Hospitals shrinking as largest part of health spending pie

While hospital care remains the largest single category of healthcare spending, its share as a percentage of total spending for healthcare is declining, according to a recent report from the American Hospital Association (AHA).

Hospital care has declined from 43 percent in 1980 to 33 percent in 2009--even as health spending overall has continues to increase, the report said. However, growth in spending on hospital care is lagging behind growth in health insurance premiums, pharmaceuticals, and other services.

The report notes that the major portion of spending in healthcare goes toward caregivers and workers--and those costs are rising. Currently, about 60 cents of every dollar spent by hospitals goes to pay for wages and benefits for those directly involved with care for patients or who support their care.

At the same time, shortages of workers in hospitals with the required specialized skills have pushed up wages and benefits for hospitals relative to other industries. For instance, when hospitals are compared with private industries, the employment cost index for hospitals rose 38 percent between March 2001 and March 2010, while it only increased 27 percent in the private sector.

And, while vacancy rates for nurses may be lower in the short term because of the recession and job loss in other sectors, hospitals are facing "significant" long-term shortages, the report added. Several trends are pointing toward this shortage: the aging of the current workforce in which many nurses will be soon retiring, insufficient numbers of younger nurses to meet the needs of an aging population, and expanding opportunities for nurses outside the hospital.

For more information:
- see the AHA report