U.S. hospitals are showing early signs of growth, but the path forward remains complicated, according to Strata’s Monthly Healthcare Industry Financial Benchmarks.
“The nation’s hospitals and health systems saw incremental improvements to close the first quarter, but we have yet to see a meaningful shift in overall financial performance,” said Steve Wasson, chief data and intelligence officer at Strata Decision Technology. “Higher patient demand contributed to revenue gains across both inpatient and outpatient care, but operating margins remain fragile as organizations continue to contend with rising expenses and increase in uncompensated care.”
The report, which draws from data across 1,900 hospitals, tracks key margin, expense, and revenue trends through March 2026. Here are five key points:
1. The average health system margin hit 0.4% in March after two months of being in the red, according to Strata. Average health system margins were -0.3% in February. Hospital operating margins also increased nearly a percentage point to 2.5% on average in March.
“While margins were narrow, the past two months of improvements suggest the beginning of a possible fragile recovery,” the report notes.
2. Hospitals based in the Southern states reported a 2.2 percentage point margin increase in the last year while the Northeast reported smaller gains, of just 0.5 percentage points. There was no change in the Midwest margin averages while the West experienced a 1.1 percentage point decline.
3. Increasing expenses dampened hospital financial performance. The total expenses increased 7.1% year over year in March, driven by non-labor expenses. Hospital supply expenses reported doubled digit increases year over year. Hospitals in the West experienced the largest expense increases, at 12.1%.
4. Bad debt and charity care soared 17% year over year in March as uncompensated care increased. The growth in bad debt and charity care suggests “ongoing financial strain tied to coverage gaps, patient affordability challenges and evolving policy dynamics in 2026,” according to the report. Here is the geographic breakdown:
- Midwest: 27.3%
- South: 15.8%
- West: 15.5%
- Northeast: 3.2%
5. Outpatient revenue jumped 11.8% year over year in March, compared to a 6.6% increase in inpatient revenue. The gross operating revenue increased 9.4% year over year. Net patient services revenue per adjusted discharge was up nearly 4% year over year.
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