Monthly Healthcare Industry Financial Benchmarks

Health System Operating Margins Held Steady Throughout Q2 

This report highlights the latest trends in financial performance for U.S. hospitals and physician groups, drawn from monthly data from more than 152,000 physicians and over 1,850 hospitals.

The nation’s hospitals, health systems, and physician practices closed the second quarter with relatively stable financial performance, even as expenses continued to rise. Highlights from the June 2025 data include: 

• Health system operating margins held steady for a sixth consecutive month, with the median year-to-date operating margin of 1.2% in June, while hospital operating margins saw positive gains. 

• Drug expenses jumped nearly 10% for U.S. hospitals in June versus the same month in 2024,  outpacing labor expense growth and contributing to an 8.2% increase in total non-labor expenses. 

• Demand for outpatient services continued to grow, with outpatient visits rising 8.2% from June 2024 to June 2025, while inpatient admissions increased 3.7% and emergency visits dropped 5.2%. 

• Gross hospital revenues rose across both inpatient and outpatient categories for a 26th consecutive month, with outpatient revenues again showing the most significant increases. 

• Physician practices saw growth across most financial performance metrics in Q2 2025, as expense increases continued to pressure practice operations, despite higher revenues.        
   

Hospital Performance Benchmarks  

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

Operating Margins: Health system operating margins remained narrow but relatively stable in June, holding around 1% for a sixth consecutive month. The median year-to-date (YTD) operating margin for health systems nationally was 1.2% in June, up slightly from 1.1% in May.

For the nation’s hospitals, margins also showed gains at the close of the second quarter. The median change in hospital operating margin increased 2.4 percentage points year-over-year (YOY) and rose 1.3 percentage points month over month.

Hospitals in the South experienced the largest YOY margin increase, with the metric jumping 6.1 percentage points from June 2024 to June 2025. Hospitals in the Midwest saw a 2.5 percentage-point increase, while those in the Northeast posted a 1.6 percentage-point gain. The West was the only region to record a decline, with the median change in hospital operating margin down 2.2 percentage points over the same period.

Looking at hospitals by size, the smallest hospitals (0 to 25 beds) had the biggest decrease, with the median change in operating margin down 1.0 percentage point. The metric was down just 0.2 percentage point for the largest hospitals with 500 beds or more. The metric rose for all other hospitals, with increases ranging from 0.8 percentage point for hospitals with 300 to 499 beds to 4.2 percentage points for hospitals with 100 to 199 beds.

The median change in operating earnings before interest, taxes, depreciation, and amortization (EBITDA) margin for hospitals nationwide increased by 2.2 percentage points YOY and 1.0 percentage point month over month.

Hospital Expenses: Hospitals nationwide continue to face rising overall expenses compared to 2024 levels, with growth in non-labor expenses outpacing labor expense increases.  

Drugs expense once again experienced the largest YOY increase compared to other expense categories, jumping 9.8% compared to June 2024. This increase — along with an 8.7% YOY increase in supply expense and a 6.9% YOY increase in purchased services expense — drove an 8.2% YOY increase in total non-labor expense. Total labor expense increased 3.8% from June 2024 to June 2025, and total expense rose 5.1% over the same period.  

By census region, hospitals in the Northeast and West saw the most significant increases in drugs expense, with the metric up 17.7% and 14.7% YOY, respectively. Looking at total non-labor expense by region, hospitals in the South recorded the largest YOY increase at 12.1%.

Expenses eased somewhat month over month. From May to June 2025, total expense decreased 2.2%, total labor expense was down 3.7%, and total non-labor expense decreased 0.8%. Drugs expense decreased 4.8% and supply expense was down 2.5% month over month.

Expense performance was more mixed after adjusting for patient volumes. Total expense per adjusted discharge increased 2.1% and non-labor expense per adjusted discharge rose 3.1% YOY, but labor expense per adjusted discharge declined slightly (0.6%) over the same period.

Hospital Revenues: Hospital revenues remained on the rise YOY across both inpatient and outpatient categories, with outpatient revenues showing the most significant growth. Outpatient revenue increased 12.3% from June 2024 to June 2025, while inpatient revenue rose 7.0% YOY. Gross operating revenue was up 10.3% YOY, marking the 26th consecutive month of YOY growth across the three gross revenue metrics.

Month over month, however, gross hospital revenues decreased. Outpatient revenue declined 2.1%, inpatient revenue decreased 3.4%, and gross operating revenue was down 1.9% from May to June 2025.

Regional trends reflected continued strength in outpatient revenue growth. Hospitals in the South saw the largest YOY increase, with outpatient revenue up 13.0%. This was followed by increases of 12.4% in the Midwest, 12.0% in the Northeast, and 11.4% in the West.

Bad debt and charity care deductions decreased, falling 3.0% YOY and 0.5% month over month for hospitals nationally. Net patient service revenue (NPSR) per adjusted discharge rose 3.3% compared to the prior year and was up 2.2% month over month. NPSR per adjusted patient day increased 2.0% YOY and edged up just 0.3% from May to June 2025. 

 

Patient Volume Benchmarks 

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

Patient demand continued to show mixed results, but increased across both inpatient and outpatient categories from June 2024 to June 2025. Outpatient visits experienced the largest gain, rising 8.2% YOY as patients continue to seek more convenient and lower cost outpatient care. Inpatient admissions also increased at 3.7% YOY, while emergency visits declined 5.2% and observation visits were down 1.0% YOY. Looking at outpatient visits by region, the metric rose 11.0% YOY in the South, 7.5% YOY in the Midwest, 6.5% YOY in the northeast, and 6.2% in the West YOY.

Compared to two years ago in June 2023, inpatient admissions were up 6.1%, and outpatient visits rose 5.2% for hospitals nationally. Patient demand decreased across all four measures month over month. Emergency visits saw the steepest decline, dropping 10.4%, followed by a 6.3% decrease in observation visits. Outpatient visits were down 3.5%, and inpatient admissions decreased 3.3% from May to June 2025.

Changes in patient demand varied across different service lines, according to the latest service line data as of May 31. The normal newborn service line recorded the highest YOY increase at 5.1%, followed by hepatology and genetics — which both saw patient volumes increase 4.6% YOY. Conversely, ear, nose, and throat (ENT) services saw the largest decline, with patient volumes down 8.2% YOY.

Among 15 common procedure types, patient volumes decreased YOY for 10 and increased YOY for five. Inpatient primary knee replacements had the most significant decline, with volumes down 18.8% versus the same period in 2024. By contrast, outpatient diagnostic routine electrocardiograms (ECGs) experienced the largest increase, with procedure volumes jumping 17.0% YOY.

Children’s hospitals saw patient volumes decline across most categories in June. According to the latest available data from June 30, emergency visits showed the largest YOY drop at 11.9%, followed by a 4.9% decrease in inpatient admissions and a 2.6% decline in observation visits. Outpatient visits were the only metric to increase, rising 4.0% YOY.

For additional Patient Volume data, please see this supplemental file containing detailed charts and graphs featuring StrataSphere data.

 

Physician Practice Benchmarks 

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

Physician practices across the country experienced growth in most key performance indicators during the second quarter of 2025. The level of investment required to support these practices — measured as median investment per physician full-time equivalent (FTE) — rose to $322,490 for Q2 2025. This marked a 1.7% increase compared to the second quarter of 2024, but a slight 0.4% decline versus Q1 2025. Regionally, practices in the Northeast had the largest YOY increase, with the median investment per physician FTE rising 19.2%. In contrast, practices in the South saw the biggest decline, with the metric dropping 8.9% over the same period.

Total expense per physician FTE reached nearly $1.2 million in the second quarter, increasing 2.9% from the first quarter and jumping 11.4% compared to Q2 2024. Expenses rose YOY across all regions. The Northeast led with the largest increase at 12.2%, followed by the Midwest at 11.4%, the West at 11.0%, and the South at 8.2%.

Revenues for physician practices also continued to rise. The median NPSR per physician FTE reached $826,575 for the second quarter, up 4.1% from Q1 2025 and up 11.4% from the second quarter of last year.

Physician productivity, measured as physician work relative value units (wRVUs) per FTE, were 6,711.53 in Q2 2025. That was a 3.9% increase compared to the first quarter of this year and an 8.2% increase YOY. Additionally, support staffing levels increased, with the median support staff FTE per 10,000 wRVUs rising to 3.60 in the second quarter — up 1.2% from Q1 2025 and up 0.8% compared to Q2 2024.