Annual changes in hospital medical supply costs

Medical supply costs are a major component of a hospital’s budget, second only to labor costs and administrative expenses. These costs have been increasing in recent years due rising prices, the need to keep pace with advancements in medical technology, and other factors.

In 2023, U.S. hospitals reported over $57 billion in combined medical and surgical supply costs, averaging $15.4 million per hospital, according to data from Definitive Healthcare. This figure, sourced from the Medicare Cost Report, includes the costs of medical devices, implantable devices, and pharmaceuticals billed to patients, excluding overhead costs.

In this post, we look at supply costs from over 3,000 U.S. hospitals since 2017.

Medical and surgical supply costs increased by 6.5% on average since 2017

Medical and surgical supply costs have been steadily increasing in recent years. From 2017 to 2023, these costs rose from $30.2 billion to $57 billion, reflecting an average annual increase of approximately 6.5%. This increase is driven by factors such as rising pharmaceutical costs, physician preference item spending, and ongoing challenges in the medical supply chain. Items like artificial joints, robotic surgery systems, and advanced imaging technology often rely on complex and unpredictable global supply chains.

As technology and medical practices continue to evolve, hospitals face the ongoing need to acquire and update their supplies to meet clinical care standards. This includes the substantial upfront costs of critical equipment, as well as ongoing expenses for maintenance, upgrades, and staff training. For example, cardiac magnetic resonance imaging machines, essential for diagnosing heart conditions, can cost hospitals millions.

Total hospital supply expense averages more than $43 million

Total hospital supply expenses average over $43 million, with medical and surgical supplies representing more than one-third of these costs — approximately 35% in 2023. The total medical and surgical supply costs, as tracked in HospitalView, include not only the costs of medical and surgical supplies but also overhead expenses, such as buildings, fixtures, maintenance, and plant operations.

Children’s hospitals have the highest medical and surgical supply costs

There’s significant variation in the average medical and surgical supply costs across different types of hospitals, highlighting the differences in costs based on the level and complexity of care provided.

Children’s hospitals and short-term acute care hospitals have higher costs, with children’s hospitals averaging around $44.14 million and short-term acute care hospitals around $29.85 million. This may be due to the higher complexity of care and advanced medical technologies often used in these settings.

On the other hand, critical access hospitals, long-term acute care hospitals, and rehabilitation hospitals report much lower costs, reflecting that these facilities may treat less acute or specialized cases, requiring fewer or less expensive supplies.

Religious non-medical healthcare institutions stand out with an unusually low cost of $15,930, which likely reflects its non-medical focus, indicating minimal use of medical and surgical supplies.

Medical and surgical supply costs by hospital type

Fig. 1 Data is from the Definitive Healthcare HospitalView product and aggregated from the most recent 12-month interval tracked in our database. Accessed January 2025.

Northeastern hospitals have highest medical and surgical supply costs

The Northeast and Southeast regions have the highest average costs, at approximately $17.25 million and $17.52 million, respectively. This could be attributed to factors such as higher population density, advanced healthcare facilities, and a greater concentration of specialized medical services in these regions.

The Midwest and West regions have similar average supply costs, both around $14.57 million, suggesting that healthcare costs in these regions may be more moderate compared to the Northeast and Southeast. These regions might have a balance of urban and rural healthcare needs, with fewer extremely high-cost medical centers compared to regions like the Northeast.

The Southwest region shows the lowest average medical and surgical supply costs among the U.S. regions, at $13.43 million. This could be due to a smaller population, fewer healthcare networks, and other factors.

Medical and surgical supply costs by hospital region

Fig. 2Data is from the Definitive Healthcare HospitalView product and aggregated from the most recent 12-month interval tracked in our database. Accessed January 2025.

Connecticut, North Carolina, and Florida hospitals have the highest average supply costs

There is also variation in costs by state, which could be influenced by factors such as population, healthcare infrastructure, regional differences in care, and the complexity of medical services offered.

States like Connecticut, Florida, and North Carolina have relatively high average supply costs, with Connecticut at $45.19 million, North Carolina at $34.34 million, and Florida at $27.04 million. In contrast, smaller or less densely populated states such as Hawaii (HI), with an average of just $65,162, and Delaware, with an average of $1.12 million, show much lower supply costs.

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