Health System Operating Margins Leveled Off in February, While Hospital Margins Rose, According to New Strata Data
Persistent Expense Increases Pose Ongoing Challenges
CHICAGO – March 27, 2025 – Operating margin performance plateaued in February for health systems nationwide, as rising expenses continued to limit growth, according to new data from Strata Decision Technology.
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 down from 2.1% in December 2024. At the same time, individual hospitals saw increases across most key performance metrics compared to 2024, including higher operating margins and higher expenses.
“Expense increases continue to exert pressure on our nation’s hospitals and health systems in the early months of 2025,” said Steve Wasson, chief data and intelligence officer at Strata Decision Technology. “While expenses are increasing across all categories, non-labor expense increases have outpaced labor expense growth for the past three months. Reining in these increases will be a primary focus for healthcare leaders as we head into the second quarter of the year.”
Trends in hospital margins were mixed. The median change in hospital operating margin increased 1.4 percentage points from February 2024 to February 2025, but decreased 1.4 percentage points from January to February 2025. The median operating earnings before interest, taxes, depreciation, and amortization (EBITDA) margin rose 1.1 percentage points year over year (YOY), but decreased 1.2 percentage points month over month.
Hospitals continued to contend with mounting expenses. Purchased services had the biggest expense increase for the month at 8.7% YOY, followed by supply expense at 6.7% YOY, and drugs expense at 5.4% YOY. Total non-labor expense rose 5.7% from February 2024 to February 2025 as a result. Total labor expense increased 2.2% and total expense was up 4.2% YOY.
Hospitals saw some relief month over month. Total expense decreased 4.9%, total labor expense dropped 7.1%, and total non-labor expense decreased 3.1% from January to February 2025.
Patient demand decreased across most metrics and measures in February. Emergency visits had the biggest YOY decrease, with patient volumes down 6.1% YOY. 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. Month over month, emergency visits dropped 14.8%, observation visits were down 11.1%, inpatient admissions decreased 9.3%, and outpatient visits were down 6.9%.
Meanwhile, patient volumes increased 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.
Gross inpatient hospital 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. Inpatient revenue rose 7.4% from February 2024 to February 2025, while outpatient revenue was up 4.4% and gross operating revenue increased 5.1%.
About the Data
This report uses data from Comparative Analytics and Strata’s StrataSphere® database. Comparative Analytics offers access to near real-time data drawn from more than 135,000 physicians from over 10,000 practices and 139 specialty categories, and from 500+ unique departments across more than 1,600 hospitals. Comparative Analytics also provides data and comparisons specific to a single organization for visibility into how their market is evolving. StrataSphere is a unique and comprehensive data-sharing platform that helps providers leverage the power of a network that represents approximately 25% of all provider spend in U.S. healthcare. This report incorporates data from more than 650 hospitals from over 120 health systems with StrataJazz® Decision Support.
About Strata Decision Technology
Strata Decision Technology, LLC provides a cloud-based, enterprise performance platform for software, and data and service solutions to help organizations better analyze, plan, and perform in support of their missions. More than 2,300 organizations rely on Strata’s StrataJazz and Axiom solutions for financial analytics, planning, and performance management. Named the market leader for Business Decision Support for more than 15 consecutive years, Strata delivers first-class solutions and service, with an intense focus on accelerating innovation. For more information, please go to www.stratadecision.com.
Strata Social Networks
LinkedIn: Strata Decision Technology
Media contact:
Sally Brown, Inkhouse