Monthly Healthcare Industry Financial Benchmarks

Overview: Double-Digit Increases in Drug and Supply Expenses Impede Hospital and Health System Operating Margin Growth 

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 1,850 hospitals.  

U.S. healthcare organizations continued to battle rising expenses at the end of the third quarter, with margins showing minimal changes despite ongoing gross revenue increases. Highlights from the September 2025 data include: 

• Health system operating margins shifted slightly upward for a second consecutive month in September but remained thin, consistent with levels seen since January. 

• Hospitals saw double-digit growth in drug and supply expenses year-over-year (YOY) to close the quarter, as non-labor expense increases again outpaced labor expense growth. 

• Demand for outpatient care continued to climb; outpatient visits rose 9.8% YOY in September, with hospitals in the South and Midwest seeing the biggest increases. 

• Hospital revenues reflected mounting outpatient demand, with outpatient revenue jumping 12.8% YOY nationally and rising 11.4% or more YOY across all census regions. 

• Physician practices saw investment needs decline for the first time in 2025 versus 2024 levels, with a median per-physician investment of $311,264 for Q3 2025. 

Hospital Performance Benchmarks  

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

Operating Margins: Operating margins for health systems nationally ticked upward for the second consecutive month in September. The median year-to-date (YTD) operating margin rose from 1.0% in August to 1.1% to close the third quarter. Despite the modest increase, margins remained thin — as they have throughout 2025 — hovering around 1%. 

For U.S. hospitals, operating margins showed minimal overall movement. The median change in hospital operating margin rose just 0.5 percentage point year-over-year (YOY) in September and was up just 0.4 percentage point from August to September 2025. 

Performance varied across census regions. Median YOY changes in operating margin ranged from 0.5 percentage-point increases for hospitals in the South and Midwest to a more substantial increase of 4.4 percentage points for hospitals in the Northeast. Hospitals in the West, however, experienced a slight 0.3 percentage point YOY decline in median change in operating margin. 

Operating margin trends also differed by hospital size. The smallest hospitals (0–25 beds) saw a 0.4 percentage point decrease YOY, while the largest hospitals (500+ beds) reported a 0.5 percentage point increase. Among mid-sized facilities, YOY increases ranged from 0.4 percentage point for hospitals with 200-299 beds to 1.3 percentage points for those with 26-99 beds and 100-199 beds. 

Nationally, the median change in operating earnings before interest, taxes, depreciation, and amortization (EBITDA) margin also rose slightly, increasing 0.2 percentage point YOY and 0.4 percentage point month over month. 

Hospital Expenses: Hospital expenses continued to rise for most metrics compared to 2024 levels, with non-labor expenses once again outpacing labor expense growth. Total non-labor expense jumped 9.3% YOY, while total labor expense increased 5.0% YOY. Overall, total hospital expenses climbed 7.5% YOY in September. The growth in non-labor expenses was driven by a 12.8% YOY increase in drug expenses, a 12.1% YOY rise in supply expenses, and an 8.0% YOY increase in purchased service expenses. Those increases are expected to accelerate as the federal government moves forward with long promised tariffs on pharmaceuticals and medical supplies. 

Regional trends showed notable variation. Hospitals in the Midwest saw the largest jump in drug expenses, up 17.3% from September 2024 to September 2025, followed by hospitals in the West with a 15.7% increase. Hospitals in the Northeast reported an 8.7% YOY increase, while those in the South experienced a more moderate 3.4% rise over the same period. 

At the national level, hospitals showed some improvement month-over-month. Total expense declined 0.5%, and total labor expense was down 1.7%, though total non-labor expense edged up slightly by 0.6% from August to September 2025. 

Expense results were more mixed after adjusting for patient volumes. Total expense per adjusted discharge increased 1.8% YOY, and non-labor expense per adjusted discharge rose 3.9% YOY. At the same time, labor expense per adjusted discharge declined 2.1% YOY. 

Hospital Revenues: Hospitals continued to see gross revenues rise above 2024 levels in September. Gross operating revenue increased 11.4% YOY, driven by a 12.8% increase in outpatient revenue and a 9.8% increase in inpatient revenue. Month-over-month, gross operating revenue was up 1.0%, with outpatient revenue increasing 1.4%. Inpatient revenue was essentially flat, declining just 0.1%. 

Hospitals experienced double-digit YOY growth in outpatient revenue across all census regions. Facilities in the Northeast and South saw the largest increases, both up 14.3% YOY. The metric was up 12.9% for hospitals in the West and up 11.4% for those in the Midwest over the same period. 

Bad debt and charity care rose 2.2% from September 2024 to September 2025, but decreased 9.9% from August to September 2025 for hospitals nationally. Net patient service revenue (NPSR) per adjusted discharge increased 2.3% YOY and 2.0% month-over-month, while NPSR per adjusted patient day was up 4.7% YOY and 0.5% month-over-month.

  Patient Volume Benchmarks 

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

Hospital volumes: Hospitals continued to see mixed results in patient demand at the close of the third quarter. Outpatient visits showed the strongest growth, with patient volumes up 9.8% from September 2024 to September 2025. Inpatient admissions increased 5.3% during the same period, while observation visits rose 1.5%. Emergency visits declined slightly, down 0.5% YOY. 

Month-over-month trends were less favorable. Outpatient visits rose 3.6% compared to August, but all other categories saw declines. Emergency visits experienced the largest drop, with patient volumes down 3.3% from August to September 2025, followed by observation visits down 2.1% and inpatient admissions down 0.2%. 

Regional performance varied. Hospitals in the South saw the greatest YOY increase in outpatient visits at 11.5%, followed closely by the Midwest at 11.1%. Hospitals in the Northeast reported the largest increase in inpatient admissions, up 7.0% YOY. Compared to September 2023, outpatient visits nationally rose 16.0% in September, while inpatient admissions increased 9.8% over the same period. 

Service line volumes: Patient demand showed wide variation across different service lines, according to the latest data from August. The infectious disease service line recorded the largest YOY decline, with patient volumes down 14.4%. Other decreases were more modest, ranging from a 1.6% drop in behavioral health to a 0.1% decline in the endocrine service line. The genetics service line posted the strongest YOY gain, with patient volumes up 5.3%, followed closely by hepatology with a 5.2% increase.

Procedure volumes: Among 15 common procedure types, seven saw YOY decreases in patient volumes, while eight experienced increases in August. Outpatient microbiology lab procedures had the largest decline at 10.2% YOY, followed by inpatient primary knee replacement surgeries, which were down 9.7%. Conversely, outpatient positron emission tomography (PET) imaging posted the largest increase at 13.2% YOY.  

Children’s hospital volumes: Children’s hospitals also experienced mixed results to end the third quarter. Outpatient visits increased 6.6% from September 2024 to September 2025, while inpatient admissions declined 1.2%. Observation visits rose 3.2%, and emergency visits decreased 3.7% YOY. 

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 investments: Physician practices saw the level of investment required to support operations decline YOY for the first time this year. The median investment per physician full-time equivalent (FTE) was $311,264 in the third quarter, down 1.8% compared to Q3 2024 and down 4.7% from Q2 2025. Across regions, practices in the Midwest experienced the largest decrease from Q3 2024 to Q3 2025, with investment levels down 20.9%. Other regions saw smaller declines, ranging from 2.1% in the Northeast to 4.6% in the West. Physician practices in the South were the only ones to see an increase, with the metric rising 2.6% compared to the same quarter last year. 

Physician expenses: The median total expense per physician FTE remained around $1.1 million in Q3. This represented a 3.9% increase compared to the third quarter of 2024, but a 1.3% decline from the second quarter of 2025. From Q3 2024 to Q3 2025, per-physician expense changes ranged from a -3.1% decrease for practices in the West to a 4.7% increase for those in the Midwest. 

Physician revenues: The median net patient service revenue (NPSR) per physician FTE was $761,684 for the quarter. The metric increased 5.3% compared to the same period last year but declined 1.3% versus Q2 2025. Practices in the Midwest reported the largest YOY gain, with per-physician revenues up 10.0%, followed by the South at 6.6%. 

Physician productivity and staffing: Physician productivity rose compared to the same time last year as staffing levels declined. The median work relative value units (wRVUs) per physician FTE reached 6,195.54 for the quarter, up 1.6% from Q3 2024 but down 2.6% versus Q2 2025. Meanwhile, median support staff FTEs per 10,000 wRVUs stood at 3.48 in Q3 2025, down 3.8% compared to the same quarter last year but up 2.2% from Q2 2025. 

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