July’s Split Reality: Outpatient Momentum Meets Margin Pressure 

July data shows a moderation in momentum: health system operating margins declined from June's year peak, while outpatient volumes remain resilient. Strong revenue growth continues, but persistent labor and supply cost pressures are driving expenses higher.

July 2026 data highlights:

• Health system operating margin declined to a national median of +0.5% in July, retreating from June's year peak of +0.7%.

• Outpatient revenue continues to outperform, up 3.5% month over month and 9.0% year over year, offsetting inpatient softness.

• Total hospital expenses rose 1.7% month over month, significantly outpacing the month's revenue growth, driving margin compression.

• Non-labor expenses dipped 0.8% month over month but remain 7.5% above year-ago levels, indicating ongoing structural cost pressures.

Hospital Performance Benchmarks

*Note: Operating margins are calculated on a percentage point change basis. The table above reflects individual hospital performance, which may or may not include enterprise-level operating or administrative expense.

Operating Margins: Health system operating margins pulled back to 0.5% in July following June's peak, suggesting margin expansion may have cooled after a strong first half of the year. Meanwhile, on the individual hospital level, operating margin is down 0.1% over last month and 0.3% over last year.

Hospital Expenses: Total expenses climbed 1.7% month over month and 6.9% year over year. Non-labor expense dipped slightly month over month (-0.8%) but remains significantly elevated year over year (+7.5%), indicating that while month-to-month volatility exists, the underlying cost structure has shifted upward.

Hospital Revenues: Gross operating revenues grew solidly, with outpatient revenue up 3.5% month over month and 9.0% year over year. This outpatient strength is becoming the primary margin driver as inpatient softness persists.

Source: Comparative Analytics

Patient Volume Benchmarks 

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

Hospital volumes: Inpatient admissions rebounded 2.8% month over month and grew 4.4% year over year. Outpatient visits held flat month over month (0.0%) but are up 2.7% year over year. Emergency visits declined 0.8% month over month and 2.1% year over year—a notable softening that may reflect either seasonal patterns or a shift toward other care settings.

Physician Practice Benchmarks 

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

“Investment” measures per-physician profitability from patient care: net patient revenue minus total operating expenses, divided by physician FTEs. “Support Staff” includes all ancillary, business operations, clinical support, and front office personnel.

Physician practice expenses & productivity: Physician revenue growth remains in positive territory (+1.1% vs. 2025, +5.1% vs. 2024) alongside a parallel emerging trend: physician productivity declined 0.3% versus 2025 and 0.8% versus 2024. This productivity softening occurred amid a 2.1% year-over-year reduction in support staff levels, suggesting practices may be testing the limits of lean operations.

Total direct expenses per physician rose 0.8% compared to 2025, eroding some of the investment gains (+3.3% vs. 2025). This dynamic—declining productivity paired with reduced staffing—merits close monitoring.

Outlook

July’s data shows moderating momentum despite resilient demand. Outpatient activity remains the bright spot, with double-digit year-over-year growth, while inpatient volumes have stabilized. Yet system-wide operating margins eased from June’s peak as expense growth continued to outpace revenue gains.

This ongoing divergence puts greater focus on how health systems translate volume growth into margin. As care continues to shift across settings and locations, understanding how utilization changes affect revenue mix and the cost of care becomes increasingly important. For physician practices, declining productivity alongside staffing reductions raises the risk of capacity constraints. Whether that reflects a cyclical adjustment or a more structural shift should become clearer in coming months.

Heading into Q4, two signals bear watching: whether the summer slowdown in emergency visits persists and whether outpatient growth maintains its current pace.

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June Health System Operating Margins Climb to Year High Despite Rising Supply Costs 

June's data shows strong momentum: health system operating margins reach their year peak and outpatient volumes rebound, though supply cost pressures persist.

June 2026 data highlights:

• Health system operating margin continued its climb to a national median of +0.74%, a peak for the year

• Outpatient visit volumes rebounded, nearly leveling out last month’s sharp decline

• Hospitals’ outpatient revenue continues to outperform inpatient: outpatient was up 5.0% this month compared to inpatient’s dip of -0.8%.

• Hospital expenses dipped -0.3% since May, while supplies continued to grow, increasing 5.7% month over month (and up 10.4% year over year).

Hospital Performance Benchmarks

*Note: Operating margins are calculated on a percentage point change basis. The table above reflects individual hospital performance, which may or may not include enterprise-level operating or administrative expense.

Operating Margins: Health system operating margins grew to 0.7% in June — this year’s peak.

At the individual hospital level, operating margin grew by 1.2 percentage points month over month and 0.5 percentage points year over year.

Hospital Expenses: Total expense rate continued its downward trend with a slight dip of  -0.3% month over month, while still up 6.7% compared to last year. Notably, total labor expense was down 3.0% month over month, while up 5.5% year over year. Non-labor expense was up 2.4% compared to last month, and remains up 8.2% compared to June 2025, with supplies remaining a top expense here: increasing 5.7% month over month (and up 10.4% year over year). Drugs saw a modest increase this month compared to last, 0.7%, and remain up 5.3% year over year.

Hospital Revenues: Gross operating revenues for hospitals were up in June, both month over month (2.9%) and year over year (11.1%). In-patient revenue dipped to -0.8% compared to last month but remains up 7.4% year over year. Outpatient revenue was up 5.0% compared to May and up 12.6% over last year.

Source: Comparative Analytics

Patient Volume Benchmarks 

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

Hospital volumes: Nationally, inpatient admissions saw a modest dip this month, -0.6%, though still up 5.4% compared to June 2025. Outpatient visits rebounded month over month (6.6%) and year over year (7.8%), nearly reversing May’s drop of -8.4%.

Physician Practice Benchmarks 

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

“Investment” measures per-physician profitability from patient care: net patient revenue minus total operating expenses, divided by physician FTEs. “Support Staff” includes all ancillary, business operations, clinical support, and front office personnel.

Physician practice expenses & productivity: Looking at the second quarter, physician revenue saw increases of 4.5% month over month and 7.3% compared to last year, staying ahead of direct expense rates of +1.4% month over month and 6.8% year over year.

Outlook

June’s data shows a split reality. Outpatient activity is rebounding and margins have edged back to a year high, but hospitals are still absorbing rising supply costs and uneven inpatient volume. That is pushing leaders in different directions: some are trying to accelerate operational gains now, while others are stress-testing utilization and revenue scenarios to prepare for what may come in 2027.

If you’d like to see this (or other healthcare performance) data sliced for your organization, drop us a note!

Explore the previous monthly report to compare historical insights.

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