Hospitals Want to Bring Costs and Prices Down. Let’s Attack the Root Causes of the Problem.

We’re all hearing a lot about affordability these days. In these polarized times, one of the few things most of us can agree on is that too many things are too expensive.

John Hawkins, President/CEO, Texas Hospital Association — Hawkins

When people get specific about the things they pay too much for, health care expenses are as likely to come up as just about anything. Naturally, many of those complaints are tied to what people are paying for hospital care.

The Texas Hospital Association not only recognizes these frustrations – we share them, too. Because the sticker shock patients may receive after a hospital visit is a ripple effect of repeated lightning bolts to the cost-driving centers of our health care system – complex factors and hard realities continuously spiking the costs that our hospitals pay for goods, services and labor.

Our hospitals hate it as much as Texas patients do. As an industry, we desperately want to bring our own costs down, which in turn will bring down consumer costs. That’s why – ahead of another pivotal midterm election this fall and the Texas Legislature’s 2027 session – we’re working to educate both policymakers and the public on the drivers of hospital care. THA’s new explainer, What’s Driving the Cost of Hospital Care?, offers a primer on many of these factors to provide a baseline for this important discussion.

A web of moving and volatile parts determines our facilities’ costs for labor, supplies, equipment and much more. Let’s start with labor, which accounts for more than half of our costs – 56%, to be exact, according to the American Hospital Association’s April 2025 Cost of Caring report. Worker burnout – before, during and since the COVID-19 pandemic – has taken a nearly relentless toll on our employee rosters at facilities all over our state and in the United States. Recruiting hospital workers in this era requires offering competitive wages – undoubtedly a big reason why, for example, advertised salaries for registered nurses have outpaced inflation by more than 25% over the previous four years.

While workforce remains the biggest line item on our facilities’ outlay, the cost of drugs and supplies is growing faster than any other facet of their costs. With prescription drug pricing constantly highlighted by media and policymakers as a pain point, it probably won’t be surprising to learn that the median annual launch price for 154 new drugs increased by more than 50% between 2022 and 2024, according to data from the Institute for Clinical and Economic Review. And in the year between November 2024 and November 2025, according to Kaufman Hall, overall drug spend increased by 11%.

Other persistent challenges exacerbate the problem. Government insurance payers such as Medicare and Medicaid continue to reimburse providers well below the cost of care, with Medicare typically reimbursing a little more than 80 cents on the dollar. Meanwhile, insurer prior authorization requirements continue to eat up administrative time, energy and costs, with Medicare Advantage – the version of Medicare administered by private health plans – serving as one area where preauthorization has become particularly onerous. And the complexities inherent in our medical supply chains – with both domestic and international manufacturers providing medical devices, safety equipment and more – represent another area where the cost of care rests outside our facilities’ control.

All of these factors are, unfortunately, conspiring to propel hospital and health care costs upward – and all of them should be part of the calculus when policymakers and industry groups look at ways to reverse that trend. THA stands ready to help illuminate the path to a future where receiving care is neither punitively expensive nor unattainable. If we and other stakeholders can agree on ways to attack these root causes, we’ll be off to a running start.