U.S. hospital revenue and expense trends

By Maggy Tieche

Hospital revenue is impacted by numerous factors including patient case complexity, commercial versus government insurance reimbursement, participation in value-based care programs and care moving to ambulatory settings.

Hospitals also experience increasing costs, including salaries, supplies, and information technology expenses.

In this blog, we review changes in annual hospital net patient revenue and operating expenses to understand current financial trends for U.S. healthcare organizations. Data is sourced from the Medicare Cost Report and aggregated from the last five calendar years of hospital financial performance tracked in our database. The most recent full calendar year of data available at the time of publishing is for 2021.

What is the average hospital net patient revenue?

Based on data for more than 5,300 U.S. hospitals tracked in the Definitive Healthcare HospitalView product, the average net patient revenue (NPR) is $207.6 million for 2021.

Average net patient revenue for U.S. hospitals

Fig. 1 Data is from the Definitive Healthcare HospitalView product and sourced from Medicare Cost Report. Accessed June 2023.

How much does hospital net patient revenue increase each year?

Average net patient revenue at U.S. hospitals increased by nearly $51 million in the last five years, from $156.7 million in 2017 to $207.6 million in 2021, or about 7% annually. However, between 2019 and 2020, average net patient revenue decreased by nearly 1%, likely due to patients postponing care during the COVID-19 pandemic.

How does net patient revenue compare for hospitals of different sizes?

Smaller hospitals with fewer beds report lower net patient revenue figures than larger hospitals with more beds. For example, the average net patient revenue for hospitals with 25 beds or fewer was $32.8 million in 2021 compared to $817.1 million for hospitals with more than 250 beds.

The strongest performance in average net patient revenue increases was for large hospitals, or those with more than 250 beds. Their annual average increase in net patient revenue between 2016 and 2021 is 7.1%. Hospitals with 26 to 100 beds have annual net patient revenue increases of about 3.8% annually.

Net patient revenue by hospital bed count

Fig. 2 Data is from the Definitive Healthcare HospitalView product and sourced from Medicare Cost Report. Accessed June 2023.

How does net patient revenue compare by hospital location?

Hospitals in the northeastern U.S. have the highest average net patient revenue at $332.1 million. Some of the top hospitals in the country by net patient revenue are in the region, including many in New York.

Between 2017 and 2021, hospitals in the southwest and western U.S. had the highest annual increases in net patient revenue at 9.1% and 10.1%, respectively.

Average net patient revenue by hospital region

Fig. 3 Data is from the Definitive Healthcare HospitalView product and sourced from Medicare Cost Report. Accessed June 2023.

What is the average hospital operating expense?

HospitalView tracks total hospital operating expenses for more than 5,400 U.S. hospitals. According to the last 12-month interval of data, the average hospital operating expenses are $209.4 million.

The average net patient revenue value being less than the average operating expense value indicates hospitals operate on low margins.

Average operating expense for U.S. hospitals

Fig. 4 Data is from the Definitive Healthcare HospitalView product and sourced from Medicare Cost Report. Accessed June 2023.

How much do hospital operating expenses increase each year?

Average hospital operating expenses steadily increased between 2016 and 2021 from $158.7 million to $209.4 million. This represents an increase of more than $50.6 million in that timeframe, or about a 7% increase each year.

How does operating expense compare for hospitals of different sizes?

As with trends in net patient revenue, average operating expense correlates with hospital bed count—with hospitals reporting average total expenses of $34.5 million for hospitals with 25 or fewer up compared to $824.8 million for hospitals with more than 250 beds.

Changes in total expenses also follow similar patterns to the hospital revenue trends. The largest hospitals have annual increases higher than other hospitals. 

Average operating expenses by hospital bed count

Fig. 5 Data is from the Definitive Healthcare HospitalView product and sourced from Medicare Cost Report. Accessed June 2023.

How do operating expenses compare by hospital location?

Hospitals in the northeast and the west have the highest average operating expenses at $348.5 million and $260.3 million, respectively. Similar to the net patient revenue analysis, many hospitals in the northeast have some of the highest operating expenses in the country. Large cities with high costs of living contribute to higher costs in those regions.

At a regional level, hospitals in both the southwest and west report average annual increases in operating expenses between 2017 and 2021 that are higher than the national average.

Average operating expense by hospital region

Fig. 6 Data is from the Definitive Healthcare HospitalView product and sourced from Medicare Cost Report. Accessed June 2023.

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