Hospital margins stable despite rising drug, supply costs

Editor's Note

US hospitals and physician practices demonstrate steady financial performance through the second quarter of 2025, with health system operating margins holding at a median 1.2% year-to-date, according to new data from Strata Decision Technology analyzing more than 1,850 hospitals and 152,000 physicians. DotMed reported the news August 4, noting that operating margins remained stable despite rising non-labor expenses, particularly for drugs and supplies.

Holding at 1.2% in June, operating margins remained relatively stable for the sixth straight month, the outlet reports. Hospitals also posted year-over-year gains in operating margins, with the median change rising 2.4 percentage points from June 2024. Facilities in the South experienced the sharpest increase, while hospitals in the West saw declines. Among size categories, small hospitals with fewer than 25 beds experienced the largest drop.

Other notable statistics reported by DotMed include:

• Overall hospital expenses rose 5.1% from June 2024
• Cost drivers include a 9.8% year-over-year increase in drug cost and an 8.2% increase in non-labor expenses
• June marked the 26^th month of consecutive growth for hospital revenues, with outpatient revenue rising 12.3% and inpatient revenue rising 7% compared to June 2024
• Net patient service revenue per adjusted discharge increased 3.3% year over year and 2.2% from the previous month.
• Outpatient visits rose 8.2% year over year, while inpatient admissions increased 3.7 and emergency department visits declined 5.2%
• Median net patient service revenue per full-time physician climbed 11.4% in Q2.
• Expenses also increased, with total cost per physician FTE climbing 11.4%.
• Physician productivity rose 8.2%, support staffing levels increased, and median investment per physician FTE showed a 1.7% year-over-year gain.