Health System Operating Margin Benchmarks: 2026 Report

Health System Operating Margin Benchmarks by Year

Percentiles give a fuller benchmark than a single average, because hospital margins vary widely. We computed the 10th, 25th, 50th, 75th and 90th percentile margins for each year from the IRS's annual Form 990 extracts.

• The median operating margin fell from 6.8% in fiscal 2021 to 2.0% in fiscal 2022 and 1.5% in fiscal 2023.
• The share of hospital organizations with negative operating margins doubled, from 20.5% to 41.7%.
• A top-quartile operating margin, the 75th percentile, was 6.9% in fiscal 2023, against 13.2% in fiscal 2021.
• Hospitals now have little room for a bad year. When the typical organization keeps so little of each operating dollar, a modest rise in wages or supply costs can turn a small profit into a loss. If margins stay this low, more hospitals may delay building projects or cut services.

Operating Margin vs Total Margin

Total margin counts investment income and gains on asset sales as revenue, so it runs higher than operating margin in most years.

• The median total margin was 2.5% in fiscal 2023, 1.0 percentage point above the median operating margin.
• Combined across all organizations, the operating margin rose to 2.1% in fiscal 2023 from 1.5% in fiscal 2022, while the median kept falling. That points to larger organizations recovering faster than the typical one.
• Investment income and gains on asset sales keep many hospitals' bottom lines positive. Those gains rise and fall with stock and bond markets, so a weak year for markets could push more hospitals into the red even if patient care results hold steady.

Operating Margin Benchmarks by Health System Size

Size changes what counts as a normal margin. The benchmarks below group organizations by operating revenue in fiscal 2023.

• Organizations with $1 billion to $5 billion in operating revenue had the highest median margin, 3.3%, and the lowest share below zero, 31.3%.
• Nearly half of the smallest organizations, those under $50 million, had negative operating margins.
• Losses reach every size group, including the biggest systems, so growing larger does not by itself fix a thin margin. Small hospitals have the least revenue to absorb a loss, and if losses continue, more of them may cut services or look for a larger partner.

Operating Margins at the Largest Health Systems

The largest filers are mostly parent organizations of major health systems. Their Form 990 results show how widely margins differ even at the top of the market.

• Five of the 14 posted negative operating margins: Kaiser Foundation Hospitals, UPMC, Providence, Dignity Health and Bon Secours Mercy Health.
• Kaiser Foundation Hospitals ran a -0.4% operating margin but a 6.5% total margin, the widest gap in the group, because of investment income and gains.

Hospital operating margins in 2025 and 2026

Form 990 data run two to three years behind, so the most recent figures come from monthly hospital data and rating agency medians. Each uses a different sample and definition from the Form 990 benchmarks above, so the direction of change is more comparable than the exact level.

• The national hospital median was 2.5% for 2026 through August, below the 3.4% for all of 2025, on Kaufman Hall's measure that includes costs allocated from corporate offices and physician groups.
• The monthly median fell to 1.8% in August 2026 from 3.8% in July. Kaufman Hall puts about 43% of hospitals at an operating loss, against about 33% before the pandemic, close to the 41.7% of nonprofit hospital organizations below zero in our fiscal 2023 data.
• Fitch's median for rated nonprofit systems rose to 1.5% in fiscal 2025 from 1.1%, a third straight year of improvement, while Moody's median slipped to 1.2% from 1.3%.

The rating agency medians for fiscal 2025 sit close to the 1.5% Form 990 median for fiscal 2023. Margins for the typical hospital have stopped falling but have not returned to the 6.8% of fiscal 2021, a year helped by federal pandemic relief. Fitch keeps a neutral outlook for 2026 but warns that tighter Medicaid eligibility and funding rules could weaken hospitals' payer mix beginning in 2027.

What Health System Operating Margin Trends Mean for 2027 and Beyond

Thin margins leave hospitals with little room to absorb higher wages or supply costs. When money is short, a hospital may delay new buildings and equipment, close units that lose money or hold down hiring, and those choices shape what care is available nearby.

If margins stay this thin, more hospitals are likely to join larger systems or close services. Communities served by small hospitals that lose money could see their hospital change hands. Fiscal 2024 filings are not yet in the IRS bulk data, and they will show whether the decline has leveled off.

So if you rely on a small local hospital, follow news on its finances and any merger talks, because those decisions can change what care stays close to home.