Trends in hospital administrative costs: urban-rural disparities, barriers, and reduction strategies

Abstract

Introduction: Administrative expenses represent a growing portion of hospital costs in the United States. However, the distribution of these costs remains underexamined. This study examines trends in administrative and general (A&G) spending among hospitals and evaluates the broader impact on expenses.

Methods: We conducted a sequential explanatory mixed methods study, analyzing Medicare cost report data from 2011 to 2022 for all US short-term acute care hospitals. Quantitative analysis focused on A&G salary expenses and total A&G costs as a percentage of overall hospital expenditures. Findings were supplemented with qualitative interviews with hospital executives to contextualize observed trends.

Results: While urban hospitals reported higher total A&G expenses, rural hospitals consistently allocated a larger proportion of spending to A&G salaries, 18% more on average. Across all hospital types, A&G salary costs declined as a share of total expenses while total administrative costs increased, reflecting a shift toward nonsalary drivers.

Conclusions: Rising administrative costs are primarily driven by systemic and structural demands, rather than salaries. Addressing these challenges will require targeted policy responses that simplify processes and support the unique needs of hospitals with limited resources, particularly in rural communities. Such reforms may enhance financial resilience and promote sustainable access to care.

Keywords: A&G; hospital administrative costs; salary expenses.

Figure 1.

Average annual A&G salary expenses as a percent of total expenses by rurality, 2011-2022. Source: Authors’ analysis of Medicare Hospital Cost Reports from 2011 to 2022, merged with American Hospital Association Annual Survey data (2017-2021) and the AHRQ Compendium (2016-2022). Notes: The percentages represent nominal values without adjustment, offering a baseline comparison of salary expense distribution across rural and urban hospitals.

Figure 2.

Adjusted total A&G salary expenses as a percent of total expenses, by rurality, 2011-2022. Source: Authors’ analysis of Medicare Hospital Cost Reports from 2011 to 2022, merged with American Hospital Association Annual Survey data (2017-2021) and the AHRQ Compendium (2016-2022). Notes: The trends depicted regression-adjusted insights into the evolution of A&G salary expenditures across hospitals, highlighting variations by key characteristics such as rurality.