The cost of inefficiency in US hospitals, 1985-1997

We conducted a descriptive analysis of data from the Hospital Cost Report Information System from 1985 through 1997 on nonfederal, short-stay hospitals in the United States with 12-month reporting periods and valid data for the primary outcomes. The main outcome measures were change in number of beds, inpatient days, overhead cost per bed, and overhead cost per inpatient day. Actual outcomes were compared to predicted outcomes from: (1) a scenario holding the ratio of overhead cost per volume constant throughout the study period; and (2) a scenario holding overhead expenditures for 1985 constant as volume changed. The sample contained a mean of 3,605 hospitals per year. Volume declined annually by 2.2 beds (95 percent confidence interval [CI], 2.1 to 2.2; P < .001) and 997 inpatient days (95 percent CI, 992 to 1,003; P < .001). Overhead cost per bed increased by 3,388 dollars annually (95 percent CI, 3,049 to 3,737; P < .001) and overhead cost per inpatient day increased by 40 dollars annually (95 percent CI, 36 to 44; P < .001). In the constant ratio scenario, mean overhead cost per bed increased by 42,523 dollars (32 percent), and mean overhead cost per inpatient day increased by 435 dollars (59 percent). In the constant overhead cost scenario, overhead cost per bed increased 15 percent and overhead cost per inpatient day increased 19 percent. Hospital overhead costs are increasing faster than would be expected if efficiency were the primary goal of hospital management.