Hospital overhead costs: The neglected driver of health care spending?

Objective: To examine temporal trends in hospital overhead costs relative to total hospital costs, hospital inpatient beds, and inpatient days in United States hospitals. Methods: Using Medicare data regarding nonfederal acute care hospitals in the United States, we conducted analyses of hospital overhead costs, total hospital costs, inpatient bed capacity, and inpatient days for nonfederal acute care hospitals from 1996 through 2010. Overhead costs were examined as a function of total beds, total inpatient days, and overall costs during this time period. Results: In 1996, baseline hospital overhead costs were $220,497 per inpatient bed and $1,361 per inpatient day in 2010 dollars; mean hospital overhead costs represented 46.1% of total hospital costs. Relative to medical inflation, overhead costs per inpatient bed grew 3.02% per year and overhead costs per inpatient day grew 1.86% per year. Overhead costs as a share of total costs remained unchanged. Conclusions: Overhead costs represent approximately half of total hospital costs. Between 1996 and 2010, mean hospital overhead costs per inpatient bed and per inpatient day increased faster than medical inflation. To adequately constrain rising health care costs, hospitals must address overhead costs as well as direct patient costs.

Duke Scholars

Author Bradley Gordon Hammill Population Health Sciences

Author Bimal Ramesh Shah Medicine, Cardiology