Executive Summary
Per capita hospital spending rose by 7.1% in 2001 representing an almost three-fold increase over the preceding year. From 1998 to 2001, hospital expenditures comprised about 34.2% of the growth of total health care expenditures, outstripping pharmaceuticals and outpatient spending as the most important contributor to health care cost increases. Six-month data for 2002 has indicated a slowing of the rate of overall health care expenditure from 10% in 2001 to 8.8%. Hospital expenditure reduction along with decreased spending on prescription drugs and physician services has contributed to this deceleration.
Due to the high cost of inpatient care, spending growth in this segment is a concern for all health care consumers, providers and payers. Understanding the underlying drivers of recent inpatient cost growth and projected future drivers will aid decision-makers in finding the best means of inpatient cost management. Review of the literature has revealed many potential contributors to the recent spending growth. These include population growth, the aging population, disease, trends in public and private health care coverage and the uninsured, hospital business issues and directions, new technology, labor costs, legislation and policy as well as related factors; geographic variation and discharge policies.
Future trends in non-teaching hospital cost will depend on several factors such as general economic status, increased transfer of risk to the consumer and evolution of new technology. With a slowdown in the economy, the tight labor market has loosened allowing for a tightening of managed care. This may decrease costs on the short term; however, the fallout may be a rise in the number of uninsured and increased dependence on the safety net. Trends in nursing and other labor costs, antitrust activities regarding mergers as well as the ever growing list of federal and state level legislation and policies are also likely to impact future expenditure growth...........
