Benchmark · Operating cost

A hospital spends about $530 a year on each square foot. The building itself is 3 cents of every dollar

Medicare cost reports from 2,859 general hospitals show what a square foot costs to run, department by department. At the median, a hospital spends the cost of a new building every 25 months.

Oct. 20, 2026· Medicare cost reports, fiscal year 2023

A hospital is an expensive building to put up and a far more expensive one to run. Medicare cost reports say what each department spent in a year and how much floor space it occupies, so the two can be divided. The median general hospital spent $532 for every square foot of its building in fiscal year 2023. The middle half spent between $382 and $753.

$532a year to run a square foot of the median general hospital

$1,112to build one, the median budget in filings since 2023

25 monthsfor a hospital to spend what its building would cost new

Sources: Medicare cost reports (HCRIS), fiscal year 2023, 2,859 general hospitals; project budgets per gross square foot in 146 state filings, from construction cost. Budgets are in each filing year's dollars.

Laboratories cost the most per square foot

Department by department, the direct cost of a square foot varies more than fourfold. A laboratory, whose costs include the tests it sends out, spends a median $974 a year on each square foot; a pharmacy, $971. Operating rooms come in at $354, below intensive care ($460) and the emergency department ($437). General patient rooms cost $277.

Direct cost per square foot of a department's own space, a year

Median general hospital (dot) and the middle half (bar), fiscal year 2023. The dashed line is the whole hospital's median.

Source: Medicare cost reports (HCRIS): Worksheet A direct cost over Worksheet B-1 square feet. Departments with 100 or more hospitals.

Operating rooms look cheap here partly because of where the money is booked. Implants and surgical supplies billed to patients have their own cost report lines. As first booked, the median operating room cost $623 a square foot; after hospitals move those supplies to their own lines, $354. With its share of the hospital's overhead and the building added, $640.

People or things

Where the money goes differs as much as how much. In general patient rooms, salaries are 70% of direct cost; in operating rooms, 30%, because supplies and equipment dominate.

Salaries as a share of direct cost, by department

Median among hospitals that pay the department's staff themselves. Contract staff count as other costs.

Physical therapy 83%

Recovery 82%

Psychiatric unit 78%

Rehabilitation unit 77%

Nursery 76%

Skilled nursing unit 75%

Labor and delivery 71%

General inpatient rooms 70%

Intensive care 70%

Outpatient clinics 62%

MRI 60%

Emergency department 58%

Kidney dialysis 58%

CT scanning 57%

X-ray and diagnostic radiology 56%

Radiation therapy 50%

Nuclear medicine 37%

Laboratory 36%

Operating rooms 30%

Cardiac catheterization 27%

Source: Medicare cost reports (HCRIS), Worksheet A columns 1 and 2.

The building is three cents on the dollar

The building itself, counted as its depreciation, interest, leases, insurance and taxes, costs the median hospital $15.80 a square foot a year: 3% of its yearly cost. Across all hospitals together it is 3%. Each square below is one cent of a dollar spent.

Where a hospital's dollar goes

One square per cent: all 2,859 general hospitals' direct costs together, fiscal year 2023.

The building itself 3
Equipment, utilities, upkeep and cleaning 7
Administration and employee benefits 23
Patient care: units, treatment, supplies and drugs 52
Other support and services that are not patient care 15

Source: Medicare cost reports (HCRIS), Worksheet A.

That figure understates what a new building would cost, because the books carry old buildings at what they cost when they were built, often decades ago. Even so, at $15.80 a year against a new square foot's $1,112, the building is a small part of what a hospital spends; the people and supplies inside it are most of it.

Bigger hospitals spend more per square foot

The median hospital with under 100 beds spends $440 a square foot a year; with 300 beds or more, $670. The cost reports alone do not say how much of that is sicker patients, teaching or simply more of the costly departments.

Yearly cost per square foot by hospital size, median

General hospitals, fiscal year 2023.

Under 100 beds $4401,063 hospitals

100 to 299 beds $5381,175 hospitals

300 beds or more $670621 hospitals

Source: Medicare cost reports (HCRIS).

Operating rooms: direct cost per square foot a year, each hospital

One dot per general hospital with operating room space. The scale is logarithmic: equal distances are equal ratios.

Loading 2,763 hospitals…

Source: Medicare cost reports (HCRIS), fiscal year 2023.

How these figures were made

Direct cost for a year over floor space, department by department, at 2,859 general (short-term acute) hospitals whose fiscal year 2023 Medicare cost report covers a full year and has usable square feet.
Direct cost (Worksheet A column 7): salaries and other costs after reclassification and adjustment. The department's own square feet (Worksheet B-1). Direct cost on every Worksheet A line (departments, overhead, capital, supplies and drugs billed to patients, and services that are not patient care) over the hospital's square feet.
A department counts at a hospital when it reports both cost and at least 200 square feet, and the result is between $10 and $10,000 a square foot. Reports must cover a full year.
Left out: Employee benefits, administrative and general, nursing administration. Cost pools for the whole hospital; their own office space says little about what they cost.
Left out: Anesthesiology, respiratory therapy, electrocardiology, intravenous therapy. Staff work at the bedside or in the operating room, not in the department's own space.
Left out: Supplies, implants and drugs billed to patients; blood; organ acquisition. Purchases that pass through the hospital, mostly with little or no space.
Left out: Other ancillary, other outpatient, other nonreimbursable lines. Catch-all lines that differ from hospital to hospital.
Cost report square feet are each hospital's own statistic for spreading building cost. A department's figure is its assigned space, without the corridors, lobbies, stairs and mechanical rooms that a gross square foot in a construction budget includes; the hospital-wide figure counts all the space the hospital reports, so it is the fairer comparison. Construction budgets are for new projects, often towers full of costly space, in the dollars of their filing year; cost report capital is depreciation on what the buildings cost when they were built.
How much space hospitals add: more building, not more beds. What new space costs to build: construction cost.

Direct cost per square foot by department
Department	Hospitals	25th percentile	Median	75th percentile
Laboratory	2,750	$678	$974	$1,454
Pharmacy	2,014	$604	$971	$1,539
CT scanning	1,838	$518	$839	$1,402
Kidney dialysis	1,082	$387	$688	$1,298
Cardiac catheterization	1,327	$288	$495	$933
Intensive care	2,439	$313	$460	$670
Nursery	1,706	$240	$439	$894
Emergency department	2,700	$308	$437	$656
Physical therapy	2,454	$214	$398	$887
Medical records	2,080	$178	$395	$831
Nuclear medicine	1,293	$225	$391	$703
Recovery	1,529	$229	$383	$654
MRI	1,718	$210	$362	$616
Operating rooms	2,763	$224	$354	$541
X-ray and diagnostic radiology	2,808	$223	$330	$517
Labor and delivery	1,797	$185	$314	$525
General inpatient rooms	2,846	$181	$277	$413
Outpatient clinics	1,533	$147	$271	$519
Psychiatric unit	712	$191	$268	$395
Radiation therapy	759	$168	$266	$455
Rehabilitation unit	660	$156	$236	$328
Kitchen and cafeteria	2,800	$156	$227	$330
Central supply and sterile processing	2,053	$107	$214	$400
Skilled nursing unit	228	$146	$208	$375