julia Burleson, Sabrina Corlette, Christine H. Monahan
The One Big Beautiful Bill Act (HR 1) is expected to cut more than $1 trillion dollars in funding to hospitals and other providers, primarily through cuts to Medicaid and the Affordable Care Act Marketplaces. As many as 300 rural hospitals face disproportionate risk of closure, service reductions, or conversion, with some already citing HR 1 in decisions to restructure or close essential services. In an attempt to offset the impact, the bill includes a $50 billion Rural Health Transformation Program. However, this funding is a stop-gap measure at best and may not reach the hospitals or health systems most in need.
Meanwhile, many Americans are struggling to afford care and coverage, with high hospital prices contributing to higher premiums and greater cost-sharing requirements for patients. Just as families are adjusting to economic pressures, hospitals and health systems must also adapt—and many likely can. However, it can be challenging for policy makers and regulators to know which hospitals can afford to tighten their belts and which cannot. Hospital financial data are often fragmented across multiple sources and require specialized expertise to interpret, making it difficult for states to identify which systems are at greatest financial risk. At the same time, as hospitals lose revenue from cuts in federal coverage programs, state and local officials will face rising pressure to financially support the maintenance of essential services and effectively target limited public resources, including via the Rural Health Transformation Program.
Significant Diversity In Hospital And Health System Financial Health
Hospital financial health varies widely across the country. A 2023 national analysis from KFF found that operating margins were generally higher among for-profit, system-affiliated, and urban hospitals, as well as those serving more commercially insured patients. By contrast, many rural and independent hospitals continued to face negative operating margins after the COVID-19 pandemic. At the state level, Pennsylvania data show that 37 percent of general acute care hospitals reported negative operating margins in fiscal year 2024, while nearly half had positive margins above 4 percent. In Oregon, 45 percent of general acute care hospitals had negative operating margins in fiscal year 2024, while more than 28 percent recorded positive margins above 4 percent.
Profitability alone, however, provides an incomplete picture of financial health. Other metrics—such as liquidity and solvency—are essential to understanding a hospital’s financial standing. KFF found that 60 percent of health systems and independent nonprofits with negative operating margins in 2022 still had at least “strong” levels of days cash on hand, which is a metric that reflects how long a hospital could operate without new revenue. Unsurprisingly, most health systems and independent nonprofits with “vulnerable” or “highly vulnerable” cash reserves also reported negative operating margins, signaling deeper financial instability.
Nearly 70 percent of hospitals operate within health systems, where an individual hospital’s financial metrics offer only a partial view of its financial condition. System-affiliated hospitals may centralize expenses across the health system, distorting hospital-specific metrics of financial health and potentially masking signs of hospital distress. To obtain a more accurate financial picture, policy makers and analysts should evaluate metrics at both the hospital and system levels.
As policy makers work to stabilize the health care system and pursue long-term reforms, a more complete and nuanced understanding of hospital finances will be essential to directing resources effectively. Achieving this requires access to standardized, reliable financial data. However, existing public sources vary widely in scope, quality, and purpose.
Sources Of Hospital And Health System Financial Data
The three primary public sources of financial data for hospitals and health systems are Medicare Cost Reports, Internal Revenue Service (IRS) 990 Forms, and audited financial statements (AFSs). Each offers strengths and limitations in terms of content, provider scope, and accessibility.
Medicare Cost Reports
All Medicare-certified hospitals must submit annual cost reports to the Centers for Medicare and Medicaid Services (CMS), which the agency uses to calculate hospital payment rates. Data on the cost reports describe facility characteristics such as use, payer mix, cost, and charges. Although these data can be used to assess profitability and revenue, analysts should interpret them with caution, as the reports do not follow Generally Accepted Accounting Principles and may lack sufficient detail for analysts to standardize the metrics. These reports are submitted at the hospital level and do not contain health system-level data. They are also known to have reporting errors and are not independently audited. Public access is available approximately two years after the hospital’s fiscal year ends via CMS’s Healthcare Provider Cost Reporting Information System. A more user-friendly version of select metrics from the cost reports is also available to the general public through the National Academy for State Health Policy’s (NASHP’s) Hospital Cost Tool.
Internal Revenue Service 990 Forms
Private nonprofit hospitals or health systems file IRS 990 Forms annually to maintain their tax-exempt status. Whether they are filed at the hospital or health system level depends on which entity holds the nonprofit status. When they are filed at the health system level, hospital-level information often is not reported. The forms provide unique information on community benefit expenditures and financial assistance programs not reported through other hospital financial data sources, which can help policy makers evaluate the degree to which a given nonprofit hospital or health system is giving back to its community. (Although the obligation to provide community benefits is at the hospital level, the IRS does not require nonprofit health systems to report community benefits for individual hospitals in the system.) The forms are publicly available about two years after the end of the provider’s fiscal year via the IRS, ProPublica Nonprofit Explorer, and GuideStar.
Audited Financial Statements
AFSs are considered the “gold standard” of financial data due to their comprehensiveness, reliability, and purpose as a record of financial health. They must be certified by independent auditors, and hospitals are legally liable if they misrepresent information. The IRS requires nonprofit hospitals and the Securities and Exchange Commission requires publicly traded for-profit hospitals to submit AFSs, and members of the public can access these filings through the websites of several federal agencies. AFSs for privately held for-profit hospitals may not be available on a consistent basis. AFSs provide detailed data on profitability, liquidity, solvency, capital investment, and financial burden. However, when hospitals are part of larger health systems, separating out hospital-level data in a system-level AFS can be challenging. AFSs are typically released within six months of the end of the provider’s fiscal year and are available only as PDFs, with important contextual information in footnotes. The format and differences in calculation methods make comparisons across hospitals and health systems challenging. Various sources publish AFSs for different subsets of hospitals, including state reporting systems and national databases such as the Electronic Municipal Market Access (EMMA); Electronic Data Gathering, Analysis, and Retrieval (EDGAR); and the Federal Audit Clearinghouse. However, none offer a comprehensive collection of AFSs for all hospitals nationwide.
Analyzing And Standardizing Financial Data
States vary widely in how they collect and analyze hospital and health system financial data. While some states have no financial reporting requirements, others mandate that all hospitals submit AFSs, which are then analyzed and made public. To more effectively distinguish between financially distressed hospitals from financially strong ones, states can take the following steps:
- Require all hospitals to submit audited financial statements to the state: Requiring hospitals to submit AFSs directly to the state ensures centralized access to complete, independently verified financial data. Currently, 17 states require at least some hospitals to submit AFSs. States with reporting requirements could also consider publishing a public-facing database with the AFSs they collect to make this information more accessible.
- Standardize financial metrics across hospitals and health systems: Differences in how hospitals and health systems apply Generally Accepted Accounting Principles, due to managerial discretion, can limit the comparability of financial metrics across providers. To ensure consistent comparisons, standardizing the inputs for financial metrics is imperative. Resources such as the financial analysis templates that the NASHP and the Milbank Memorial Fund have developed can facilitate uniform assessment of hospital data across key areas of financial health such as profitability, liquidity, and solvency. States can also create their own standardization templates and require hospitals to use them for submission, as Maine has done. While states will focus their analyses on hospitals and systems within their jurisdictions, greater consistency across states in how financial metrics are defined and reported would promote comparability nationwide. Existing national templates already provide a common framework for defining key financial metrics, and states developing their own templates can build on these expert-developed standards to ensure coherence.
- Publish analyses: States can conduct analyses comparing and aggregating hospitals and health systems within their borders and release reports explaining their analyses and highlighting implications. For example, Massachusetts maintains a regularly updated hospital and hospital system financial dashboard for readers to easily compare hospital and health system metrics.
- Use data to inform policy and identify at-risk hospitals early: Comprehensive analyses of audited hospital financial data can advance long-term efforts to improve health care affordability. Results of financial analyses can serve as an early warning system, helping states identify distressed hospitals before they reach a crisis point. They can also aid evaluations of the financial impacts of hospital mergers and acquisitions, post-transaction. In addition, insights can inform targeted strategies to contain statewide health expenditures.
Looking Ahead
The impact of HR 1 will vary, with some hospitals struggling to stay open while others remain financially flush. To ensure that limited state and Rural Health Transformation Fund dollars are distributed fairly and effectively, policy makers should have timely, accurate financial data and robust analyses to identify which providers are in most financial distress.
By taking the steps outlined above to standardize and analyze hospital financial data, state policy makers and the public can better understand the financial standing of hospitals and health systems. Although this picture may still be imperfect, more reliable data can support stronger, evidence-based policy making.
As hospital and health system finances grow increasingly complex, maintaining transparency will remain an ongoing challenge. Investing in centralized, publicly accessible financial reporting and robust analyses now can help states make better short-term funding decisions and lay a stronger foundation for data-driven health policy in the future.
Julia Burleson, Sabrina Corlette, Christine H. Monahan “Federal Budget Cuts Won’t Hit All Hospitals Equally: How States Can Better Analyze Hospital And Health System Financial Data” December 3, 2025, https://www-healthaffairs-org.proxy.library.georgetown.edu/content/forefront/federal-budget-cuts-won-t-hit-all-hospitals-equally-states-can-better-analyze-hospital. Copyright © 2025 Health Affairs by Project HOPE – The People-to-People Health Foundation, Inc.
