Late-Year Margin Gains Emerge, but Persistent Cost Pressures Continue to Constrain Performance
CHICAGO, IL — December 23, 2025 — U.S. hospitals and physician practices saw modest financial improvement in November, with health system operating margins posting their strongest month-over-month gain of the year. However, elevated expenses — particularly for drugs and physician operations — continued to weigh on overall performance despite steady revenue growth, according to the latest data from Strata Decision Technology.
Health system margins strengthened late in the year, with the national median year-to-date (YTD) operating margin rising from 1.2% in October to 1.5% in November. The increase marked the fourth consecutive month of improvement and the largest month-over-month gain observed in 2025, though margins remained historically tight.
Expense pressures remained a central challenge. Total hospital expenses increased 5.0% year over year (YOY) in November, driven by continued growth in labor and non-labor expenses. Drug expenses again stood out, rising 9.3% YOY, while supply and purchased service expenses increased 5.6% and 5.5%, respectively. Total non-labor expense was up 5.5% YOY and total labor expense rose 3.6% YOY for the month.
“November’s data suggest that some financial stability may be returning as organizations close out the year, but it’s far too early to declare a turning point,” said Steve Wasson, Chief Data and Intelligence Officer at Strata Decision Technology. “With expenses still rising across both labor and non-labor categories, leaders will need to remain focused on aligning resources to where demand is strongest while continuing to reassess cost structures entering 2026.”
Patient volumes were mixed in November. Inpatient admissions increased 2.0% YOY nationally, while outpatient, observation, and emergency visits declined 0.2%, 1.5%, and 2.8%, respectively. Regional variation persisted, with hospitals in the Northeast and South reporting the strongest inpatient growth, while outpatient trends ranged from modest growth in the West to declines in the Northeast.
Hospital revenues continued to rise compared to 2024 levels. Gross operating revenue increased 5.3% YOY in November, supported by growth in both outpatient revenue (+5.5%) and inpatient revenue (+6.4%). Revenue performance on a per-patient basis was more mixed, with net patient service revenue per adjusted discharge increasing 3.3% YOY but showing minimal month-over-month improvement.
Physician practices faced ongoing expense pressures. The median total expense per physician full-time equivalent (FTE) was approximately $1.1 million for November annualized, up 8.2% YOY and 17.5% compared to 2023. These increases drove higher levels of investment required to support practice operations, with median investment per physician FTE rising 7.4% YOY. At the same time, physician productivity continued to increase, while staffing levels declined, reflecting continued operational strain across practices.
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 1,850 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, LLC provides an innovative, cloud-based platform for software, and data and service solutions to help healthcare organizations acquire insights, accelerate decisions, and enhance performance in support of their missions. More than 2,300 organizations rely on Strata’s StrataJazz and Axiom solutions for market-leading service and enterprise performance management software, data, and intelligence solutions. To learn more about Strata and why the company has been named the market leader for Business Decision Support for more than 15 consecutive years, please go to www.stratadecision.com.
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