Operating margin and EBIDA margin are the headline profitability measures for hospitals and health systems. Calculate them the way lenders and rating agencies do, along with excess margin including non-operating income.
How it works
Measure hospital profitability the way rating agencies and lenders do: operating margin, operating EBIDA margin and excess (total) margin including non-operating income.
Operating margin = (Total operating revenue − Operating expenses) ÷ Total operating revenue
Operating EBIDA = Operating income + Depreciation & amortization + Interest
Operating EBIDA margin = Operating EBIDA ÷ Total operating revenue
Excess margin = (Operating income + Non-operating gains) ÷ (Operating revenue + Non-operating gains)Common uses
- Monthly financial dashboards for boards
- Debt covenant and rating agency reporting
- Turnaround and performance improvement tracking
Worked example
The calculator above opens with this example. Change any input to see the results update instantly, or select Reset to return to these figures.
| Net patient service revenue | $289,000,000 |
| Other operating revenue | $14,500,000 |
| Total operating expenses | $298,200,000 |
| Depreciation & amortization | $15,800,000 |
| Interest expense | $6,900,000 |
| Non-operating gains (losses) | $2,100,000 |
| Operating margin | 1.7% |
| Operating EBIDA margin | 9.2% |
| Excess (total) margin | 2.4% |
| Operating income | $5,300,000 |
| Operating EBIDA | $28,000,000 |
EBIDA (not EBITDA) is used because most not-for-profit hospitals pay no income tax.
Interpreting the results
- EBIDA margin shows cash-generating capacity before capital costs and is central to debt service coverage.
- Excess margin can mask operating losses when investment income is strong; read it alongside operating margin.
- Classify one-time items consistently between operating and non-operating before comparing years or peers.
Frequently asked questions
What is the difference between operating margin and EBIDA margin?
Operating margin measures profit after all operating expenses, including depreciation and interest. EBIDA margin adds back depreciation, amortization and interest, showing cash-generating capacity before capital costs.
Why do hospitals use EBIDA instead of EBITDA?
Most hospitals are not-for-profit organizations that pay no income tax, so the tax term is dropped. EBIDA is the standard measure in not-for-profit healthcare credit analysis.
What is excess margin?
Excess margin, also called total margin, includes non-operating income such as investment returns and contributions. It can look healthy even when operations lose money, so it should always be read alongside operating margin.
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