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 See Slight Increase After Months of Declines 

Healthcare organizations nationwide saw mixed margin and patient volume performance to start the fourth quarter, but many continued to see revenues increase even as expenses rose. Highlights from the October data include: 

• U.S. health systems saw slight margin gains in October following three months of declines, while operating margins for individual hospitals narrowed following two months of increases. 
• Demand for outpatient services continued to climb, with growth in outpatient visits up 8.6% year-over-year, outpacing inpatient volume growth for the month. 
• Significant increases in drug costs contributed to higher non-labor expenses, as drugs expense rose 15.2% and total non-labor expense increased 10% from October 2023 to October 2024. 
• Per-physician expenses remained elevated at $1.1 million for October annualized, up 9.8% versus 2023 and 17.8% compared to 2022. 

Hospital Performance Benchmarks

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

Operating Margins: Health system operating margins took a slight step up in October following three months of declines, while hospital operating margins decreased. The median year-to-date (YTD) health system operating margin shifted up from 1.6% in September to 1.8% in October. Meanwhile, the median YTD hospital operating margin dropped from 5.1% to 4.9% over the same period.* 

Looking at shifts in operating margins over time, the median change in operating margin rose 1.7 percentage points both year-over-year (YOY) and month-over-month in October. By region, the median change in operating margin ranged from increases of 1.2 percentage points for hospitals in the Northeast/Mid-Atlantic to 3.1 percentage points for hospitals in the south. 

By size, larger hospitals with 300 to 499 beds had the biggest increase of 2.9 percentage points YOY while mid-sized hospitals with 200-299 beds had the least increase of just 0.9 percentage point. The median change in operating earnings before interest, taxes, depreciation, and amortization (EBITDA) margin for hospitals nationwide increased 1.6 percentage points YOY and 1.2 percentage points from September to October. 

Hospital Expenses: Overall hospital expenses continued to climb both YOY and month-over-month, with non-labor expenses seeing the biggest increases. Total non-labor expense jumped 10% from October 2023 to October 2024 as drugs expense rose 15.2%, supply expense increased 13.2%, and purchased service expense rose 11.6%. Total labor expense was up 6.5%, and total expense increased 8.5% YOY. 

Hospitals in the Great Plains had the largest YOY increase in non-labor expense at 12.6%, while hospitals in the Midwest had the least increase at 6.9%. From September to October 2024, total expense was up 4.6%, total non-labor expense increased 4.5%, and total labor expense rose 4.4%. 

Hospitals saw some relief after adjusting for patient volumes, with total expense per adjusted discharge down 1.0% and labor expense per adjusted discharge down 2.7% YOY. Non-labor expense per adjusted discharge, however, increased 1.2% over the same period. 

Hospital Revenues: Gross hospital revenues remained on the rise, marking an 18th consecutive month of YOY increases for inpatient, outpatient, and overall gross operating revenues. Growth in outpatient revenue continued to outpace inpatient revenue increases.  

Outpatient revenue was up 12.7% YOY in October. Inpatient revenue increased 5.9%, and gross operating revenue rose 11.2% over the same period. For hospitals in different regions, outpatient revenue growth ranged from 11.3% YOY for hospitals in the Midwest to 13.8% YOY for those in the West. Month-over-month, outpatient revenue jumped 10.3%, inpatient revenue was up 4.5%, and gross operating revenue increased 8.1%. 

Net patient service revenue (NPSR) per adjusted discharge is nearly flat, up just 0.1% YOY and down -2.3% month-over-month. NPSR per adjusted patient day rose 5.5% from October 2023 to October 2024 and was up 0.8% compared to the prior month. 

Patient Volume Benchmarks

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

Hospitals again saw mixed results relative to patient demand in October. Outpatient volumes had the biggest increases as demand for such services continues to grow, with outpatient visits jumping 8.6% YOY and 12.8% month-over-month. Inpatient admissions also increased, rising 4.7% YOY and 3.7% from September to October 2024. Compared to two years ago in October 2022, inpatient admissions were up 8.7% and outpatient visits jumped 16.2%. 

Meanwhile, observation visits decreased 1.2% YOY but increased slightly at 0.6% month-over-month, and emergency visits were down 1.4% YOY and 3.1% versus the prior month. 

Patient volumes increased YOY across most service lines. Allergy and immunology had the biggest YOY increase at 7.8%, followed by cardiology at 7.1%. Infectious disease had a slight decrease, with patient volumes down 0.7% YOY following three months of increases. 

Patient volumes increased across 14 of 15 common procedure types between October 2023 and October 2024. Outpatient positron emission tomography (PET) again had the biggest YOY increase at 12.6%, followed by routine outpatient ECG diagnostics at 10.5%. Inpatient primary knee replacement was the only service line to see a YOY decrease at 12.0%. 

Children’s hospitals again had mixed patient volume results. Inpatient admissions decreased 1.5% while outpatient visits increased 2.7% YOY. Observation visits were up 2.8% and emergency visits decreased 4.9% over the same period, according to the latest data as of Oct. 31, 2024. 

Physician Practice Benchmarks 

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

Physician practices nationwide continued to see significant increases across most metrics in October. The level of investment needed to support physician practices remained on the rise, with the median investment per physician full-time equivalent (FTE) reaching $332,887 annualized for the month. That represents increases of 8.8% compared to 2023 and 17.0% versus 2022. 

Physician expenses remained elevated. The median total direct expense per physician FTE was $1.1 million annualized. The metric jumped 9.8% versus 2023 and 17.8% compared to 2022. Per-physician revenues also continued to climb. The median net revenue per physician FTE was $726,691 for October annualized, up 9.1% from 2023 and 17.2% from 2022. 

Physician productivity continued to rise as staffing levels decreased. The median physician work relative value units (wRVUs) per FTE were 6,311.97 for October annualized, up 8.3% compared to 2023 and 14.8% from 2022. Median support staff FTEs per 10,000 wRVUs — a measure of staffing levels and productivity — were 2.85 for the month (annualized), down 5.8% compared to 2023 and 7.1% versus 2022.