Monthly Healthcare Industry Financial Benchmarks

Health System Operating Margins Edge Back Above Zero as Rising Revenues Help Ease Persistent Expense Pressures

This report highlights the latest trends in financial performance for U.S. hospitals and physician groups, drawn from monthly data from more than 135,000 physicians and over 1,900 hospitals.  

U.S. hospitals and health systems saw modest financial improvements in March, with gains across most key performance indicators that helped to offset mounting expenses. Highlights from the March 2026 data include:

• Health system operating margins remained thin but returned to positive territory in March after two consecutive months in the red, rising to 0.4% up from negative 0.3% in February.
• Hospital supply expenses saw double-digit increases year-over year, contributing to higher non-labor expenses along with rising drug and purchased service expenses.
• Patient demand rose in March following a February downturn as growth in outpatient volumes continued to outpace inpatient admissions.
• Bad debt and charity care rose 17.0% year over year, reflecting growth in uncompensated care even as inpatient and outpatient revenues rose.
• Per-physician practice expenses reached nearly $1.3 million in the first quarter, driving the need for higher investment levels even as physician revenues rose.

Hospital Performance Benchmarks  

The latest benchmarks illustrate the interplay of revenues and expenses on historically tight hospital operating margins.

*Note: Operating margins are calculated on a percentage point change basis.

Operating Margins: Health system operating margins remained thin but returned to positive territory in March after two months in the red. The median year-to-date (YTD) operating margin for health systems nationally was 0.4% for the month, up from negative 0.3% in February and negative 0.6% in January. While margins were narrow, the past two months of improvements suggest the beginning of a possible fragile recovery.

Operating performance also improved modestly at the individual hospital level. The median change in hospital operating margin rose 0.9 percentage point year over year (YOY) and increased 2.5 percentage points month over month. The median change in operating earnings before interest, taxes, depreciation, and amortization margin followed a similar pattern, rising 0.8 percentage point YOY and 1.9 percentage points from February to March.

Regional performance varied. Hospitals in the South saw the largest increase in median change in operating margin, rising 2.2 percentage points from March 2025 to March 2026. The Northeast experienced a smaller gain of 0.5 percentage point. The Midwest saw no change, while hospitals in the West were the only ones to experience a decline, with the metric down 1.1 percentage point YOY.

Performance also differed by hospital size. The median change in hospital operating margin decreased 0.2 percentage point for larger hospitals with 300 to 499 beds. In contrast, smaller hospitals with 26 to 99 beds saw the largest increase, with margins rising 1.5 percentage points YOY.

Hospital Expenses: The nation’s hospitals continued to face elevated expense burdens through the end of the first quarter in March, with sizable expense growth across multiple categories. Total hospital expense increased 7.1% YOY. Growth in non-labor expenses again outpaced labor-related spending. Total non-labor expense rose 9.7% YOY, compared to a 4.0% YOY increase in total labor expense.

The rise in non-labor expenses was driven largely by a 10.3% YOY increase in supply expense, an 8.6% YOY increase in drug expense, and a 7.7% YOY increase in purchased service expense. On a month-over-month basis, total expense increased 6.6%, while total labor expense rose 8.5% and total non-labor expense increased 5.1%.

By census region, YOY increases in supply expense ranged from 9.7% in the South to 12.1% in the West. Drug expense growth showed a similar pattern, ranging from 8.2% YOY in the Midwest to 14.3% YOY in the West.

Labor-related metrics showed some moderation. Contract labor as a percent of total labor expense decreased 0.5 percentage point YOY for hospitals across the country and remained flat month over month. Overtime hours were essentially flat, with overtime as a percent of productive hours decreasing just 0.1 percentage point YOY and unchanged month over month in March.

Hospital Revenues: Hospitals across the country saw outpatient revenue growth surpass inpatient gains, reinforcing the ongoing shift toward outpatient care settings. Outpatient revenue increased 11.8% YOY and 11.3% month over month in March, while inpatient revenue rose 6.6% YOY and 9.1% month over month. As a result, gross operating revenue grew 9.4% from March 2025 to March 2026 and increased 10.4% from February to March 2026.

At the same time, hospitals saw continued growth in uncompensated care. Bad debt and charity care increased 17.0% YOY and 4.1% month over month, suggesting ongoing financial strain tied to coverage gaps, patient affordability challenges, and evolving policy dynamics in 2026. Hospitals in the Midwest experienced the largest increase in bad debt and charity care, rising 27.3% YOY. The South saw a 15.8% YOY increase, followed by the West at 15.5%, while the Northeast had a more modest rise of 3.2% YOY.

After adjusting for patient volumes, revenue performance was more mixed. Net patient service revenue (NPSR) per adjusted discharge increased 3.9% YOY but declined 1.2% from February to March. NPSR per adjusted patient day rose 5.9% YOY and was nearly flat month over month, increasing just 0.2%.

Source: Comparative Analytics

Patient Volume Benchmarks 

Hospital inpatient and outpatient volumes are drawn from analysis of more than 10 million patient visits. 

Hospital volumes: Hospitals saw patient demand increase in March after dropping across most metrics in February. Many metrics posted double-digit increases from February to March.

Outpatient volumes continued to lead growth on a YOY basis, rising faster than inpatient admissions and mirroring outpatient revenue trends. Outpatient visits increased 7.3% YOY, and inpatient admissions rose 3.1% YOY. Observation visits were up 2.7%, while emergency department (ED) visits saw more limited growth, increasing just 0.3% YOY.

Month-over-month gains were more pronounced across all settings. Outpatient visits rose 10.7%, ED visits increased 10.0%, observation visits were up 10.8%, and inpatient admissions climbed 9.1%.

Looking at patient demand across different census regions, hospitals in the Midwest reported the largest YOY increase in outpatient visits at 9.6%, followed by the Northeast at 6.2%. Growth was somewhat lower in the South at 6.0% and the West at 4.3%. Inpatient trends showed even greater regional variation. YOY increases in admissions ranged from 7.9% in the Northeast to just 0.6% in the West, suggesting uneven recovery in higher-acuity care across different parts of the country.

Service line volumes: Patient volumes varied widely across service lines based on the latest data from February, though most service lines experienced YOY growth. Several specialties posted notable increases. Ophthalmology volumes rose 10.9% YOY, followed by hematology at 10.3%, hepatology at 10.0%, and genetics at 9.4% YOY.

In contrast, the infectious disease service line saw a sharp decline, with volumes dropping 28.6% YOY. Other service lines that experienced decreases included normal newborn, which declined 8.3% YOY, and ear, nose, and throat (ENT), which was down slightly at 0.5%.

Procedure volumes: Across 15 common procedures, eight showed YOY increases while seven saw declines. Among those with decreases, outpatient microbiology lab procedures saw the largest YOY drop, with volumes down 17.8%. Inpatient primary knee replacements also declined significantly, down 15.2% YOY, as such procedures continue to shift to outpatient settings.

At the same time, several outpatient procedures posted strong gains. Outpatient positron emission tomography (PET) volumes increased 11.3% YOY. Outpatient magnetic resonance imaging (MRI) followed closely with a 10.9% YOY increase, while outpatient chemistry lab procedures grew 7.2% YOY, reflecting strength in outpatient diagnostic services.

Children’s hospital volumes: The nation’s children’s hospitals saw increases across most patient volume metrics in March. Inpatient admissions rose 5.1% YOY, while observation visits jumped 13.4% YOY. Outpatient visits also grew, up 7.8% YOY. ED visits were the exception, declining slightly by 0.6% YOY.

Month-over-month trends showed increases across all settings. Inpatient admissions rose 7.4%, observation visits were up 10.6%, ED visits grew 2.8%, and outpatient visits increased 7.1%.

Physician Practice Benchmarks 

A look at last quarter’s key performance indicators from more than 10,000 physician practices. 

Physician investments: Physician practices reported growth across most performance metrics in the first quarter. Higher expenses continued to drive up the level of investment required to support practice operations. The median investment per physician full-time equivalent (FTE) reached $391,974 for the quarter, representing a 10.3% increase compared to Q4 2025 and a 9.7% increase versus the first quarter of last year.

Performance varied by region. Changes in median investment per physician FTE ranged from a 5.0% decline in the Midwest to increases of 3.0% in the West, 6.1% in the South, and 10.8% in the Northeast from Q1 2025 to Q1 2026.

Physician expenses: Per-physician practice expenses rose in the first quarter. The median total expense per physician FTE rose to nearly $1.3 million, marking a 5.2% increase from the fourth quarter of 2025 and a 7.9% increase versus Q1 2025.

Practices in the South and West saw the largest increases from Q1 2025 to Q1 2026, with total expense per physician FTE rising 10.9% YOY in both regions. The Midwest experienced a 7.0% increase, while the Northeast was up 5.0% over the same period.

Physician revenues: Per-physician revenue remained on the rise in the first quarter. NPSR per physician FTE reached $879,588, increasing 7.7% from Q4 2025 and 12.9% compared to Q1 2025. Practices in the Northeast saw the largest increase, with NPSR per physician FTE rising 21.2% from Q1 2025 to Q1 2026. The West, South, and Midwest also posted gains at 12.8%, 12.1%, and 8.0%, respectively.

Physician productivity and staffing: Physician productivity increased in the first quarter even as staffing levels declined, pointing to efficiency gains across physician practices.

The median work relative value units (wRVUs) per physician FTE reached 6,602 for the quarter, up 3.5% from Q4 2025 and up 2.7% compared to Q1 2025. By region, YOY increases ranged from 1.3% in the Northeast to 5.1% in the South. The West was the only region to see a decline, with wRVUs per physician FTE down 4.1% from Q1 2025 to Q1 2026.

At the same time, staffing levels trended downward. Median support staff FTEs per 10,000 wRVUs — a measure of staffing and productivity — declined to 3.4 for the quarter. That was down 1.5% from Q4 2025 and down 0.9% from the first quarter of last year.

Most regions experienced reductions in support staffing relative to productivity, including the South (down 11.1%), Midwest (down 5.5%), and Northeast (down 2.0%). The West was the exception, with support staff levels relative to productivity increasing 5.5% from Q1 2025 to Q1 2026.

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