The full content of Annals is available to subscribers

Subscribe/Learn More  >
Medicine and Public Policy |

Reasons for Increasing Administrative Costs in Hospitals

David J. Shulkin, MD; Alan L. Hillman, MD, MBA; and William M. Cooper, MD, JD
[+] Article, Author, and Disclosure Information

From the Office of Clinical Outcome Assessment and Quality Management, University of Pennsylvania Medical Center, Leonard Davis Institute of Health Economics, University of Pennsylvania, Philadelphia, Pennsylvania; Shadyside Hospital, Pittsburgh, Pennsylvania. Requests for Reprints: David J. Shulkin, MD, Hospital of the University of Pennsylvania, Administration-1 Founders, 34th and Spruce Streets, Philadelphia, PA 19104. Acknowledgments: The authors thank Blue Cross of Western Pennsylvania, the Pennsylvania Medical Society, and the Hospital Association of Pennsylvania for their assistance and cooperation; they also thank Michael Karpf, MD, Barbara Hanusa, PhD, and James Goin, PhD for their statistical support and guidance. Grant Support: In part by the Shadyside Hospital Foundation, Pittsburgh, Pennsylvania, and the Robert Wood Johnson Foundation. Dr. Shulkin was a Fellow in General Internal Medicine at the University of Pittsburgh and a Robert Wood Johnson Foundation Clinical Scholar at the University of Pennsylvania during part of the time that this work was done.

Copyright 2004 by the American College of Physicians

Ann Intern Med. 1993;119(1):74-78. doi:10.7326/0003-4819-119-1-199307010-00012
Text Size: A A A

Objective: To evaluate trends in administrative expenditures by examining changes in administrative costs compared with other areas of the hospital budget, changes in expenditures for patient care departments compared with nonpatient care departments, and departments with a greater number of regulatory requirements compared with those with fewer regulatory requirements.

Design: Annual hospital operating budgets submitted to Blue Cross were examined for an 8-year period from 1983 to 1990.

Participants: Seventy hospitals in Western Pennsylvania.

Measurements: Annual operating expenditures.

Results: Total administrative expenditures showed a larger growth rate (90%) than service departments (29%), ancillary services (30%), professional care (52%), miscellaneous expenses (70%), and the total hospital budget (45%). Administrative costs increased from 10.6% as a proportion of the total hospital budget in 1983 to 13.9% in 1990. These increases were seen regardless of hospital size. Departments with a greater number of regulatory obligations had a greater increase in expenditures (84%) than did departments with fewer regulatory requirements (5%). However, overall expenditures in departments with direct patient care responsibilities did not increase appreciably faster (44%) than in departments not providing clinical services (46%), possibly reflecting the fact that administrative costs may be increasing equally in both areas.

Conclusions: Administrative costs were found to be one of the fastest growing components of hospital budgets. Future research should determine the effect of these increases on the quality of patient care.


Grahic Jump Location
Figure 1.
Cumulative percentage increase in average expenditures by budget category.

Increase was from 1983 to 1990.

Grahic Jump Location
Grahic Jump Location
Figure 2.
Percentage of administrative budget compared with total hospital budget, by year.
Grahic Jump Location
Grahic Jump Location
Figure 3.
Percentage of administrative costs compared with total hospital budget by hospital size.

Costs were from 1983 to 1990.

Grahic Jump Location
Grahic Jump Location
Figure 4.
Cumulative percentage increase in patient care and nonpatient care expenditures.

Increase was from 1983 to 1990.

Grahic Jump Location
Grahic Jump Location
Figure 5.
Cumulative percentage increase in expenditures for departments with a greater number of regulatory requirements and those with fewer requirements.

Increase was from 1983 to 1990.

Grahic Jump Location




Citing articles are presented as examples only. In non-demo SCM6 implementation, integration with CrossRef’s "Cited By" API will populate this tab (http://www.crossref.org/citedby.html).


Submit a Comment/Letter
Submit a Comment/Letter

Summary for Patients

Clinical Slide Sets

Terms of Use

The In the Clinic® slide sets are owned and copyrighted by the American College of Physicians (ACP). All text, graphics, trademarks, and other intellectual property incorporated into the slide sets remain the sole and exclusive property of the ACP. The slide sets may be used only by the person who downloads or purchases them and only for the purpose of presenting them during not-for-profit educational activities. Users may incorporate the entire slide set or selected individual slides into their own teaching presentations but may not alter the content of the slides in any way or remove the ACP copyright notice. Users may make print copies for use as hand-outs for the audience the user is personally addressing but may not otherwise reproduce or distribute the slides by any means or media, including but not limited to sending them as e-mail attachments, posting them on Internet or Intranet sites, publishing them in meeting proceedings, or making them available for sale or distribution in any unauthorized form, without the express written permission of the ACP. Unauthorized use of the In the Clinic slide sets will constitute copyright infringement.


Buy Now for $32.00

to gain full access to the content and tools.

Want to Subscribe?

Learn more about subscription options

Topic Collections
Forgot your password?
Enter your username and email address. We'll send you a reminder to the email address on record.