1. Share of Hospital Cost Growth Explained by Various Factors 2001-2006 Higher costs of caring are a bigger factor in spending growth than increased demand for care. Source: AHA analysis of American Hospital Association Annual Survey data, 2001-2006, for community hospitals; Centers for Medicare and Medicaid Services, Office of the Actuary; Intensity and Other 8% Change in Number of Services Provided 30% Costs of Goods and Services Purchased 62%

2. Share of Cost Growth Explained by Key Components of Hospital Costs 2001-2006 All Other – 12% Prescription Drugs – 4% Prof. Liability Insurance – 2% Professional Fees – 3% Wages & Salaries/Employee Benefits – 41% Growth in labor costs is the most important single factor driving up the cost of hospital care. Costs of Goods and Services Purchased 62% Source: AHA analysis of American Hospital Association Annual Survey data, 2001-2006, for community hospitals; Centers for Medicare and Medicaid Services, Office of the Actuary;

3. Factors Influencing the Number of Services Provided 2001-2006 Both a growing population and more hospital use per person have led to higher service volume. Number of Services Provided 30% Population Growth 13% Use Rates 17% Source: AHA analysis of American Hospital Association Annual Survey data, 2001-2006, for community hospitals; Centers for Medicare and Medicaid Services, Office of the Actuary;