Rising costs to hospitals accounted for 64 percent of the overall growth in spending on hospital care between 2004 and 2008, according to a report issued this month by the American Hospital Association (AHA).
Understanding the factors driving the growth In spending on hospital care is “critical to the debates about healthcare costs and affordability,” the AHA maintains, since hospitals continue to account for the largest share of the healthcare dollar (33 percent), according to the AHA.
The AHA reported that about two-thirds of every dollar spent by hospitals goes toward wages and benefits of staff and caregivers—which means that labor costs are the single most important factor driving spending growth (accounting for 35 percent). The pressure on hospitals caused by rising labor costs is being exacerbated by shortages of registered nurses, medical technicians and other clinical workers.
Rising demand for healthcare accounted for most of the rest of the growth in spending on hospital care (34 percent). According to the AHA, demand is rising not only because the general population has increased, but individuals, on average, are using more hospital services. Population growth accounts for 15 percent of the increase in hospital spending, while more hospital use accounts for 19 percent.
While the aging of the country’s population is driving some of the increase, the general population is also “getting sicker," the AHA said. " More and more people today are suffering from chronic diseases than ever before, driven by lifestyle factors, such as obesity.”
The AHA also suggested that medical advances drive up costs as well. “Each year ill and injured patients have more options to meet their needs—new diagnostic techniques, procedures and treatment regimens. These advances lead to longer and better lives, but add to the number of hospital services provided and drive up spending.”