Monthly Healthcare Industry Financial Benchmarks

 

Overview: Hospital Expenses, Revenues Continue to Rise Even as Health System Margins Narrow

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.  

Hospitals nationwide saw increases across most metrics to close the first quarter in March, including both higher expenses and higher revenues. Highlights from the March 2025 data include: 

• Operating margins for U.S. health systems narrowed slightly to 0.9% in March, after holding steady at 1% for both January and February, while hospital operating margins rose year-over-year (YOY). 

• Non-labor expenses continued to rise faster than other expense categories, due in part to double-digit increases in both drug and supply expenses versus the same month last year. 

• Patient demand was up nationwide across most metrics in March, following decreases in February, as growth in outpatient visits outpaced inpatient admissions.  

• Gross outpatient revenues led overall hospital revenue increases, jumping 10.0% YOY as hospitals and health systems continue to see care shift from inpatient to outpatient settings.  

• Per-physician expenses rose to $1.2 million in the first quarter, representing an increase of 3% compared to Q4 2024 and 10.3% versus Q1 2024. 

Hospital Performance Benchmarks  

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

Operating Margins: U.S. health systems saw a slight decrease in operating margins at the end of the first quarter in March, while individual hospitals continued to see margin gains. The median year-to-date (YTD) health system operating margin decreased to 0.9% in March, after holding steady at 1% for both January and February following a drop from 2.1% in December 2024. The last time the median YTD health system operating margin dropped below 1% was 15 months ago in December 2023, when the metric was also 0.9%. 

At the same time, operating margin trends for U.S. hospitals were up for the month. The median change in hospital operating margin rose 2.1 percentage points from March 2024 to March 2025, marking a fourth consecutive month of increases for the metric. The median change in operating earnings before interest, taxes, depreciation, and amortization (EBITDA) margin increased 1.7 percentage points over the same period. Month-over-month increases were minimal, with the median change in hospital operating margin up just 0.4 percentage point and the median change in operating EBITDA margin up 0.1 percentage point.  

Margin changes varied by census region. Hospitals in the Northeast saw the biggest increase, with median change in operating margin up 3.1 percentage points year-over-year (YOY), while hospitals in the Midwest had the least increase at 1.5 percentage points YOY. There was significant variation for hospitals of different sizes. Hospitals with more than 500 beds had the lowest increase in median change in operating margin at just 0.1 percentage point YOY. The smallest hospitals with 0-25 beds saw the median change in operating margin increase 1.2 percentage point, while hospitals with 300-499 beds had the biggest increase at 3.3 percentage points. 

Hospital Expenses: Hospitals across the country continued to see expenses rise across most measures, with non-labor expenses seeing the biggest YOY increases. Total non-labor expense jumped 9.1% from March 2024 to March 2025. Total labor expense was up 5.6% and total expense increased 7.4% over the same period. Looking at specific non-labor expense categories, drugs expense had the biggest increase at 11.5% YOY, followed by supply expense at 10.8% and purchased service expense at 9.5% YOY. 

Across different census regions, YOY increases in total non-labor expense ranged from 7.4% for hospitals in the Midwest to 10.6% for those in the South. Month-over-month, growth in total labor expense outpaced total non-labor expense at 9.1% versus 3.3%, respectively. Total expense increased 6.0% from February to March 2025. 

Expenses rose YOY after adjusting for patient volumes, but decreased across most metrics month-over-month. Non-labor expense per adjusted discharge rose 5.7% YOY, driven by a 7.9% increase in supply expense per adjusted discharge, a 6.6% increase in drugs expense per adjusted discharge, and a 5.9% increase in purchased service expense per adjusted discharge. Labor expense per adjusted discharge was up 1.1% YOY while total expense per adjusted discharge rose 3.0% YOY. Compared to the prior month, non-labor expense per adjusted discharge decreased 2.8% and total expense per adjusted discharge was down 1.1%, while labor expense per adjusted discharge rose 1.4%. 

Hospital Revenues: Hospitals continued to see growth in overall revenues, but some declines in adjusted patient revenues. Gross outpatient revenue had the biggest increase at 10.0% from March 2024 to March 2025. Inpatient revenue rose 9.6% and gross operating revenue increased 9.7% over the same period. March was the 23rd consecutive month of YOY increases across the three metrics. 

Month-over-month, outpatient revenue rose 7.2%, inpatient revenue increased 5.4%, and gross operating revenue was up 6.2%. Looking at changes in outpatient revenue across different parts of the country, the rate of growth was nearly identical across three of four census regions. Gross outpatient revenue increased 10.2% YOY for hospitals in the Northeast and 10.3% YOY for hospitals in both the South and the West. Hospitals in the Midwest saw gross outpatient revenue increase 9.3% from March 2024 to March 2025. 

Revenue results were mixed after adjusting for patient volumes. Net patient service revenue (NPSR) per adjusted discharge rose 4.9% YOY, and NPSR per adjusted patient day increased at 5.6% YOY — but both metrics decreased 0.2% month-over-month. 

Patient Volume Benchmarks 

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

Patient demand was up nationwide across most metrics in March. Outpatient visits had the biggest YOY increase at 5.6%, followed by inpatient admissions at 4.6%. Observation visits increased 1.9% and emergency visits were up 1.8% from March 2024 to March 2025. Compared to the previous month, outpatient visits increased 7.9%, inpatient admissions were up 6.6%, observation visits rose 8.6%, and emergency visits were up 5.5%. 

Looking at patient volumes across different census regions, hospitals in the South had the biggest increase in outpatient visits at 6.3% YOY, followed by those in the Midwest at 6.2% YOY. Compared to two years ago in March 2023, outpatient visits were up 1.1% nationally while inpatient admissions were up 7.5%. 

While overall patient volumes increased, patient demand decreased YOY across most service lines, according to the latest service line data from February. Ear, nose, and throat (ENT) had the largest YOY decrease, with patient volumes down at 14.6%, followed by ophthalmology at 6.0% YOY. Some of the decreases can be attributed to the fact that 2024 was a leap year, so there was an extra day in February 2024 versus February 2025 for the YOY comparisons. Infectious disease was one of the few service lines to see patient demand increase, with patient volumes jumping 18.7% YOY even with the shorter month in February 2025. Other service lines to see YOY increases were hepatology at 1.5%, genetics at 0.9%, and cancer at 0.7%. 

Across 15 common procedure types, data from February show patient volumes increased for five and decreased YOY across 10, again due in part to 2024 being a leap year. Not surprisingly, inpatient primary knee replacements had the biggest drop at 18.1% YOY, as such surgeries continue to shift to outpatient settings. Examples of procedures that saw patient volume increases are outpatient positron emission tomography (PET) imaging, up 6.1% YOY, and outpatient primary hip replacements, up 3.0% YOY. 

Patient volumes were down YOY across most metrics for the nation’s children’s hospitals in March. Emergency visits saw the biggest decrease at 5.5% YOY, followed by inpatient admissions at 2.4% YOY, and outpatient visits at 2.1% YOY. Observation visits had the only YOY increase at 2.7%.   

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 quarter’s key performance indicators from more than 10,000 physician practices. 

 

The nation’s physicians’ practices continued to see increases across most metrics throughout the first quarter of 2025. The level of investment needed to support physician practice operations — measured as median investment per physician full time equivalent (FTE) — rose to $347,053 for Q1. That marked a 5.4% increase from the fourth quarter of 2024 but just a slight 0.2% increase from the first quarter of 2024.  

Per-physician expenses continued to climb, contributing to the increase in needed investment. The median total expense per physician FTE rose to $1.2 million in the first quarter, up 3% from Q4 2024 and up 10.3% from Q1 2024. The median net revenue per physician FTE was $765,530. That was down slightly 0.7% from the fourth quarter of last year but up 9.1% versus the first quarter of 2024. 

Physician productivity remained on the rise. Median physician work relative value units (wRVUs) per FTE increased to 6,250.88 for Q1 2025, up 2.4% from Q4 2024 and up 3.3% from Q1 2024. Meanwhile, staffing levels at physician practices decreased compared to late last year. Median support staff FTEs per 10,000 wRVUs were 3.07 for the first quarter, down 2.9% from Q4 2024 but up 1.2% from Q1 2024.