The average operating margins for U.S. health systems improved slightly from 0.9% in March to 1.1% in April, the fourth month of minimum fluctuation, according to Strata’s Monthly Healthcare Industry Financial Benchmarks. However, average margins dropped from 2.3% in May 2024.
While health system margins improved, year-to-date median hospital operating margins were stagnant month over month and year over year. Median hospital EBITDA dropped 0.3 percentage points year over year as expense growth matched revenue gains. There was some variation for hospital margin change based on region and size:
- Hospitals in the South reported margins rose by nearly 1 percentage point.
- Hospitals in the Midwest reported margins dropped by nearly 1 percentage point.
- Hospitals with 0 to 25 beds reported the largest margin decline, at around 2 percentage points per year from April 2024 to 2025.
- Hospitals with 200 to 299 beds reported margins increased by 1.4 percentage points on average, the largest increase by hospital size.
Average hospital expenses grew 6.8% in April, driven by an 8.5% jump in supply expenses, nearly 8% increase in purchased services and 5.6% growth in drug expenses. Non-labor expenses increased the most in the West, at 8.7%, and the least in the Northeast, at 5.3%. Labor expenses increased 6.1% year over year in April.
Hospital revenue has grown every month for the last two years, with the most recent month-over-month revenue growth attributed to 2.6% increase in outpatient revenue; year-over-year, outpatient revenue jumped 9.7%. Gross operating revenue was flat and inpatient revenue dropped 4.4% overall.
Most revenue metrics grew in the last year after adjusting for patient revenues:
- Net patient service revenue: 4.1%
- NPSR per adjusted discharge: 0.6%
- Bad debt and charity care were flat
Strata surveys more than 1,600 hospitals for its monthly data reports.
