Hospitals Face Increased Costs of Caring for Patients
A hospital patient from the 1990s would likely marvel at the pace of progress in health care just a generation later. America’s hospitals and health systems remain the backbone of the U.S. health care system, while today’s care is more advanced, effective and medically innovative than ever before.
Our highly skilled workforce and technological breakthroughs have resulted in patients living longer, recovering faster and benefitting from treatments scarcely imagined not long ago. But these admirable advances carry a cost, requiring substantial and sustained investment.
Hospitals are different than other parts of the health care system as they support a wide spectrum of services — emergency care, inpatient treatment, surgery, diagnostics — all operating simultaneously.
They have substantial fixed costs to maintain specialized services, high‑cost equipment, and a fully staffed, 24/7 care environment that remains ready for anything.
And hospitals increasingly face misalignments between those costs and how care is paid for, posing a threat to the progress we have made.
Factors Driving Costs and Expenses
This week, the AHA released an updated Costs of Caring report that provides a data-driven assessment of these realities and underscores why sustainable affordability solutions must address the structural drivers of cost growth rather than focusing narrowly on hospital prices alone. Our analysis spotlights the top five factors driving costs and expenses.
Workforce Spending
Hospitals continue to invest heavily in their workforce. About 60% of total expenses went to paying the talented doctors, nurses, specialists and other professionals who allow hospitals to provide around-the-clock care and services. In 2025, workforce costs rose 5.6% from the previous year.
Hospital Costs to Care for Patients Grew Twice as Fast as Hospital Prices
In 2025, total hospital expenses grew 7.5%, more than twice the rate of growth in hospital prices. Hospital expenses for supplies increased 9.9%, and drugs increased 13.6%.
Hospitals Are Caring for More Patients Who Are Sicker
From 2019 to 2024, about 36% of hospital expense growth reflected treating more patients, and about 19% reflected caring for sicker, more complex patients, as hospitals devote more staff time, monitoring and specialized treatment to these higher-need patients. The rest was from higher input costs, such as labor, drugs and supplies.
Administrative Burden from Commercial Insurer Claims Denials, Prior Authorization
Hospitals spent $43 billion in 2025 trying to collect payments insurers owe for care already delivered. Prior authorization, claims denials, repeated documentation requests, and evolving billing and coverage rules have contributed to these expenses, as well as taking clinicians away from direct patient care.
Most Hospital Costs Are Tied to Service Lines Where Reimbursements Fall Short of the Cost to Deliver Care
About 56% of hospital costs are tied to service lines where reimbursement falls short of, or is less than, the cost to deliver the care, including behavioral health, obstetrics, infectious disease, and burns and wounds. Many of these services are only available in hospitals, so they are essential to the health of the community.
These data and trends help explain why hospital expenses continue to grow, outpacing growth in hospital prices. Together, these strains are jeopardizing hospitals’ ability to provide around-the-clock care and services that patients and communities need.
Hospitals are unique within the health care sector in the wide spectrum of services they support. They remain always there, ready to care, every minute of every day — a promise kept with the people and communities they serve.
However, as the 2026 Costs of Caring report warns, this mismatch between the actual cost of caring versus reimbursements from payers leaves hospitals increasingly at risk of being unable to maintain the full spectrum of services on which communities rely.