Monthly Healthcare Industry Financial Benchmarks

 

Overview: Health System Margins Leveled Off in February, While Hospital Margins Rose 

This report highlights the latest trends in financial performance for U.S. hospitals and physician groups, drawn from monthly data from more than 135,000 physicians and over 1,600 hospitals.  

Health system margin performance plateaued in February, even as individual hospitals saw increases across most metrics compared to 2024. Highlights from the February 2025 data include: 

• Operating margins for the nation’s health systems held steady at 1.0% in the second month of 2025, as rising expenses continued to limit growth. 

• Non-labor hospital expense increases outpaced labor expense growth in February, with total non-labor expense up 5.7% and total labor expense up 2.2% year over year (YOY). 

• U.S. hospitals saw patient demand drop across most metrics, with emergency visits seeing the largest decrease, down 6.1% from February 2024 to February 2025. 

• Gross inpatient revenues rose faster than outpatient revenues for the month, as hospitals saw a 22nd month of YOY increases across gross operating, inpatient, and outpatient revenues. 

• Physician practices continued to experience strains on performance, as increases in per-physician expenses drove up the level of investment needed to support physician practices. 

Hospital Performance Benchmarks  

The latest benchmarks illustrate the interplay of revenues and expenses on historically tight hospital operating margins. 

Operating Margins: Operating margins for the nation’s health systems leveled off in the second month of 2025, as rising expenses continued to limit growth. The median year-to-date (YTD) health system operating margin was 1.0% for February 2025. That was unchanged from 1.0% in January, but remained down from 2.1% in December of 2024. 

Meanwhile, trends in operating margins for individual U.S. hospitals saw some improvement year-over-year (YOY). The median change in hospital operating margin was up 1.4 percentage points from February 2024 to February 2025. The median operating earnings before interest, taxes, depreciation, and amortization (EBITDA) margin rose 1.1 percentage points over the same period. 

Margins decreased compared to the prior month, however. The median change in hospital operating margin was down 1.4 percentage points while the median operating EBITDA margin decreased 1.2 percentage points from January to February 2025. 

Median changes in operating margin varied by census region.¹ Hospitals in the South saw the greatest YOY increase, with the metric up 2.4 percentage points from February 2024 to February 2025. Median change in operating margin also increased 2.0 percentage points YOY for hospitals in the Northeast and rose 1.2 percentage points YOY for hospitals in the Midwest, but decreased 0.5 percentage point YOY for those in the West.

Hospital Expenses: Hospitals continued to feel the pressures of mounting expenses. Purchased service expense had the biggest increase at 8.7% YOY, followed by supply expense at 6.7% YOY, and drugs expense at 5.4% YOY. Those increases drove total non-labor expense up 5.7% from February 2024 to February 2025. Total labor expense increased 2.2% over the same period, while total expense was up 4.2% YOY.  

By census region, hospitals in the West had the biggest YOY increase in total expense, with the metric jumping 5.5%. Total expense rose 5.3% YOY for hospitals in the Northeast, 4.0% YOY for those in the South, and 3.9% YOY for hospitals in the Midwest. Looking at non-labor expenses, hospitals in the Northeast had the biggest increase in total non-labor expense at 7.7% YOY, followed by those in the South at 6.6% YOY. Total non-labor expense rose 5.5% YOY for hospitals in both the Midwest and the West from February 2024 to February 2025. 

Expenses for hospitals nationwide also rose YOY after adjusting for patient volumes. Total expense per adjusted discharge increased 4.6%, labor expense per adjusted discharge was up 2.9%, and non-labor expense per adjusted discharge rose 6.5% YOY. 

Hospitals saw some relief month over month. From January to February 2025, total expense decreased 4.9%, total labor expense dropped 7.1%, and total non-labor expense decreased 3.1%. 

Hospital Revenues: Overall hospital revenues also remained on the rise, marking a 22nd month of YOY increases in gross operating, inpatient, and outpatient revenues. Inpatient revenue had the biggest increase, rising 7.4% from February 2024 to February 2025, while outpatient revenue was up 4.4%. Gross operating revenue rose 5.1% over the same period.  

By census region, hospitals in the Northeast had the biggest YOY increase in inpatient revenue, with the metric up 9.8%. Inpatient revenues also rose 8.2% for hospitals in the Midwest, 6.8% for those in the South, and 6.3% for those in the West from February 2024 to February 2025. 

Gross revenues decreased month over month for hospitals nationwide. Inpatient revenue dropped 8.5%, outpatient revenue decreased 6.3%, and gross operating revenue declined 6.8% from January to February 2025. Revenue fluctuations varied after adjusting for patient volumes. Net patient service revenue (NPSR) per adjusted discharge rose 5.1% YOY, but decreased 0.8% month over month. NPSR per adjusted patient day increased 4.8% YOY and rose 1.3% from January to February 2025. 

Patient Volume Benchmarks 

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

Patient demand decreased across most metrics and measures in February. Emergency visits had the biggest YOY decrease with patient volumes down 6.1% from February 2024 to February 2025. Observation visits were down 4.6% and outpatient visits decreased 2.7% over the same period. Inpatient admissions were the only metric to see an increase at 1.5% YOY. 

From January to February 2025, emergency visits dropped 14.8%, observation visits were down 11.1%, inpatient admissions decreased 9.3%, and outpatient visits were down 6.9%. Compared to two years ago in February 2023, inpatient admissions were up 11.7% while outpatient visits increased 6.9%. 

Patient volumes increased YOY across most service lines. Infectious disease had the biggest increase at 15.2% YOY, followed by nephrology at 7.5%, according to the latest service line data from Jan. 31, 2025. Service lines that saw YOY decreases included ear nose and throat (ENT), which was down 3.4%, and neonatology, which decreased 2%. 

Looking at patient demand across 15 common procedure types, five had YOY decreases while 10 had increases, based on the latest procedure data from January. Of those, outpatient positron emission tomography (PET) had the biggest YOY increase at 16.9%, and inpatient primary knee replacements again had the biggest decrease in patient volumes at 13.9%. 

Children's hospitals saw patient volumes decline in February. Emergency visits had the biggest drop at 11.3% YOY. Outpatient visits decreased 9.6%, observation visits were down 5.6%, and inpatient admissions decreased 1.8% from February 2023 to February 2025.  

For additional Patient Volume data, please see this supplemental file containing detailed charts and graphs featuring StrataSphere data.

 

Physician Practice Benchmarks 

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

 

Physician practices across the country saw significant increases in per-physician expenses as well as the level of investment needed to support physician practices in February. The median investment for physician full-time equivalent (FTE) rose to $359,470 for the three-month period of December 2024 through February 2025 annualized. That was up 9.1% from 2024 and 21.5% from 2023. 

Higher physician expenses contributed to the increase. Median total expense per physician FTE rose to about $1.2 million for December through February 2025 annualized, an increase of 8.0% compared to 2024 and up 20.0% compared to 2023. Meanwhile, the median net revenue per physician FTE was $770,089 annualized, marking increases of 3.9% versus 2024 and 15.2% versus 2023. 

Physician productivity increased over the same period. Median physician work relative value units (wRVUs) per FTE were 6,166.18 for December 2024 through February 2025 annualized, up 1.1% from 2024 and 8.2% from 2023. Staffing levels at physician practices increased slightly. Median support staff FTEs per 10,000 wRVUs were 3.22 for the three-month annualized period. That was up 3.2% from 2024 and up 1.9% from 2023.