Data Trends

Hospital expenses have shown steady historical growth, with expenses per adjusted wage index and case mix index discharge increasing at an annual rate of 4.2 percent (wage index adjustment only) and 3.0 percent (wage index and case mix index adjustment). The metrics include inpatient and outpatient operating expenses, normalized by an adjusted discharge factor, which takes into account the relative amount of inpatient versus outpatient revenue. The difference in inflation rates can be thought of as contribution of increased acuity to cost (1.2 percent annually).

Exhibit 1


Expense per adjusted discharge.

Exhibit 2


Expense per adjusted discharge (annual percentage change)

Analysis of financial data for general acute care community hospitals discloses that the rate of that expense inflation diminished in recent quarters, especially near the end of 2008, following an increase in the third quarter of 2007 (2007Q3). These data suggest that hospitals were reducing cost growth during the recession (beginning in 2007Q4).

The hospital operational and financial performance data used for this analysis are quarterly financial data (2005Q2 through 2008Q4) for general acute care community hospitals. Expense per adjusted discharge contains inpatient and outpatient operating expense and excludes nonoperating expenses. It is normalized by the number of patient discharges, then multiplied by a factor that is the ratio of total revenue to inpatient revenue. The quarterly samples have, on average, 470 reporting hospitals.

Data for this analysis were developed by Thomson Reuters.

For more information, e-mail David Koepke, PhD, at

Publication Date: Saturday, May 01, 2010

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