Health Care Costs and Financing

Study identifies factors contributing to growth in hospital inpatient costs since 1998

Nationwide, hospital inpatient costs have accelerated each year since 1998, with costs rising nearly 5 percent per year by 2001. A new study by researchers at the Agency for Healthcare Research and Quality illuminates some of the factors contributing to these escalating hospital costs. Bernard S. Friedman, Ph.D., Herbert S. Wong, Ph.D., and Claudia A. Steiner, M.D., M.P.H., used State inpatient databases from the Healthcare Cost and Utilization Project to analyze all discharges from 1,706 hospitals in 172 metropolitan statistical areas (MSAs) from 22 States in 1998 and 2001. They combined discharge summary information with surveys of managed care plans, MSA demographics, and State malpractice data to examine factors affecting growth in inpatient costs across nine leading clinical conditions.

Results suggest that HMO market penetration continued to restrain hospital admission rates after 1998. The percentage of unemployed adults in an MSA, included as a proxy for the uninsured population, increased admission rates. This may have been due to lower use of ambulatory and preventive services by this group, resulting in more preventable hospital admissions. However, this was partly offset by a lower increase in cost per case. A cap on malpractice awards appeared to restrain admissions at hospitals in States with caps. However, the net effect on hospital cost-per-adult eroded by 2001 for those States with the most experience with award caps.

The admission rate increased significantly for three of four conditions for which beneficial technology advances were introduced: nonspecific chest pain; osteoarthritis; cardiac arrhythmias; and complication of a device, implant, or graft. Significant cost increases per case were seen in two of these four conditions. The illness severity index had a large effect on cost after controlling for the type of condition. HMO market penetration, level of hospital competition, and proportion of hospital system membership were not significantly associated with hospital inpatient costs.

See "Renewed growth in hospital inpatient cost since 1998: Variation across metropolitan areas and leading clinical conditions," by Drs. Friedman, Wong, and Steiner, in the March 2006 American Journal of Managed Care 12(3), pp. 157-166. Reprints (AHRQ Publication No. 06-R062) are available from the AHRQ Publications Clearinghouse .

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