• Yang Wang, Ge Bai, and Gerard Anderson.
• Johns Hopkins Bloomberg School of Public Health, Baltimore, MD, USA.
• J Gen Intern Med. 2023 Jun 1; 38 (8): 188718931887-1893.

BackgroundIn response to the declining utilization and patient revenue due to the COVID-19 pandemic, the U.S. hospital industry furloughed at least 1.4 million health care workers to contain their clinical-related expenses. However, it remains unclear how hospitals responded by adjusting their administrative expenses, which account for more than a quarter of U.S. hospitals' spending, a proportion substantially higher than that of other industrialized countries. Examining changes in hospitals' administrative expenses during the COVID-19 pandemic is important for understanding hospitals' cost-containment behaviors under operational shocks during a pandemic.ObjectiveTo assess changes in hospitals' administrative expenses and clinical expenses during the COVID-19 pandemic in 2020.DesignTime-series observational study.Participants1420 Medicare-certified general acute-care hospitals with fiscal years starting in January and continuously operating during 2016-2020.Main MeasuresHospitals' annual administrative expenses and clinical expenses.Key ResultsHospitals' median administrative and clinical expenses both increased consistently around 4% each year from 2016 to 2019. From 2019 to 2020, the median administrative expenses grew by 6.2% while the median clinical expenses grew by 0.6%. The interrupted time-series regression estimated an additional 6.4% (95% CI, 4.5 to 8.2%) increase in administrative expenses in 2020, relative to the pre-COVID annual increase of 3.9% (95% CI, 3.3 to 4.4%), while an additional increase in clinical expenses in 2020 (0.5%; 95% CI, -0.3 to 1.4%) did not differ from the pre-COVID annual increase of 3.7% (95% CI, 3.5 to 4%). Stratified analysis showed hospitals with larger utilization volume, located in states with lower COVID-19 burden, or situated in counties with higher median household income experienced larger increase in administrative expenses in 2020.ConclusionsIn 2020, administrative expenses grew much faster than clinical expenses, resulting in a larger share of hospital financial resources allocated to administrative activities. Higher administrative expenses might reflect hospitals' operational effort in response to the pandemic or inefficient cost management.© 2023. The Author(s), under exclusive licence to Society of General Internal Medicine.

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