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Analyzing administrative costs in hospitals.

Niccie L McKay¹, Christy Harris Lemak

¹Department of Health Services Research, Management and Policy, University of Florida, Gainesville, FL, USA. nmckay@phhp.ufl.edu

Health Care Management Review

|November 2, 2006

Summary

This study introduces a management framework to analyze hospital administrative costs, categorizing them by operational, payer-based, and regulatory factors based on control. The framework was applied to Florida hospital data from 2003.

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Published on: February 24, 2026

Area of Science:

Health Services Research
Healthcare Management
Health Economics

Background:

Administrative costs represent a significant and growing portion of hospital expenditures.
Understanding the drivers of these costs is crucial for effective hospital management and policy.
Existing frameworks may not adequately differentiate cost types based on control.

Purpose of the Study:

To present a conceptual framework for analyzing hospital administrative costs.
To categorize administrative costs into operational, payer-based, and regulatory types.
To illustrate the application of this framework using real-world data.

Main Methods:

Development of an integrated, management-based conceptual framework.
Classification of administrative costs based on the locus of control.
Application of the framework using administrative cost data from Florida hospitals in 2003.

Main Results:

The framework successfully categorizes hospital administrative costs into three distinct types.
Analysis of Florida hospital data provides an illustration of the framework's utility.
Identifies specific cost drivers within each category.

Conclusions:

The proposed framework offers a structured approach to understanding hospital administrative costs.
Differentiating costs by locus of control aids in targeted management strategies.
This approach can inform policy and operational improvements in healthcare administration.