Monthly Healthcare Industry Financial Benchmarks

Health System Operating Margins Improve Slightly but Remain in the Red Amid Ongoing 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 limited financial improvement in February, as persistent expense growth continued to weigh on performance. Highlights from the February 2026 data include:

• Health system operating margins held below breakeven levels at negative 0.3%, up only slightly from negative 0.6% in January.
• Supply and drug expenses served as key drivers of ongoing expense growth, rising 7.8% and 7.6% YOY and contributing to a 5.7% increase in total expense.
• Revenue growth reflected continued strength in outpatient care, with gross operating revenue increasing 6.0% YOY, including a 7.2% rise in outpatient revenue.
• Patient demand remained soft across most volume metrics, with declines in emergency department visits and inpatient admissions and only modest growth in outpatient visits.
• Physician practices felt the weight of sustained financial strain, as rising expenses and limited physician productivity gains pushed needed investment levels higher.

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 inched upward but remained in the red in February, continuing a rocky start for U.S. health systems as they navigate unstable revenues and ongoing expense increases in early 2026. The median year-to-date (YTD) operating margin for health systems nationally was negative 0.3% in February, up from negative 0.6% in January.**

At the individual hospital level, the median change in operating margin declined 1.3 percentage points from February 2025 to February 2026 but was essentially flat month over month, increasing just 0.1 percentage point from January to February 2026.

Operating margin changes were relatively consistent across hospitals in different census regions. The median change ranged from a decrease of 1.7 percentage points in the West to a decrease of 1.3 percentage points in the Northeast. There was greater variation among hospitals by size:

• 0-25 beds: down 2.3 percentage points
• 26-99 beds: down 3.5 percentage points
• 100–199 beds: down 1.1 percentage points
• 200–299 beds: up 0.2 percentage point
• 300–499 beds: down 1.3 percentage points
• 500 beds or more: up 0.5 percentage point

The median change in operating earnings before interest, taxes, depreciation, and amortization (EBITDA) margin showed a similar pattern. The metric decreased 1.4 percentage points year over year (YOY) but were unchanged month over month for hospitals nationally.

**Note: Some of the variation in health system operating margins can be attributed to the year-to-date view, which reflects the full year of performance for December, but just two months of performance as of February.

Hospital Expenses: Hospitals across the country continued to see expenses increase across most categories compared to 2025 levels, with supply and drug expenses remaining key drivers of overall growth. Supply and drug expenses rose at similar rates, increasing 7.8% and 7.6% YOY, respectively, contributing to a broader rise in non-labor expenses. Overall, total non-labor expense increased 6.8% YOY in February, outpacing the 4.0% growth in labor expense and contributing to a 5.7% increase in total expense. Purchased service expense increased 3.5% over the same period.

By census region, YOY increases in non-labor expenses ranged from 6.2% for hospitals in the Northeast to 9.3% for those in the South. Hospitals in the Northeast experienced the largest increase in drug expense at 14.7% YOY.

Overall expenses showed some improvement month over month. Total expense decreased 5.4%, total labor expense declined 8.4%, and total non-labor expense fell 3.0% from January to February. Expenses increased versus 2025 levels after adjusting for patient volumes. Total expense per adjusted discharge rose 3.0% YOY, labor expense per adjusted discharge increased 2.1%, and non-labor expense per adjusted discharge rose 3.8% YOY.

Taking a closer look at labor trends for the month, contract labor as a percent of labor expense was relatively stable, decreasing 0.6% YOY in February. Overtime hours as a percent of productive hours improved, dropping 7.4% from February 2025 and 2.2% month over month. The hospital average employed hourly rate decreased 3.3% YOY and was nearly flat, declining just 0.3% from January to February.

Hospital Revenues: Gross operating revenues grew compared to levels seen in early 2025 but declined versus January of this year. Gross operating revenue increased 6.0% YOY, driven by a 7.2% rise in outpatient revenue and a 3.5% increase in inpatient revenue. Month over month, a 9.1% drop in inpatient revenue and a 3.0% decrease in outpatient revenue contributed to a 5.2% decline in gross operating revenue.

Looking at hospitals by census region, outpatient revenue increases ranged from 3.5% YOY for hospitals in the Northeast to 12.0% for those in the West. The largest hospitals experienced the greatest increases in this metric, with outpatient revenue up 10.2% YOY for hospitals with 300-499 beds and up 10.0% YOY for those with 500 beds or more. By comparison, outpatient revenue increased 3.3% YOY for the smallest hospitals with 0-25 beds.

Adjusted revenues improved across all measures for hospitals nationally. Net patient service revenue (NPSR) per adjusted patient discharge rose 2.3% YOY and 0.3% month over month, while NPSR per adjusted patient day increased 6.1% YOY and 2.1% compared to the prior month. Meanwhile, bad debt and charity care increased 8.6% YOY but declined 4.8% month over month.

Patient Volume Benchmarks 

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

Hospital volumes: Patient demand remained soft in February, as declines seen in January continued across most patient volume metrics. Emergency department (ED) visits experienced the largest decreases, with volumes down 10.3% YOY and 14.7% month over month. Observation visits declined 1.9% compared to February 2025 and 8.8% compared to January 2026. Inpatient admissions decreased 0.8% YOY and fell 9.2% month over month. Outpatient visits showed mixed results, increasing 3.9% YOY but declining 0.8% from the prior month.

Hospitals across most regions saw outpatient visits increase compared to 2025 levels, with gains ranging from 2.3% for hospitals in the South to 7.8% for those in the Midwest. The Northeast was the only region to report a slight decrease, with outpatient visits down 0.3% YOY. Inpatient admissions declined across all regions, ranging from a 0.1% decrease in the West to a 1.4% decrease in the South.

Service line volumes: Shifts in patient demand varied across service lines, according to the latest data from January. Ophthalmology again saw the largest YOY increase, with patient demand rising 7.3% YOY, followed by hepatology at 5.0%.

Several service lines experienced declines. Infectious disease had the steepest drop, with patient volumes down 23.8% from January 2025 to January 2026. Other notable YOY declines included the normal newborn service line at 12.2%, ear, nose, and throat (ENT) at 7.9%, gynecology at 6.0%, and general medicine at 5.1%. Other service lines saw more modest YOY volume changes, including cancer with an increase of 0.7%, cardiology with an increase of 1.0%, and gastroenterology with a decrease of 0.2%.

Procedure volumes: Organizations saw decreases across most common procedure types in January compared to the same month last year, with declines in 11 of 15 common procedure types. Outpatient microbiology lab procedures experienced the largest decrease, with volumes down 14.8% YOY, followed by inpatient primary knee replacements, down 10.2% YOY. Outpatient X-ray imaging decreased 9.0% YOY, and outpatient primary knee replacements declined 8.2% YOY.

Procedures that saw an increase in patient demand included outpatient computed tomography (CT) imaging, up 0.3% YOY; outpatient chemistry lab, up 0.4%; outpatient magnetic resonance imaging (MRI), up 4.9%; and outpatient positron emission tomography (PET) imaging, up 7.0%.

Children’s hospital volumes: Patient volumes at the nation’s children’s hospitals showed mixed performance in February, with modest YOY changes across care settings and more pronounced shifts month over month. Inpatient admissions declined 0.8% from February 2025 to February 2026. ED visits saw a more significant drop, falling 13.5% YOY, according to data through February 28. In contrast, observation visits increased 6.7% YOY, while outpatient visits rose 6.0% over the same period.

Month over month, declines were more widespread. Inpatient admissions decreased 2.7%, and observation visits edged down 1.1%. ED visits again saw the steepest drop, down 13.5%. Outpatient visits were the exception, increasing 4.1% from January to February.

Physician Practice Benchmarks 

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

Physician investments: Physician practices across the country continued to see rising investment levels needed to support operations, driven by persistent expense increases. For December 2025 through February 2026 annualized, the median investment per physician full-time equivalent (FTE) reached $373,152. This represents an increase of 7.7% compared to 2025 and 13.1% compared to 2024.

Investment growth varied by region, with practices in the South experiencing the largest increases. In that region, median investment per physician FTE jumped 15.4% compared to 2025 and 39.6% compared to 2024. Practices in the Northeast also saw notable growth, with an 8.1% increase YOY and a 17.4% increase compared to two years ago. The metric increased 4.6% YOY in the Midwest and 3.8% YOY in the West.

Physician expenses: Similar to broader healthcare trends, physician practices continued to face rising expenses. Total expense per physician FTE climbed to just over $1.2 million for the December 2025 through February 2026 annualized period, representing a 2.1% increase from 2025 and an 8.5% increase compared to 2024.

Per-physician expenses rose YOY for practices in three of the four regions. Practices in the Northeast saw the largest increase at 10.0%, followed by those in the South at 4.7% and practices in the West at 4.1%. The Midwest was the only region to report a decline, with per-physician expenses decreasing 2.8% compared to 2025 levels.

Physician revenues: At the same time, physician revenues remained on the rise. Median NPSR per physician FTE increased to $818,390 for the three-month annualized period, up 2.3% YOY and 5.5% over the past two years.

Revenue performance varied by region. Per-physician revenues increased 2.6% YOY in the South and 3.1% YOY in the Midwest but declined 0.9% in the Northeast and were down 1.6% YOY in the West.

Physician productivity and staffing: Physician productivity inched upward in February while staffing levels declined, reversing trends from the prior month. Median work relative value units (wRVUs) per physician FTE reached 6,558 for the December 2025 through February 2026 annualized period, up 0.2% from 2025 and 2.4% from 2024. Regionally, practices in the Northeast saw the largest increase, with productivity rising 4.4% YOY, while practices in the Midwest experienced the largest decline, with the metric down 4.0% YOY.

Meanwhile, staffing levels decreased. Median support staff FTEs per 10,000 wRVUs — a measure of staffing and productivity — declined to 3.4 for the same annualized period, down 0.2% from 2025 and 2.8% compared to 2024.

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