Health System Operating Margins Remain Below Breakeven Amid Ongoing Expense Pressures and Unstable Patient Demand
Chicago, IL — April 2, 2026 — U.S. hospitals and health systems continued a rocky start to 2026 in February, facing ongoing financial headwinds as persistent expense growth and softer patient demand limited performance gains, according to new data from Strata Decision Technology. The median year-to-date operating margin for health systems nationally stayed in the red, rising only slightly from negative 0.6% in January to negative 0.3%.
“While margins showed modest improvement in February, the underlying pressures facing healthcare leaders remain significant,” said Steve Wasson, Chief Data & Intelligence Officer at Strata Decision Technology. “Sustained expense growth and uneven patient demand are contributing to a challenging environment, reinforcing the need for healthcare leaders to better anticipate future performance and ensure their organizations thoughtfully manage expenses and align resources and care delivery with changing utilization patterns.”
Hospitals felt the weight of mounting expenses, especially in non-labor categories. Supply and drug expenses saw the biggest increases, rising 7.8% and 7.6% year over year (YOY) respectively and contributing to a 5.7% increase in total expense. Total non-labor expenses again grew faster than total labor expenses, rising 6.8% YOY compared to 4.0% for labor.
At the same time, patient demand was soft across most measures, with declines in emergency department visits and inpatient admissions compared to February 2025. More detailed data showed similar patterns, with decreases across most procedure categories and several service lines in recent months. Outpatient visits were an exception, climbing nearly 4.0% YOY.
Overall hospital revenues remained on the rise. Gross operating revenue rose 6.0% YOY, driven by a 7.2% increase in outpatient revenue and a 3.5% increase in inpatient revenue. However, these gains were not sufficient to fully offset rising expenses.
Financial pressures extended to physician practices. Rising expenses and limited physician productivity gains continued to push up the level of investment needed to support physician practice operations. The median investment per physician full-time equivalent reached $373,152 for a three-month annualized period ending in February, up 7.7% from 2025 and 13.1% compared to 2024 levels.
These findings are drawn from Strata Decision Technology’s latest Monthly Healthcare Industry Financial Benchmarks report.
About the Data
This report uses data from Comparative Analytics and Strata’s StrataSphere® database. Comparative Analytics offers access to near real-time data drawn from more than 135,000 physicians from over 10,000 practices and 139 specialty categories, and from 500+ unique departments across more than 1,900 hospitals. Comparative Analytics also provides data and comparisons specific to a single organization for visibility into how their market is evolving. StrataSphere is a unique and comprehensive data-sharing platform that helps providers leverage the power of a network that represents approximately 25% of all provider spend in U.S. healthcare. This report incorporates data from more than 650 hospitals from over 120 health systems with StrataJazz® Decision Support.
About Strata Decision Technology
Strata Decision Technology provides an innovative, cloud-based platform for software, and data and service solutions to help organizations acquire insights, accelerate decisions, and enhance performance in support of their missions. More than 2,300 organizations rely on Strata for market-leading service and enterprise performance management software, data, and intelligence solutions. For more information, please visit www.stratadecision.com.
Media contact:
Stephanie Fergione, Inkhouse