Report: Cost of Providing Care Biggest Factor in Hospital Spending

The ever-increasing costs of labor, goods and services needed to provide high quality care are the most significant drivers of overall growth in healthcare spending, according to The Cost of Caring, a report released last week by the American Hospital Association.

The report shows that hospitals account for the largest share of every healthcare dollar. The report delves deeper into those costs, showing that about two-thirds of every dollar spent by hospitals goes toward wages and benefits for caregivers and staff. Those costs are responsible for 35 percent of overall spending growth.

Rising demand for care also added significantly to healthcare spending, accounting for about 34 percent of overall spending from 2004 to 2008. Demand is rising because the population is growing and each person, on average, is using more hospital services. At the same time, the population is getting sicker. More and more people are suffering from chronic diseases than ever before.

Understanding the factors that drive growth in spending is critical to the debates about healthcare costs and affordability, the report notes. In most cases, hospitals cannot control demand for care or the costs of the goods and services they need to purchase. These factors will continue to put further cost pressure on hospitals.