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. 

Overview: Health System Margins, Hospital Patient Volumes Down in August

Performance metrics were mixed for U.S. healthcare organizations in August, with patient demand stalling for many even as revenues continued to rise. Highlights from the August data include:

• Health systems nationwide continued to see operating margin declines, with the metric narrowing to 1.9% in August while the median hospital operating margin rose slightly to 4.9%. 
• Patient volumes dropped across most key metrics for the month, representing a return to declines seen in June following rising patient demand in July. 
• Hospital expense increases eased somewhat compared to double-digit increases in July; drugs expense, for example, rose 4.6% year-over-year (YOY) versus 17.3% YOY the prior month. 
• The level of investment needed to support physician practice operations rose, with the median investment per physician full-time equivalent up 13.7% versus 2023, due in part to ongoing expense increases. 

Hospital Performance Benchmarks

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

Operating Margins: Hospital operating margins saw a slight increase in August while health system operating margins narrowed. The median year-to-date (YTD) operating margin for hospitals nationwide rose just one-tenth of a percentage point from 4.8% in July to 4.9% in August.* At the same time, the median YTD health system operating margin dropped from 2.1% in July to 1.9% in August. 

Hospital operating margins saw minimal changes compared to prior year and prior month. The median change in hospital operating margin rose 0.9 percentage point from August 2023 to August 2024, and just 0.2 percentage point from July to August 2024. Margin changes varied by region, with hospitals in the Midwest and Northeast/Mid-Atlantic seeing decreases of 0.5 percentage point and 1.1 percentage point year-over-year (YOY), respectively. Other regions had increases ranging from 0.2 percentage point for hospitals in the Great Plains to 1.9 percentage points for those in the South. 

The median change in hospital operating earnings before interest, taxes, depreciation, and amortization (EBITDA) margin for hospitals nationwide was up 0.5 percentage point YOY and just 0.1 percentage point month-over-month. 

Hospital Expenses: Hospital expense increases eased somewhat in August compared to July’s double-digit increases. Non-labor expenses rose faster than labor expenses for the month, with total non-labor expense up 6.2% YOY and non-labor expense per adjusted discharge up 5.6% YOY. By comparison, total labor expense increased 5.4% YOY and labor expense per adjusted discharge rose 3.9% YOY. Total expense and total expense per adjusted discharge were up 6.2% YOY and 4.7% YOY, respectively. 

Looking at specific non-labor expenses, supply expense was up 5.5% YOY compared to a 16.4% YOY increase in July. Drugs expense increased 4.6% versus 17.3% YOY the prior month, while purchased service expense rose 12.0% YOY, the same level as in July. 

Month-over-month expense changes were mixed. Total expense was up 0.6% and total non-labor expense rose 1.1%, due in part to a 1.4% increase in supply expense and a 1.6% increase in purchased service expense from July to August 2024. Drugs expense decreased 1.1% after increasing 8.8% month-over-month in July, while total labor expense was essentially flat, decreasing just 0.1%. Both total expense per adjusted discharge and labor expense per adjusted discharge decreased 1.7% month-over-month. 

Hospital Revenues: Hospital revenues continued to rise across most metrics. Gross operating revenue and inpatient revenue both increased 6.1% YOY while outpatient revenue was up 5.6% YOY. Month-over-month, gross operating revenue increased 1.2%, outpatient revenue rose 1.5%, and inpatient revenue decreased just 0.2%. Net patient service revenue (NPSR) per adjusted discharge increased 3.6% YOY and decreased 1.7% from July to August 2024. 

By region, increases in gross operating revenue ranged from 4.6% YOY for hospitals in the Northeast/Mid-Atlantic to 7.0% for those in the Midwest. Inpatient revenues rose for hospitals in four of five regions, with increases ranging from 5.7% YOY in the West to 7.4% YOY for both the South and Northeast/Mid-Atlantic. The Great Plains was the only region to see a decrease, with inpatient revenues there down 0.6% YOY. 

Patient Volume Benchmarks

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

Patient demand dropped across most metrics in August, representing a return to declines seen in June following July’s increases. While inpatient admissions increased 3.5% YOY, other metrics saw declines over the same period ranging from 0.5% for outpatient visits to 4.9% for emergency visits. From July to August, inpatient admissions decreased 0.7% but outpatient visits increased slightly, up 0.4%. Compared to two years ago in 2022, inpatient admissions were up 7.2% and outpatient visits increased 3.0% 

Volumes rose across different service lines. Infectious disease had the biggest YOY increase at 20.5%, due in part to recent increases in cases of pertussis, COVID-19, and other infectious diseases reported by the Centers for Disease Control and Prevention. Rheumatology had the second highest YOY increase at 16.1%, followed by cancer at 15.0%. Patient volumes also increased YOY across 14 of 15 common procedure types. Outpatient positron emission tomography (PET) had the biggest increase at 14.5% YOY, followed by outpatient microscopic lab exams at 11.4% YOY, and outpatient chemistry/hematology labs at 11.3% YOY. Inpatient primary knee replacements were the only procedure to see a YOY decrease at 6.3%, as such procedures continue to shift to outpatient settings. 

Patient volumes were mixed for the nation’s children’s hospitals. Inpatient admissions increased 1.4% while outpatient visits decreased 5.4% from August 2023 to August 2024. Observation visits were up 2.2% and emergency visits decreased 5.1% over the same period, according to data as of August 31. 

Physician Practice Benchmarks 

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

Physician practices saw double-digit increases in the level of investment needed to support practice operations. The median investment per physician full-time equivalent (FTE) rose to $337,903 for August annualized, up 13.7% versus 2023 and 18.9% compared to 2022.  

Rising expenses contributed to the increases. The median total direct expense per physician FTE was $1.1 million for August annualized. That is up 8.9% compared to 2023 and 16.2% from 2022. The median net revenue per physician FTE was $725,717 for the month (annualized), up 8.5% from 2023 and 15.1% from 2022. 

Physician productivity increased as staffing levels continued to decrease. The median physician work relative value units (wRVUs) per FTE were 6,415.08 for August annualized, up 8.4% from 2023 and 12.4% from 2022. Median support staff FTEs per 10,000 wRVUs — a measure of staffing levels and productivity — were 2.92 for August annualized, down 5.0% compared to 2023 and down 8.4% versus 2022. 

*The median YTD hospital operating margin of 4.8% for July 2024 represents a correction from the figure contained in the previous month’s report.