Episode 7: Read & React - AHA Cost of Caring 2026

The numbers are in—and we have thoughts! 🎙️

In Episode 7 we have our first Read & React, digging into the American Hospital Association’s Cost of Caring 2026 report. We break down the numbers behind hospital spending, patient volumes, and drug costs, react to what stands out, and talk about what these trends could mean for hospitals and value analysis teams.

Link to report: Costs-of-Caring-2026.pdf

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Transcript

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SPEAKER_01 0:04

Hello, and welcome back to the Data Slayer podcast, where insight meets impact, brought to you by the team at Blue Point Supply Chain Solutions. I'm your host, Jennifer Dodi, and joining me today from Blue Point are Anne-Marie Orlando, the Vice President of Clinical Services, Kegan Smith, the Senior Manager of Analytics and Product Development, and Sarah Hobbs, Clinical Program Director. Welcome everyone.

SPEAKER_04 0:27

Hello.

SPEAKER_01 0:28

Good morning. So today we're kicking off a read and react episode, taking a closer look at the 2026 American Hospital Association's cost of caring report and what the data is telling us about the rising cost of healthcare. More patients, higher acuity, rising labor costs, expensive drugs and supplies, there's a lot to unpack here. If you would also, any readers out there or listeners want to read the article, I will have a link to that in the description of this episode. But let's go ahead and just start with some data from the article and discuss what surprised us the most. So the report highlights a 7.5% growth in hospital expenses in 2025. And that's broken down into the following, and I'll go from the least to the most. So workforce spending was a 5.6% growth, supply spending was 9.9% growth, and drug spending was 13.6% growth. So which one of those surprised you guys the most?

SPEAKER_02 1:32

For me, it was the drug spending. And yeah, so that's the one that stood out the most.

SPEAKER_00 1:55

Yeah, and I guess for me, I was thinking the workforce would be a little bit more stabilized at this point. Um, you know, in in terms of the increased spending. I know after COVID, there was a large volume of you know, traveling uh staff, right? Clinical staff. So whether it's nurses or even physicians, and there's always going to be a premium cost when you have to uh bring in staff quickly like that in order to uh you know, I guess sub uh some of the volume of staff that you're missing for whatever reason. And so I was thinking that would be a little bit more stabilized at this uh time and place, but unfortunately, no, that's not either.

SPEAKER_03 2:46

Yeah, and I I kind of took it at the angle of like it's a not just one thing really that just stood out, it's the combination of all of it, right? Like, wow, that's crazy. Hard we aren't just paying um for the same care anymore, right? We're delivering more complex care, which requires more resources, and so that's increasing the cost.

SPEAKER_01 3:08

And one stat that um was also there that I didn't just mention was that the growth in hospital prices over the same period was only 3.3%. So that means that the growth in the expenses overall is more than twice that. So we're treating more patients, more complex patients, with more expensive everything. So there's like that gap, which I guess you know is what we're discussing today. Uh so that also brings up where the report notes that patient acuity increased about 5% between 2019 and 2024, and that they are treating more complex cases. So, what does the more patients sicker patients actually mean?

SPEAKER_00 3:54

Well, if you think about when you're uh patients that are coming into the hospitals, they are of a higher acuity, so they're going to require more specialized care. So there's that training piece, right? That workforce piece. Um, and then from a supply perspective and drug perspective, I'm gonna bundle those a little bit. Uh, they're gonna require more of those. Um, and because of their uh whatever they're coming in with, they may require more expensive drugs, right? Because there's uh, you know, a lot of patients are uh, you know, they're they're coming to the hospital, they're living longer, but more chronic diseases, and there's just that evolution of uh the drugs that are uh helping them maintain their their um you know their their quality of life. And so those those do also come with the cost. But then there's the supplies, right, to take care of those patients, right? There's a lot of advancement, as we know, and and technology going into not only the hospitals, but the supplies that are uh supporting the patient care. And so so there's you know, their increase for that is significant. And I think that when you have these patients coming in and they're taking it, you know, they have the access to those types of um, you know, that that higher quality of care, I and with it those higher prices that come with some of those innovations. I think it it really uh you know increases the cost. But, you know, the patients are they're doing better, you know, at the end they're living longer, right? We're living longer, and my parents are 91. And um, you know, it's and it's wonderful to be able to see, but it also does, you know, it it costs more for some of those more advanced treatments.

SPEAKER_03 5:57

The options, the extra options, and like you said, Emory, your parents are living longer, but that also requires more attention, right? So those additional treatment options, the additional um age consideration, longer stays or shorter stays. It really just depends. But the complexity, complexity, let me speak right, drives that resource consumption, right? Um, and so I just really think that you're you hit the nail on the head when you said like all these options are really driving that.

SPEAKER_02 6:33

Something that kind of stood out to me is just also the time period of this, right? So our higher acuity and our higher complexity uh measurements here with the patients. Is are we gonna see that decrease a little bit as you know this time goes on? And would that affect what we're looking at for numbers or not so much because we are having to care for an even older population because people are living longer? So, you know, we're coming out of that pandemic, which you know is kind of seen in these this date range. Will we see a different case and numbers if they look at it from 2026 to you know 2028, 2029? Um, yeah, so I don't know. That was just one thing that kind of was in the back of my head as I was reading all of it, just kind of like, hmm, I wonder if it'll look different as we continue, and would it really affect what we're seeing cost-wise and the gap wise? Um, but yeah, anyway, that's true.

SPEAKER_00 7:47

Well, I was just thinking as you were saying that, is just is it's like based on data, and data like anything can always be skewed. So for those of you out there, sometimes you're we we are taught to say that data can be black and white, and it can be, but also it can be manipulated in a way and presented in a way that supports whatever hypothesis you're putting forward. So, so Keegan, I I would be looking at, oh, I can just exclude, you know, maybe, you know, 2019, 2020, 2021, and every even 2022. And now let's see what these last 12 months look like versus uh versus maybe the longer time period.

SPEAKER_03 8:34

Well, it's interesting you say that though, because then you also think about the other the next disease, right? What's the next one that's coming? It may not be as big as COVID, but I mean, you have all of these other ones that like are isolating people or whatnot. So I it's that's pretty interesting. I didn't think of it that way, but that was that's a good point.

SPEAKER_00 8:55

Yeah, I mean, we would never skew data here at Blue Point.

SPEAKER_04 8:58

I'm just telling you that I didn't probably harm by that.

SPEAKER_01 9:05

No, but we do like to look at it at all angles or be able to do that and then you know, compare. You know, it's always good to be able to see trends. Um, yeah, the next question about hospital spending, how that we broke it down into all the categories of workforce, drugs, supplies, technology, equipment, and administrative activities. Um and which categories are growing the fastest, or actually, I think it's more interesting to see which ones are most predictable versus those that are harder to forecast, because kind of what we were just talking about, um, and even uh goes back to our previous episode of um here at Data Slayer when we talked about shortages and recalls.

SPEAKER_00 9:49

I always say that you know, the most unpredictable and largest from a cost perspective, I think that hits all at once, uh, is I think twofold. First, I think number one would be capital equipment. It I mean, you can have the most the best capital outlay for your facility for the next 10 years laid out, and then suddenly either maybe a reimbursement will change, and suddenly that new toy you just got is no longer being reimbursed, or maybe there's a new toy in town that your facility uh would be able to and and patients are asking for, or maybe it's becoming standard of care. Uh, so there's a lot that can change pretty quickly uh with especially in uh the surgery surgical uh areas, right? There's there's a lot of um advancement and innovation there, but then you have equipment that you know suddenly breaks and you need to replace it and you can't find a replacement um or you can't find a part to fix it. And uh is that even the right thing to do, right? Because you have to look at uh the age of the equipment and um in the functionality and the outcomes uh from that equipment. So I think that's just and just the dollar value associated with capital equipment is huge. Uh so that's a that's a large one. And then, you know, I always think that anything that you cannot control, uh, so government reimbursement. And so where you may have had a service line built around a particular procedure, uh, you know, because reimbursements were great, and then suddenly uh that payment is no longer available, or maybe the site of care has changed. So and you built it in the hospital, but now suddenly it's only uh equitable in the ambulatory surgery center, but you don't have one. And so and so how are you navigating that um you know that type of um you know CMS out of your control, right? Right, that that kind of environment. And I think having to react to that is is um could affect your bottom line for sure.

SPEAKER_03 12:17

You know, it's kind of funny to me, I think about this, like the challenge that the fastest growing expenses are the ones that hospitals really don't have that control over the technology growth. Like we don't have control over, oh, we're stopping here, we're not going any further, right? Yeah, because that's not advancing patient care. And so we don't have those, um, that control, which is kind of hard to uh navigate through, but really those are kind of the ones that are the hardest to forecast because you don't know what's gonna come. You don't know what's gonna change. Are you gonna have to go to the ambulatory um clinic instead? Um, how are you gonna be reimbursed? All of the biologics, whoa, you know, you know, how is that gonna be changed and how is that gonna be paid out? So it's kind of just one of those huh moments where you're like, well, it's interesting because I don't have a control over that. But those predictable ones, the labor costs, the I mean, that routine supply demand, like really kind of thinking that way, those are the most predictable, but the ones that we don't have control over are gonna be the hardest to forecast, anyways.

SPEAKER_00 13:27

What uh in the ambulatory surgery center, what could be a uh a great opportunity for the hospital and for the patients could be a loss, right, within the four walls of four walls of the hospital. And it has nothing to do with anything the hospital did. Uh, it's just a fact of you know, CMS decided or insurance companies decided that, hey, this is where that site of care should occur. And hopefully you have that uh in place already that you would be able to set that up and move that uh service line over uh so that you don't get hit with those um, you know, higher charges. And God forbid you don't want to also stop those uh procedures from happening, right?

SPEAKER_01 14:15

Well, one of the other interesting themes in the article is the concept of readiness. So maintaining the emergency departments, the critical care, the specialized staff, the equipment, um, and the surge capacity, regardless of the daily patient volume. Um that whole concept, like what does it really take to keep a hospital ready 24-7? I mean, it I think we just take it for granted in a sense, uh, without really thinking, or at least in my daily life, when there's a a busy night at in the emergency department at midnight, or when there's not, but you still have to have everything ready for that.

SPEAKER_03 14:54

Yeah, yeah. I take that as kind of the fire department, right? Like the fire department has to be ready all the time because you're not expected, they're not expected to show up until there's a fire, right? And so you think that the same way. Like even if you're gonna be slow that night, you still have to be ready because, and you don't say slow in the hospital, right? But you have to be ready because you've got to have that that those resources and everything else available because if there is an emergency, if there is something that happens, then you've got to um be able to react. And so you have to be proactive in that planning, which we've talked about multiple times, but proactive in that planning to be able to react in the moment.

SPEAKER_00 15:41

Also um depends on you know what tools you have and innovations you have available to you. I know there are a lot of uh forecasting tools that people use, and there's programs out there um to look that looks at the uh not only the geopolitical environment, the weather, etc., and and looks on historical usage, the socioeconomic, you know, population health, uh, you know, what what does that look like in the area of the hospital and tries to predict uh what's any kind of surges or what's coming in, and even they may not get that right, even if you employ that tool, right? And I think everyone's readiness is different, right? One hospital may have uh the luxury of having a warehouse, and so to them, it having some you know 96 hours of extra stock is nothing because that's just standard protocol. They have the room and they cycle all of those products into their facility, and then you have others that don't have the luxury of their own warehouse or um in and they have to figure out how we can make that uh a reality with the limited space that we have, and how can we uh better use the resources that uh we do have on site and um can serve when we need to? How do we make sure that we can do that? And then from a people standpoint too. Do you do you have a place where you can call in uh additional staffing, right? Or are you a rural hospital and guess what? There isn't anyone else to call in, right? Right. So you you have staff that may be stuck there, so it's it's uh yeah, I think everyone is a little bit different, but you have to be open certainly to figuring out what does ready mean for your facility in terms of supplies, drugs, and staffing.

SPEAKER_02 17:48

A little bit outside of this, you know, like we're talking about if one patient or multiple hundred patients arrive, you know, and keeping the hospital ready 24-7. Something that stood out to me in the article was the administration and like the additional hiring of those looking at, you know, the claims that get denied, or you know, and that also helps towards keeping the hospital open and ready 24-7 because they're behind the scenes, like, okay, this is how we're getting paid, and we have to spend hours looking at this stuff, you know. So it's even looking at those roles and how they keep it running and afloat for you know the patients to receive the care and the physicians to give the care.

SPEAKER_01 18:43

Yeah, the report also mentioned, and I was didn't think of it either, was cybersecurity. Like there's a whole now labor force and expenses on that side in order to keep all the data safe. That's a newer expense, you know, or that keeps growing as well as there's more threats. The forecasting tool before Anne-Marie, when you were mentioning that, I was thinking, is this where we want to mention does AI going to have any assistance in that? Yeah, okay.

SPEAKER_00 19:16

Oh, absolutely. If you think about it, the visibility that hospitals have now into the products that they purchase, and you know, like I said, from a geopolitical uh sense, and even from weather, natural, natural disasters, right? There's uh, you know, the the programs now understand where the raw raw materials are coming from. They understand where they're manufactured. Um, and so anything along that chain, even before it hits the hospital, uh, you know, AI can be used, and there's a lot of forecasting tools that look at it from that perspective to say, hey, there is uh weather upset in this area where uh rubber is harvested, right? And so now um what are the product lines that feed from that area of the world? And how is that going to affect uh eventually um, you know, what product lines, uh what companies, you know, what hospitals ultimately will feel the effect of that potential shortage. So it it's uh pretty interesting the volume of data that can be had. Now, is it 100% at this point? Maybe not, but it sure is a lot more than um data that we have access to now than before you would just find out when it didn't show up. And sometimes it is still like that, honestly, when it just doesn't show up. And then you're like, uh oh, we've got a problem.

SPEAKER_01 20:50

Right. And I bet those emergency moments always cost more.

SPEAKER_00 20:54

Yes, yes, it costs more, uh, not only from a uh pricing perspective, but it could also cost more from a patient safety, right? Think about getting a new uh something new, right? And now you have staff that haven't seen it before, maybe they're not as familiar with it, and depending on the product line, uh, so it could there could be some bad patient outcomes because of it being a substitute. Not everything is operates the same way from company to company.

SPEAKER_01 21:24

So all right then. So now that I mentioned AI and we're talking about the future, if these trends continue with the the growth in outpatient care, increasing complexity, advances in medical technology, and rising pharmaceutical costs, what does the future hospital look like? Will it they become more specialized? Uh, or do you think services are likely to move outside the hospital in order to alleviate this? What are your thoughts?

SPEAKER_00 21:55

I think you know, if you if you continue to move the Patients that can go to ambulatory or outpatient, you continue to siphon those away from the hospital, then what is left is going to be the sickest of the sick. But that is kind of how it should be anyway, right? Because if you think about it, um, you know, patient care, they always, you know, home care is is is huge right now. Patients do best when they're in their own home. I know I've just I will speak from it not from a nurse or from I will speak from it from my parents' perspective. They do best in their house, in their home, right? They've been there for however many years at this point in time, right? It's it's best for them to be home, not at a facility. Um, you know, and if they need someone to come in, someone comes in to care for them in their home. Uh, you know, I think that getting them to home is is great from a safety perspective in most cases. In most cases, it's also great to um get them back to their life and to um, you know, that's where they're comfortable. Um, and it also decreases the amount of people that are coming in and out, right? So there's that less exposure. But I think uh from a facility standpoint, that just means that, you know, the people that are gonna coming in, that are coming in seeking help at a hospital, they are gonna be very sick. And from a specialized perspective, I think we're already sort of seeing that, right? There are hospitals, think about the hospitals in your area, where some are really uh centers of excellence for orthopedics, right? And some don't even have uh labor and delivery, right? Which is another specialty if you think about it. Um, you know, really it's sort of almost heading in that direction naturally. Um, you know, and I and I think that a lot of the patients that are coming in, I think there does need to be some navigation there and some education on um maybe in a little bit of transparency on what hospital should I go to, or should I go to an urgent care, or should I go to um what level of care should I should this illness bring me to? I mean, and I think that that's going to be a harder one because hospitals are never gonna turn away patients, um, but at least I hope not. Um, so they're gonna have to be prepared to not only handle the, you know, some of some of that easier, uh, easier, not as sick patients, but they'll but the but the very sick patients. And that's I I think that's what CMS is really hoping to get to is those who are admitted, they really need that acute care, um, that round the clock specialized care. And so um, and really push everything else to the um outpatient arena where they're being discharged in it, you know, in and out.

SPEAKER_03 25:11

Sarah Keegan, you have any thoughts on the futures of stole my words. But well, I just think, you know, like even with that, like we talked about the predictive analytics and all of this. Um, you can't predict when a patient's gonna show up and what they're going to have. But if you have the sickest of the sick, it's gonna be very important, right, to have that standardized approach and to know what you're gonna use. So plug for blue point, the utilization management piece of that is going to be something that we absolutely need, right? Um, we need to have that evidence-based practice, but we also need to have that evidence-based utilization and standardization across the board. And so for hospitals with the demand of the sickest patients, really need to focus on that to where they can maintain and save the money that's needed to continually keep the doors open.

SPEAKER_01 26:17

Totally agree. I mean, it does with the sicker patients needing consuming more products, and then, but then the price per unit is going up. So that just kind of all feeds into again utilization being how can we control these costs? And yeah.

SPEAKER_03 26:37

I mean, and I don't get me wrong, I think it's great because I absolutely love being able to go and have, let's say, a day procedure, right? To where you're not stuck in the hospital. Because I sure don't want to be stuck in the hospital, but I don't have to be, right? Um, and I think that like with Anne Marie, your parents, like having that same routine at being at home is so much better for you to get better because you're not being continually poked, prodded, woken up, all the noises are unfamiliar and all of that. And so driving those patients to where they can get in, get out quickly, be treated for what they need, but then the patients that absolutely need to be in the hospital are the ones that are there and being treated, and then all of the products that we're using on them as well are being looked at that way.

SPEAKER_00 27:30

So I'm also going to throw in a wrench in this conversation just because I feel like it. The you know, I you think about the facilities and the hospital's role in a patient's health care. But then let's take even a step back of how the patients got there, right? Let's look at primary care. We I think from a hospital perspective, not only do we need to be better at connecting to the next phase of care. So whether it's rehab skilled nursing, but we also need to be better about connecting to the to the preemptive um issues that or preemptive experiences of the patients that show up at the at the hospital, right? Obviously, I'm not talking about you know, those that you know go into car accidents or God forbid, have uh, you know, devastating uh something devastating happen. But those patients with the chronic diseases that ultimately end up in the hospital, you know, how can we work better with primary care? Um, I I think that that's a big miss, you know, um, and it's a lot of pressure on primary care, but I think that we need to also do a better job of of aligning with them. And how can we um educate the patients on being, you know, on preventing some of these illnesses that we're seeing the sometimes devastating results in the hospital, right? That that CO, that lifelong smoker, that that uh lifelong uncontrolled diabetic patient, that you know, how can we um work and collaborate better with primary to keep those patients um healthy? So yeah, we always talk about collaborating ahead after the patient sees the hospital, but we need to start collaborating before the patient even hits the hospital. It's a good insight.

SPEAKER_01 29:33

So I had one kind of question to sum up the entire everything we've been talking about here, and that is if we could slay one misconception about hospital costs that you think policy policymakers, payers, or the public have, what would it be? Like what is a misconception you think that they have?

SPEAKER_00 29:55

That hospitals are making money hand over fist.

SPEAKER_03 29:59

Yeah, yep.

SPEAKER_00 30:00

And while there may be some where you can view their um stock prices, right? And that is not the norm for most hospitals, that oftentimes the reimbursement on a procedure is often thousands hundreds or thousands less than the cost that the hospital outlaid uh in terms of the space, the staffing, uh, you know, and um and the products used. So um I think that that's a big misconception.

SPEAKER_01 30:41

Yeah, I think the article showed a pattern where the most resource-intensive around the clock services are the ones that are reimbursed at lower relative levels. So yeah, yeah. That's a wrap on this episode. I will uh again have that link to the article because there were a lot of other numbers and or other data um in there as well. That's interesting. Um, so I'll have that for any listeners out there that would like to read about that. Uh, thank you all for participating today. Um, make sure you to like and subscribe wherever you are enjoying this episode so that you'll be informed when our next episode airs. And for more information, you can visit our website at bluepoints.com or any links in the podcast or video description. And remember, best practice doesn't have to cost more when you slay your data with Blue Point. Until next time. Bye. Bye.

SPEAKER_00 31:41

Yes, Smokey. Oh my god. Hi, Smokey. Yeah, hi.

SPEAKER_03 31:48

Oh, mommy, woke me up. I don't like this. Oh my god, he's so cute. He's so precious. He can already sit. Oh gosh. Oh.