by
Gus Iversen, Editor in Chief | April 09, 2026
U.S. hospitals and health systems continued to face financial strain early in 2026, as rising expenses and uneven patient demand kept operating margins below breakeven, according to new data from the Chicago-based Strata Decision Technology.
The median year-to-date operating margin improved slightly to negative 0.3% in February, up from negative 0.6% in January, but remained in negative territory.
“While margins showed modest improvement in February, the underlying pressures facing healthcare leaders remain significant,” said Steve Wasson, chief data and intelligence officer at Strata Decision Technology. “Sustained expense growth and uneven patient demand are contributing to a challenging environment, reinforcing the need for healthcare leaders to better anticipate future performance and ensure their organizations thoughtfully manage expenses and align resources and care delivery with changing utilization patterns.”
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Expense growth continued to outpace revenue gains, driven largely by non-labor costs. Supply and drug expenses increased 7.8% and 7.6% year over year, respectively, contributing to a 5.7% rise in total expenses. Non-labor costs grew 6.8%, compared to a 4.0% increase in labor expenses.
At the same time, utilization trends remained inconsistent. Emergency department visits and inpatient admissions declined compared to February 2025, with decreases also observed across several procedure categories and service lines. Outpatient volumes were a notable exception, rising nearly 4% year over year.
Hospitals did report higher revenues overall. Gross operating revenue increased 6.0% compared to the prior year, supported by a 7.2% rise in outpatient revenue and a 3.5% increase in inpatient revenue. However, those gains were not enough to offset accelerating costs.
Financial pressure extended to physician enterprises as well. The median investment per physician full-time equivalent reached $373,152 on a three-month annualized basis ending in February, up 7.7% from 2025 and 13.1% from 2024 levels.
The findings are based on Strata Decision Technology’s Monthly Healthcare Industry Financial Benchmarks report, which draws on data from more than 1,900 hospitals and 135,000 physicians nationwide.
