Hospital Finances Stabilize with Six Months of Positive Margins  

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 1,300 hospitals.  

August was a positive month for hospitals as they saw volume, revenue, and margin gains across most metrics. Key trends for the month include:

  • Median hospital operating margins increased in August after dropping nearly one percentage point the month before, signaling that hospital finances are stabilizing with six months of positive results

  • Outpatient revenue had sizable increases for the month due to the ongoing shift in care to less expensive and more convenient ambulatory settings

  • Hospitals saw fewer high-acuity patients, as evidenced by a decline in the lengths of inpatient stays and minimal movement in the share of patients held for inpatient observation

  • Hospital supply and drug expenses continued to climb both on an overall and per-patient basis, driving up total non-labor costs

Healthcare data KPIs overview chart August

Note: Figures represent median year-over-year change for hospitals and August 2023 annualized versus 2022 for physician data.    

Hospital operating margin benchmarks  

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

Hospital operating margins shifted upward in August, rising to 1.4%. The increase was a welcome turn after margins — measured as median, actual year-to-date (YTD) Operating Margin — dropped from 2% in June to 1.1% in July. While margins remain narrow, the August figure suggests hospital finances are stabilizing with strong revenues contributing to six consecutive months of positive operating margins after more than a year in the red.

operating margins healthcare data


Looking at median change in margins, Operating Margin rose 1.9 percentage points year-over-year (YOY) and 3.5 percentage points month-over-month in August. The median change in Operating Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) Margin also increased, up 1.5 percentage points compared to August 2022 and 3.1 percentage points versus July 2023.   

Hospital expense benchmarks 

Monthly analysis examines fluctuations in average hospital expense metrics nationwide 

Hospitals continued to see overall expenses climb, but per-patient expenses eased somewhat. Total Expense was up 4.2%, and Total Labor Expense increased 3% YOY. Total Non-Labor Expense again had the biggest increase at 6% from August 2022 to August 2023, as inflation continued to drive higher drug and supply expenses. Drugs Expense rose 7.3%, Supply Expense increased 5.4%, and Purchased Service Expense was up 3.8% YOY for the month.

Expenses decreased across most metrics on a patient-adjusted basis. Compared to August 2022, Total Expense per Adjusted Discharge declined -2.8%, Labor Expense per Adjusted Discharge decreased -4.5%, and Non-Labor Expense per Adjusted Discharge was down -1.6%. Both Supply Expense and Drugs Expense per Adjusted Discharge increased, however, at 1% and 1.4% YOY, respectively.

Hospital volume and revenue benchmarks  

Monthly hospital volume and revenue metrics reveal underlying trends in patient demand 

Patient volumes were strong for the month, as hospitals saw both YOY and month-over-month increases across most metrics. Adjusted Discharges rose 6.5% YOY and 9.3% month-over-month, while Adjusted Patient Days were up 1.2% versus August 2022 and 5.6% versus July 2023. Operating Room Minutes increased 2.8% YOY and jumped 13.7% month-over-month, reflecting a significant uptick in surgeries compared to July 2023. Emergency Department (ED) Visits rose just 0.9% YOY, but were up 3.3% from the prior month.

Average Length of Stay decreased -4% YOY and -3.5% versus July 2023, indicating an increase in lower-acuity patient cases requiring shorter hospitalizations. Further reinforcing this, hospitals experienced minimal movement in the share of inpatients who needed to be held in observation status, with Observation Days as a Percent of Patient Days rising just 0.1% YOY and 0.4% month-over-month for August.

The ongoing shift in care to outpatient settings drove sizable 10% YOY and 11.6% month-over-month increases in Outpatient Revenue. Inpatient Revenue also increased, up 4% YOY and 3.9% month-over-month. The combined revenues pushed Gross Operating Revenue up 7.8% from August 2022 and 8.7% from July 2023.

Physician practice benchmarks  

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

Rising expenses continued to drive increases in the level of investment needed to support physician practices. For August annualized, the median Investment per Physician Full-Time Equivalent (FTE) was $254,362, up 6.4% from 2022 and up 12.1% from 2021. Total Direct Expense per Physician FTE rose 6.2% from 2022 and 11.7% from 2021 to $927,203 for August annualized.

Physician revenues and productivity increased for the month. Net Revenue per Physician FTE reached $665,852 for August annualized, up 10.1% from the prior year and up 12.7% from 2021. Physician productivity — measured as Physician work Relative Value Units (wRVUs) per FTE — rose 5.9% from 2022 and 9.2% from 2021 to 6,150.25 annualized as physicians saw more patients in August.


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