Monthly Healthcare Industry Financial Benchmarks

Overview: Hospital and Health System Operating Margins Remain Narrow as Non-Labor Expenses Climb 

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 1,850 hospitals.

Mounting expense pressures continue to hold down hospital and health system operating margins despite ongoing revenue growth. Highlights from the August 2025 data include: 

• Health system operating margins inched back to 1.0% in August, up from 0.9% in July but relatively unchanged from levels seen throughout 2025 to date. 

• Hospitals continued to see outsized growth in non-labor expenses, as total non-labor expense jumped 5.7% year over year (YOY) versus a 4.6% increase in labor expenses. 

• Patient demand rose across most service lines compared to 2024 levels, with ophthalmology posting the largest YOY growth at 12.8%, followed by genetics at 11.2%. 

• Growth in outpatient revenues again outpaced inpatient gains, with outpatient revenue up 6.3% versus a 4.3% YOY increase in inpatient revenue.  

• Per-physician practice expenses climbed to $1.1 million in August, up nearly 6% from 2024, while productivity gains helped offset rising investment needs. 

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 edged up slightly in August, with the national median year-to-date (YTD) operating margin rising to 1.0% from 0.9% in July. The increase was modest, and margins remain thin — as they have since the start of 2025.  

Across U.S. hospitals, operating margins showed little movement. The median change in operating margin increased just 0.2 percentage point YOY but declined 0.5 percentage point compared to the prior month, leaving overall performance essentially flat. The stagnant margin performance for both hospitals and health systems reflects the ongoing financial strain created by persistent expense pressures across the healthcare sector. 

Regional results were mixed. Hospitals in the Midwest experienced a 0.8 percentage point YOY decrease in median change in operating margin, while hospitals in the Northeast posted the largest improvement, up 3.7 percentage points over the same period. Hospitals in the South reported a 0.5 percentage point increase, and those in the West recorded a gain of just 0.3 percentage point. 

Differences also emerged by hospital size. The largest hospitals with 500 beds or more saw median change in operating margin decline 1.1 percentage points in August, as did medium-sized hospitals with 200 to 299 beds. By contrast, smaller hospitals with 26 to 99 beds achieved the strongest gains, with margins up 1.4 percentage points YOY. 

The median change in operating earnings before interest, taxes, depreciation, and amortization (EBITDA) margin also slipped, down 0.1 percentage point YOY and 0.5 percentage point month over month.  

Hospital Expenses: Overall hospital expenses remain on the rise nationwide, with non-labor expenses continuing to rise faster than labor expenses. In August, total non-labor expense increased 5.7% YOY, while labor expense rose 4.6%. Those increases contributed to a 5.6% jump in total expense from August 2024 to August 2025. 

The growth in total non-labor expense was driven largely by a 4.7% increase in supply expense and a 4.5% increase in purchased service expense YOY. Total drug expense also rose, though at a slower pace than in recent months, up just 1.7% in August compared to the same month last year. 

Regional trends varied. Hospitals in the South saw the largest YOY increase in total non-labor expense at 6.7%, followed by the Midwest at 6.2%. Supply expenses rose most sharply in the Midwest, up 5.9% YOY, while hospitals in the West recorded a 4.8% YOY increase. 

Despite these annual increases, overall expenses saw slight declines month over month. Total expense was down 0.7% from July to August, with total non-labor expense down 0.9% and labor expense nearly flat, decreasing just 0.1% month over month. 

When adjusted for patient volumes, expenses increased across most metrics both month over month and YOY. Total expense per adjusted discharge rose 4.3% YOY, driven by a 2.3% increase in labor expense per adjusted discharge and a 4.4% increase in non-labor expense per adjusted discharge. On a month-over-month basis, total expense per adjusted discharge increased 1.5%, with labor expense per adjusted discharge up 2.4% and non-labor expense per adjusted discharge up 0.5%. 

Hospital Revenues: Gross revenues continued to rise for hospitals nationwide in August, marking the 28th consecutive month of YOY increases across gross operating, inpatient, and outpatient revenues. Outpatient growth once again outpaced inpatient gains. Gross operating revenue rose 5.7% YOY, inpatient revenue was up 4.3% YOY, and outpatient revenue increased 6.3% YOY.  

Regional performance highlighted the strength of outpatient growth nationwide. Hospitals in the West posted the sharpest YOY increase in gross outpatient revenue at 8.0%, followed by 6.4% in the South, 5.6% in the Northeast, and 5.0% in the Midwest. Revenues decreased on a month-over-month basis at a national level. Gross operating revenue declined 2.3% from July to August, driven by a 2.8% drop in outpatient revenue and a 1.0% decrease in inpatient revenue. At the same time, hospitals faced a rise in uncompensated care. Bad debt and charity care deductions increased 6.4% from August 2024 to August 2025, adding further pressure on margins.  

Net patient service revenue (NPSR) per adjusted discharge rose 3.1% YOY and 0.5% month over month. NPSR per adjusted patient day increased 3.7% compared to August 2024 but slipped 0.2% between July and August 2025. 

  Patient Volume Benchmarks 

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

Hospitals and health systems nationwide saw mixed results in patient demand in August. Inpatient admissions rose 2.4% YOY, while outpatient visits were up 1.1%. Observation visits declined 0.6% and emergency visits were down 2.2% compared to the same month last year. 

From July to August 2025, patient volumes fell across all metrics. Outpatient visits saw the sharpest decline, down 4.7%. Observation visits and emergency visits each decreased 2.7% month over month, while inpatient admissions slipped 1.2% over the same period. 

Patient demand varied significantly across different regions. Hospitals in the Northeast reported the largest YOY increase in inpatient admissions at 5.2%, while hospitals in the Midwest led outpatient growth, with visits rising 2.8% compared to August 2024.  

Looking back two years, inpatient admissions increased 5.3% from August 2023 to August 2025. Outpatient visits were up 1.7% versus 2023 levels after spiking 22.6% from July 2023 to July 2025 the month before, reflecting seasonal patient volume increases as many people schedule elective care toward the end of the summer months. 

The latest service line data from July showed broad gains in patient demand. Nearly all service lines saw increases YOY and month over month, with ophthalmology posting the largest YOY growth at 12.8%, followed by genetics at 11.2%. Infectious disease was one of the only service lines to see patient demand decrease, with volumes down 11.1% YOY. 

Among 15 common procedure types, patient demand rose YOY for 11 and declined for four. Outpatient endoscopy of the upper gastrointestinal system saw the sharpest increase, up 19.2% YOY, followed by outpatient positron emission tomography at 17.7%. In contrast, inpatient primary knee replacements recorded the steepest decline, down 14.8%. The growth in outpatient procedure volumes coupled with declines in inpatient procedures illustrate the ongoing shift in care to more convenient outpatient settings. 

Children’s hospitals experienced mixed results. In August, inpatient admissions dropped 4.6% YOY, outpatient visits decreased 0.5%, and emergency visits declined 4.5%. Observation visits were the only area of growth, increasing 2.4% compared to the prior year.  

Looking from July to August 2025, emergency visits had the biggest month-over-month increase at 8.5%, followed by observation visits at 8.0%. Children's hospitals saw a 2.8% decrease in outpatient visits and a 1.6% increase in inpatient admissions month over month. 

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 month’s key performance indicators from more than 10,000 physician practices. 

Persistent expense growth continued to drive higher investment needs for physician practices nationwide in August. Investment per physician full-time equivalent (FTE) reached $326,199 for the month annualized, up 4.7% compared to 2024 and 17.7% compared to 2023. Hospitals in the Northeast saw the largest increase, with median investment per physician FTE rising 11.0% YOY. Practices in the West were the only ones to experience a decline, with the metric down 0.2%. 

Physician expenses also continued to climb. The median expense per physician FTE reached $1.1 million for August annualized, representing a 5.8% increase from 2024 and a 15.4% jump from 2023. Practices in the Midwest reported the steepest increase, with total expense per physician FTE up 9.5% compared to last year. By contrast, practices in the West were the only ones to see a decline, with expenses down 1.1% YOY. 

Revenues for physician practices rose alongside expenses. The median net patient service revenue (NPSR) per physician FTE was $776,129 in August (annualized), up 4.0% from 2024 and 14.7% higher than 2023. 

Physician productivity gains also played a role in offsetting rising expenses. The annualized median work relative value units (wRVUs) per physician FTE reached 6,190.69, reflecting a 1.7% increase over 2024 and a 7.2% increase compared to 2023. At the same time, support staffing levels declined as physician productivity improved. Median support staff FTEs per 10,000 wRVUs fell to 3.59 in August, down 0.9% compared to 2024 and 3.5% compared to 2023. 

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