Understanding the underlying drivers of inpatient cost growth: a literature review

After the declining growth in inpatient hospital spending that occurred from 1994 through 1998, the recent trend in increased spending has been of concern to many. Understanding the underlying reasons for this new growth will aid decision makers in finding best means to manage inpatient costs.

To identify potential contributors to recent growth in inpatient spending.

Literature review.

Healthcare and economic databases, prominent Web sites, and key journals were searched to identify potential drivers for the 1999-2001 rise in inpatient spending. Initial literature review and state-level regression analyses published in a companion paper were used to identify key explanatory factors, which were further explored.

Although many of the contributors to the rise in inpatient costs overlap and are interrelated, the major cost drivers were identified as (1) workforce shortage; (2) new technology; (3) less tightly managed care; and (4) shifting hospital business directions. Underlying factors such as legislation, quality of care, limited access to noninpatient care, pressures on the safety net, population aging, and increasing chronic illness prevalence were found to influence the contributors and healthcare spending in general.

Future trends in inpatient spending will depend on the response of the healthcare system to these cost drivers and underlying factors. Potential avenues to control inpatient spending include expanding access to primary care, encouraging cost-effective technology and more efficient hospital market structures, and developing incentives for the healthcare workforce.