U.S. health systems posted a modest improvement in operating margins in May, even as outpatient volumes fell sharply and nonlabor expenses continued to pressure hospital finances, according to new benchmark data released by Strata Decision Technology.

The report analyzed monthly financial and operational data from more than 2,200 hospitals, more than 135,000 physicians and over 10 million patient visits.

Health system operating margins rose to 0.4% in May, rebounding from April to match March levels. However, the figure remained well below the 1.1% margin reported in May 2025.
Hospital revenue continued to grow year over year, with gross operating revenue increasing 5.9%. Outpatient revenue rose 6.1%, slightly outpacing inpatient revenue growth of 5.7%. Month-over-month results were weaker, however, as total gross operating revenue fell 2.6% and outpatient revenue declined 4.5%.

The report identified outpatient care as the month's most notable trend. Outpatient volumes dropped 8.4% from April and were down 1.8% compared with May 2025. In contrast, inpatient admissions increased 0.8% month over month and 2.4% year over year. Emergency department visits also declined, falling 1.2% from April and 2.6% from a year earlier.

Hospital expenses remained elevated despite a slight monthly decline. Total expenses decreased 0.2% from April but were up 5.5% year over year. Non-labor costs continued to drive spending, increasing 6.2% annually. Supply expenses rose 4% year over year, while drug expenses increased 3.3%. Labor costs grew 3.9%.

Among physician practices, total expenses per full-time equivalent physician increased 3.6% year over year, while net patient services revenue per physician rose 1.42%. Work relative value units per physician declined 0.79%, suggesting slightly lower productivity despite a 7.36% increase in health system investment supporting physician practices.

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