Monthly Healthcare Industry Financial Benchmarks

Health System Operating Margins See Modest Rebound Despite a Drop in Outpatient Volumes

May's data reveals a mixed picture: while outpatient volumes drop, health system operating margin bounces back to March’s modest level.

Highlights from the May 2026 data include:

• Health system operating margins saw a modest increase in May, to 0.4%, returning to levels last seen in March, and less than half the level seen in May 2025 (1.1%).
• Year-over-year hospital revenue growth remains robust at 5.9% for gross operating revenue, and outpatient revenue growth continues to exceed inpatient at 6.1% versus 5.7%.
• Outpatient volumes collapsed in May, declining sharply 8.4% month-over-month and 1.8% year-over-year, while inpatient admissions stabilized at 0.8% MoM and 2.4% YoY, signaling a new divergence in patient demand patterns. We’ll analyze the drivers of this decrease in our next Strata Performance Trends Report.
• Non-labor expenses remain the primary cost driver, rising 6.2% year-over-year despite a 2.1% month-over-month decline, with supply expense outpacing drug expense particularly at 4% versus 3.3% YoY growth.

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. The table above reflects individual hospital performance, which may or may not include enterprise-level operating or administrative expense.

Operating Margins: Health system operating margins saw a modest increase in May, at 0.4%, reapproaching March levels after a dip in April. At the individual hospital level, operating margins dipped 1.5% month over month, putting them nearly on par with last year: up 0.2%. This difference in operating margin performance reflects enterprise-level operating or admin expenses which may or may not be allocated to individual hospitals.

Hospital Expenses: Total expenses declined modestly month-over-month (-0.2%) but remain elevated year-over-year (+5.5%). Non-labor expenses are the primary driver of cost increase inflation, up 6.2% annually despite a 2.1% monthly decrease. Supply and drug expenses remain particularly concerning, growing 4% and 3.3% year-over-year, respectively. Labor costs showed relative stability, increasing just 3.9% annually.

Hospital Revenues: Year-over-year revenue growth remains solid at 5.9% for gross operating revenue, driven equally by both inpatient (5.7%) and outpatient (6.1%) growth. However, month-over-month trends deteriorated, with total gross operating revenue down 2.6% and outpatient revenue declining 4.5%, suggesting seasonal softness or delayed collections. Uncompensated care with bad debt and charity care increased 9.3% annually — though it saw a 5.9% decline compared to last month — and when taken as a percentage of gross revenue, remains fairly flat month over month (+0.1%) and year over year (+0.3%).

Source: Comparative Analytics

Patient Volume Benchmarks 

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

Hospital volumes: Patient demand declined across most care settings in May. Inpatient admissions showed modest growth year-over-year at 2.4% and remained almost flat at 0.8% month-over-month, suggesting some stabilization. However, outpatient volumes contracted sharply, declining 8.4% month-over-month and 1.8% year-over-year.

ED visits decreased 1.2% monthly and 2.6% annually. Whether these figures are an outlier or signal a true shift in patient-demand patterns remains to be seen.
 

Physician Practice Benchmarks 

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

“Investment” measures per-physician profitability from patient care: net patient revenue minus total operating expenses, divided by physician FTEs. “Support Staff” includes all ancillary, business operations, clinical support, and front office personnel.

Physician practice expenses & productivity: Per-physician expenses continued upward pressure in May, with total expense per full-time equivalent (FTE) growing 3.6% year-over-year.

Investment levels accelerated more sharply, rising 7.36%, reflecting continued health system support for practice operations. However, physician revenue growth lagged expense growth, with net patient services revenue per FTE increasing 1.42% year-over-year.

Notably, physician productivity declined slightly, with work relative value units (wRVUs) per FTE down 0.79% year-over-year, indicating resource constraints or reduced practice efficiency despite higher investment levels.

Outlook

Health systems’ operating margins saw minimal movement, and supply and drug expenses continue to top the list of cost drivers. The bigger story for May is still developing: what’s behind this month’s drop in outpatient volumes? We’ll explore that trend and more in our forthcoming Q2 Strata Performance Trends Report.
 

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