Health Cost Drivers Include Rising Demand, Aging Population, Chronic Disease

A report from the American Hospital Association says “the demand for health care is rising due to advances in medicine, an aging population and a rising burden of chronic disease. At the same time, the costs to pro­vide that care are increasing: new devices and drugs are adding to hospital expenses for each service; workforce shortages are driving up wage rates; and hospitals are making significant investments in clinical information technology, quality measure­ment, care coordination and compliance with increasing regulatory and payer requirements.”

“Understanding these cost drivers is critical to developing strategies to contain costs,” AHA says.

While “hospital care remains the largest single category of health care spending,” hospital care “as a percent of total spending on health care services and supplies has actually declined from 43 percent in 1980 to 33 percent in 2009, AHA says, citing CMS data released in January 2011.

In addition, “growth in spending on hospital care has lagged behind growth in health insurance premiums, pharmaceuticals, and other services,” according to the report.

For example, AHA notes that Baylor Regional Medical Center in Plano, TX implemented an evidence-based intervention created by the Institute for Healthcare Improvement to eliminate ventilator-associated pneumonia (VAP). The institution reports no cases of VAP and direct cost savings of $150,000 per patient, totaling more than $3 million in savings from March 2007 through April 2009.