A good EBITDA margin in healthcare depends entirely on which part of healthcare you’re talking about. The sector spans everything from pharmaceutical companies averaging 33.6% to hospital systems scraping by at 5.5%, so a single benchmark is meaningless without context. Across the total U.S. market, the average EBITDA margin sits around 16.5% to 17.4%, but most healthcare sub-sectors cluster well above or well below that number.
EBITDA Margins by Healthcare Sub-Sector
Data from NYU Stern’s widely cited database breaks the healthcare sector into categories that reveal just how wide the spread is:
- Pharmaceutical companies: 33.6%
- Healthcare information and technology: 20.5%
- Healthcare products (devices, equipment): 20.3%
- Hospitals and healthcare facilities: 15.8%
- Biotechnology: 15.4%
- Healthcare support services: 3.9%
These are averages, and individual companies within each category can vary significantly. But if you’re benchmarking a healthcare business, this is the starting framework. A 15% EBITDA margin would be excellent for a support services company and mediocre for a pharmaceutical firm.
Hospital Margins: The Tightest in Healthcare
Hospitals consistently operate on some of the thinnest margins in the entire economy. Kaufman Hall’s national tracking data from early 2025 shows the median hospital operating EBITDA margin at just 5.5% when including corporate allocations, and 6.3% without them. The median operating margin (a stricter measure that includes depreciation and amortization) was only 1.9% to 2.7%.
The gap between for-profit and nonprofit hospital systems is stark. For-profit chains like HCA Healthcare, Tenet Healthcare, and Universal Health Services reported operating margins of 8.6%, 16.8%, and 11.6% respectively in recent quarters. Nonprofit systems tell a very different story. Trinity Health led the nonprofit group with a 1.2% operating margin, while Providence posted just 0.3%. Several large nonprofits, including Ascension and CommonSpirit, were still operating at a loss, though both had narrowed their deficits compared to the prior year.
For a hospital system, an EBITDA margin above 10% is genuinely strong. Anything above 7% puts you in solid for-profit territory. Nonprofit systems that reach 3% to 5% operating margins are generally considered to be performing well given the structural challenges they face.
Why Hospital Margins Are So Thin
Labor is the single biggest reason. Total compensation and related expenses account for 56% of hospital costs, according to the American Hospital Association. Ongoing workforce shortages have pushed wages higher, and hospitals have limited ability to pass those costs on because reimbursement rates from government payers are set administratively, not negotiated.
Payer mix is the other major factor. The share of patients covered by Medicare and Medicaid grew from 43% in 2019 to 45% in 2023, and that shift compresses margins because government programs reimburse at lower rates than commercial insurance. As Medicare Advantage enrollment continues to grow (projected to cover nearly 55% of Medicare beneficiaries by 2028), hospitals with heavy government payer exposure face sustained margin pressure. A hospital with 70% commercially insured patients will have a fundamentally different EBITDA profile than one serving a predominantly Medicare and Medicaid population.
Skilled Nursing and Long-Term Care
Skilled nursing facilities present a confusing picture because their margins depend heavily on which payers you’re looking at. MedPAC data from 2022 shows that freestanding skilled nursing facilities earned an 18.4% margin on Medicare fee-for-service patients specifically. The top quarter of facilities exceeded 28.9% on those patients, while the bottom quarter fell below 4.4%.
But that Medicare-specific number is misleading in isolation. When you look at all payers combined, the picture flips. The all-payer total margin for freestanding skilled nursing facilities was negative 1.4% in 2022. Without pandemic relief funds, it dropped to negative 4%. The median facility was barely breaking even at negative 0.5%, and the bottom quarter posted all-payer margins of negative 9.5% or worse. A “good” all-payer margin for a skilled nursing facility is simply being in the black, which only about half of facilities achieve.
Diagnostic Imaging and Outpatient Services
Outpatient and ancillary services tend to carry stronger margins than inpatient care. Diagnostic imaging centers, for example, show median EBITDA margins around 18.5% for single-specialty operator models. Multi-physician operator models perform even better, with median EBITDA margins around 27.6%, largely because a smaller share of their costs are fixed. Publicly traded imaging companies like RadNet have reported adjusted EBITDA margins around 16.4%, reflecting the realities of operating at scale with center consolidation and cost management.
These outpatient models benefit from higher patient throughput, lower overhead per procedure, and a more favorable payer mix than hospitals. If you’re evaluating or running an outpatient service line, EBITDA margins in the high teens to mid-twenties are realistic targets.
Medical Practices and Physician Groups
Private medical practices vary widely by specialty, though specific EBITDA margin benchmarks are less standardized than for larger entities. What the valuation data reveals is instructive: primary care practices typically trade at 3 to 5 times EBITDA, while orthopedic practices command 7 to 10 times EBITDA and cardiology practices reach 8 to 11 times EBITDA. Those higher multiples reflect not just profitability but also revenue predictability and procedure volume.
Specialty practices with strong procedural revenue (orthopedics, cardiology, dermatology, gastroenterology) generally achieve higher EBITDA margins than primary care, which relies on visit volume with lower per-encounter reimbursement. A well-run specialty practice might target EBITDA margins of 20% to 30%, while primary care practices often land in the 10% to 20% range depending on efficiency and payer contracts.
What Drives a “Good” Margin Higher
Across all healthcare sub-sectors, the same handful of levers separate high-margin operators from the rest. Payer mix is the most powerful and hardest to control: a higher proportion of commercially insured patients almost always means better margins. Labor efficiency matters enormously given that labor represents more than half of costs in most care delivery settings. Organizations that reduce turnover (the median skilled nursing facility has 53% annual staff turnover) spend less on recruitment and temporary staffing.
Operational scale helps, but not uniformly. Large for-profit hospital chains benefit from centralized purchasing and standardized processes. Smaller practices can achieve strong margins through specialization and lean overhead. The common thread is that healthcare organizations with disciplined cost structures and favorable revenue per encounter consistently outperform their peers, regardless of size.
If you’re benchmarking a healthcare business, the most useful comparison is within its specific sub-sector. Hitting the NYU Stern average for your category puts you in the middle of the pack. Exceeding it by 3 to 5 percentage points signals a well-run operation. Falling significantly below it warrants a close look at payer mix, staffing costs, and operational efficiency.