Health system operating margins dipped below 1% in July as supply and drug expenses surged, according to Strata.
The healthcare data analytics firm surveyed financial data for more than 1,600 hospitals to benchmark performance. Five things to know:
1. Hospital operating margin dropped 0.2% month over month, but was up 1.4% in July compared to last year. Hospitals in the Northeast reported a 2.5 percentage point increase in median operating margins while the South reported 1.6 percentage point increase. Hospitals in the Midwest had an average of 1.3 percentage point growth and hospitals in the West reported a 1 percentage point increase.
2. The average median margin change by hospital size was:
- 0 to 25 beds: 2.5 percentage point increase
- 100 to 199 beds: 0.3 percentage point increase
- 500-plus beds: 1.7 percentage point increase
3. Median EBITDA margin for hospitals was up 0.9 percentage points year over year, but dropped 0.3 percentage points month over month, according to the report.
4. Supply costs soared 10.6% and drug costs were up 9.5% year over year in July, which Strata reported would likely continue based on the impact of federal tariffs. The regional breakdown for supply expense growth was:
- Northeast: 15.8%
- South: 11.3%
- West: 10.4%
- Midwest: 7.6%
5. Average hospital gross revenue increased for the 27th consecutive month in July. Outpatient revenue jumped 12% year over year while inpatient revenue was up 7.2%. Overall gross operating revenue was up 10.6%.
