U.S. Hospitals and Health Systems Hit with Long-running Increases in Medical Supply and Drug Expenses, Bad Debt and Charity Care, According to New Strata Report

Analysis Highlights Enduring Challenges as Industry Anticipates Impacts of Federal Policy Changes

/EIN News/ -- CHICAGO, May 08, 2025 (GLOBE NEWSWIRE) -- Hospitals and health systems nationwide saw notable growth in medical supply and drug expenses and increases in bad debt and charity care in recent years — all factors that could be exacerbated in the coming months as the healthcare industry feels the effects of federal tariffs and other policy changes, according to a new report from Strata Decision Technology.

Non-labor expenses have long been on the rise for U.S. hospitals, with total non-labor expense increasing year-over-year (YOY) each month for more than three years, according to Strata data. Medical supply and drug expenses have steadily grown as a share of overall expenses. Medical supply expense as a percent of total expense increased from 7.2% in the first quarter of 2023 to 8.0% in Q1 of this year. Drug expense as a percent of total expense rose from 4.1% in Q1 2023 to 4.4% in Q1 2025. 

“Hospitals and health systems have battled persistent expense increases for years,” said Steve Wasson, Strata’s chief data and intelligence officer. “Now — with more than two-thirds of medical devices used in the U.S. manufactured outside of the country — tariffs and other federal policy changes could further drive up costs for pharmaceuticals, syringes, personal protective equipment, and other medical supplies and devices that healthcare professionals rely on every day to care for patients.”

U.S. health systems also saw growth in charity and bad debt deductions in recent years. The median charity deduction for health systems increased 5.4% from Q1 2024 to Q1 2025, and jumped 21.4% in Q1 2025 versus Q1 2023. The median health system bad debt deduction increased 9.2% from Q1 2024 to Q1 2025 and 16.9% versus Q1 2023. 

For hospitals, charity deductions for the first quarter rose 7.6% from Q1 2024 and jumped 24.5% versus Q1 2023. Bad debt deductions at hospitals decreased slightly at 0.9% from Q1 2024 to Q1 2025, but rose 15.3% versus two years ago. 

Possible changes to Medicaid being discussed in Congress could contribute to further increases in bad debt and charity care. As of Q1 2025, the data show that Medicaid accounts for 12% or more of revenue for most U.S. hospitals, depending on the region. Hospitals in the Midwest have the lowest share of Medicaid revenue at 11.1%, while hospitals in the West have the largest at 14.4%. 

About the Data 
The report uses data from Strata’s StrataSphere^® and Comparative Analytics database. Comparative Analytics offers access to near real-time data drawn from more than 135,000 physicians from over 10,000 practices and 139 specialty categories, and from 500+ unique departments across more than 1,600 hospitals. Comparative Analytics also provides data and comparisons specific to a single organization for visibility into how their market is evolving. StrataSphere is a unique and comprehensive data-sharing platform that helps providers leverage a network that represents approximately 25% of all provider spend in U.S. healthcare. This report incorporates data from more than 600 hospitals with StrataJazz^® Decision Support.

About Strata Decision Technology 
Strata Decision Technology provides a cloud-based platform for software and service solutions to help organizations better analyze, plan, and perform in support of their missions. With the combination of Syntellis Performance Solutions’ Axiom solutions, more than 2,300 organizations rely on Strata to provide their financial analytics, planning, and performance solutions. Strata has been named the market leader for Business Decision Support for 18 consecutive years. By uniting these two industry leaders, Strata continues to deliver market-leading solutions and world-class service, with an increased focus on accelerating innovation. For more information, please go to www.stratadecision.com.

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