Even the New York Times now admits American hospital costs are out-of-control

(Though it does nothing to acknowledge the role Obamacare, tort costs, and diversity, equity, and inclusion featherbedding play in the problem)

This Is the Biggest Culprit for Health Care Spending

When I saw the nytimes.com headline, I clicked though expecting another article blaming insurance companies.

Nope. Instead, the opinion piece — from a Yale professor — focused on hospital costs:

We are directing our anger at the part of the system that is most visible and frustrating (insurers’ restrictions on care) while ignoring the part of the health system that is most responsible for high costs and economic pain: hospital prices…

Since 2000, prices at hospitals have grown faster than prices in virtually any other sector of the economy. They have grown three times as fast as inflation and twice as fast as prescription drugs and doctor visits.

Yep. Insurance companies deserve plenty of blame, but hospital costs, including gold-plated new buildings, now threaten to bankrupt the entire system.

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The problem is only getting worse, as hospitals suck up a ever-larger share of overall medical spending. As the Kaiser Family Foundation pointed out in February, between 2022 and 2024 alone, spending on hospitals rose another $277 billion and reached $1.6 trillion, almost $5,000 for every American.

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(Raking in the green.)

SOURCE

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This explosion in costs has not come because the United States has opened more hospitals or more hospital beds.

On a per capita basis, the United States has roughly half as many hospital beds as in 1980. (That decline is one reason health bureaucrats panicked about hospital overrun during Covid. The system can handle normal patient volumes, but it has little slack for emergencies.)

Instead, hospitals simply charge far more than they once did for surgeries, outpatient or same-day procedures, imaging, and emergency room visits. Prices have risen much faster than inflation for decades.

The article pins the problem on hospital mergers, which give local hospital systems increasing market power over insurance companies and private payors:

Since 2000, there have been more than 1,300 hospital mergers among the nation’s approximately 5,000 hospitals. When hospitals that were once competitors merge, prices go up, often by double-digit percentages, with no measurable improvement in patient outcomes… 21 percent of hospitals are effectively monopolies — they have no competitor within a 30-minute drive — and an additional 24 percent face only one competitor.

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Mergers have surely given hospitals more pricing control, driving up costs.

But they are not the only issue. After all, Medicare accounts for $500 billion in hospital inpatient spending (again, these figures seem cartoonishly large, but they are correct). Yet hospitals constantly complain they lose money on Medicare patients (though that claim is hotly debated).

And hospitals do not run at huge profit margins overall.

In 2025, HCA Healthcare, the largest for-profit hospital company, reported profits of $6.8 billion on revenues of $76 billion — a decent but hardly stunning margin of 9 percent. In other words, this flood of extra spending is producing only a trickle of additional income to hospital bottom lines.

Meanwhile, hospitals that serve poorer, sicker communities and offer fewer high-profit elective procedures struggle to get by.

As an executive at a hospital in a poor part of a major city has pointed out to me, his hospital is in an entirely different business than the big academic centers and chains, which spend billions of dollars a year on branding and can charge private insurers much higher rates than his facility can.

In other words, though hospitals are charging monopoly (and possibly Monopoly (TM) prices), they are not making monopoly profits.

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(This was inevitable)

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So what’s going on?

What’s going on is that hospital expenses are also exploding.

Those rising costs are due in part to costly branding and building sprees (which are their own kind of branding) in the never-ending medical-industrial arms race. They are due in part to the multi-million dollar salaries that both for-profit and “nonprofit” hospitals are paying to more and more of their executives.

But they are also due to the costly bureaucratic and health information software requirements that the federal government imposes and Obamacare has worsened, as well as the costs of fighting lawsuits and managing diversity, equity, and inclusion programs.

A 2021 paper estimated hospitals spent $250 billion on administrative costs alone. That figure is likely closer to $400 billion now — nearly as much as the United States spends on prescription drugs (which are themselves a massive rathole, but one problem at a time).

Ever more complex government-imposed bureaucracies and rules have made hospitals too expensive to function if they are unable to charge quasi-monopoly prices. (The HCA Healthcare annual report runs 326 pages, including 12 pages simply to explain different revenue sources.)

But we need hospitals, so to solve the problem we have allowed them to become quasi-monopolies. The system still functions, at crushing expense.

The left’s answer is yet more government involvement and financial backstopping — and, apparently, to shoot insurance company executives. The mainstream Republican Party has no answer at all.

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Fixing these problems will require hard choices, ones we so far have been unwilling even to consider seriously. As the Times wrote:

Perhaps more than anything else, what makes hospital prices so hard to confront is that the relationship we have with our health care providers is very different from the transactional relationship we have with our insurers… vulnerability, fear and gratitude make it difficult to hold doctors and hospitals to the kind of scrutiny that we apply to other powerful institutions. We lean on hospitals when our children are born, when our parents get sick and when we approach life’s end. That kind of reliance requires trust.

Unfortunately, hospitals have proven for decades that — though the individual doctors and nurses who work in them may be good, caring people — as institutions they cannot be trusted, the more so because their finances are so opaque, their executives so richly compensated, and the power relationship between them and their “customers,” aka patients, so unbalanced.

What comes next?

I don’t know.

But I am glad to see the Times highlighting the problem.

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(Another angle on out-of-control hospital spending, from last year)