Hospital operating margins stagger, outpatient demand grows  

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.  

U.S. hospitals and physician practices saw growth in patient volumes and revenues in October, but high costs continue to pressure overall financial performance. Key trends for the month include: 

  • The median hospital operating margin staggered, with the metric holding flat from the prior month, continuing unsteady performance since rising out of the red eight months ago. 

  • Demand for outpatient care continued to grow, as hospitals saw double-digit growth in outpatient revenue compared to October 2022. 

  • Hospital supply and drug expenses saw sizable increases as factors such as inflation and higher patient volumes contributed to ongoing expense pressures for hospitals nationwide. 

  • Patient demand increased for both hospitals and physician practices driving higher physician productivity and higher hospital patient volumes following weak volumes in September. 

Note: Figures represent median year-over-year change for hospitals and October 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. 

Hospitals’ financial performance staggered in October, with the median year-to-date operating margin remaining flat at 1.6% for a second consecutive month after two months of increases. Margins have remained unsteady since moving back into the red in March 2023 after more than a year of negative results, with mostly minimal or no increases month-to-month and the only major increase followed by a significant drop the next month.