Hospital costs are of keen interest to Medicare, Medicaid, and private health insurers these days, who pay the vast majority of hospital costs. Which services are the most expensive? Which types of health coverage are responsible for most of the costs? A new statistical brief from the Health Costs and Utilization Project (HCUP) has some interesting data to answer those questions.

Hospital Costs a Focus for Payors:

Hospitals accounted for the single largest source of U.S. health care spending, almost one third of total health spending in 2011, or $2,734 per person. Health insurers bore most of the burden: Hospital spending was the largest health spending category – again, roughly one third of the total – for all health insurance types, from Medicaid, to Medicare, to private health plans. Yet hospital care made up less than 10 percent of consumer out-of-pocket spending. Instead, physician services, dental care, and prescription drugs accounted for most out-of-pocket spending.

So it’s no surprise that major efforts to curb health costs and spending have focused on hospitals. Hospital readmissions are the most prominent target because they can directly create unnecessary health spending and often indicate poor quality of care during or soon after the hospital stay.  Readmissions refer to when a patient who was hospitalized is readmitted soon after release with complications related to the original hospitalization.

The Affordable Care Act (ACA) launched a Hospital Readmission Reduction Program in Medicare to punish hospitals with high readmission rates. America’s Health Insurance Plans (AHIP) recently released a report to encourage private health plans to take action on hospital readmissions. And states such as New York and Texas have enacted Medicaid payment reforms to address unnecessary hospital spending.

For more information, read these previous blog posts:

A Handful of Conditions Account for Almost Half of Costs:

Data are key to understanding which conditions are contributing most to hospitals’ large contribution to national health costs. Once again, the Health Costs and Utilization Project (HCUP) has an excellent statistical brief on the subject.

HCUP found that the top 20 most expensive conditions accounted for 47 percent of the $387 billion in hospital costs for 2011. The top five most expensive conditions – septicemia, osteoarthritis, complication of device implant or graft, newborn infants, and acute myocardial infarction – accounted for almost 20 percent of total hospital costs.

An important side-note before we get to the more detailed findings: The hospital costs represent the cost to produce the services – not the amount health plans and other payors reimbursed for services – and they do not include the physician fees associated with the hospitalization. That might be one reason why this brief’s numbers are different from the National Health Expenditure Survey data.

HCUP’s brief had several more interesting findings:

  • In 2011, the aggregate hospital cost for nearly 39 million hospital stays totaled $387 billion.
  • The primary payer shares of the total aggregate hospital costs were 63 percent for Medicare ($182.7 billion) and Medicaid ($60.2 billion), 29 percent for private insurance ($112.5 billion), and 4 percent ($17.1 billion) for uninsured hospitalizations.
  • Septicemia ranked in the top four most costly conditions in the hospital for all four payer groups.
  • Hospitalizations associated with pregnancy and childbirth accounted for 7 of the top 20 most expensive conditions for hospital stays covered by Medicaid.
  • Complications of surgical procedures or medical care was a top-ranked condition for stays covered by Medicare, Medicaid, and private insurance.

Read the full brief here, and click here for other HCUP statistical briefs.