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Feature Data Briefing

Hospitals: what do they do and how much does it cost?

BMJ 2012; 344 doi: (Published 14 March 2012) Cite this as: BMJ 2012;344:e1759
  1. John Appleby, chief economist
  1. 1King’s Fund, London W1G 0AN, UK
  1. j.appleby{at}

John Appleby takes a look at where the NHS budget goes

The death of the hospital has been widely predicted—indeed advocated—since (probably) moments after Rahere (courtier, jester, and clergyman) flung open the doors of St Bartholomew’s in 1123. But hospitals are survivors: in Barts’ case, of the Great Fire of London and the dissolution of the monasteries.1 And there are good practical reasons for concentrating some types of healthcare service in one place: it’s generally a more efficient use of expensive resources, produces better health outcomes, and acts as a physical focus for research.

To survive, hospitals have also had to change. Advances in clinical techniques and better community and home care have led to shorter hospital stays and consequently fewer beds. For example, the number of general and acute beds in England fell by nearly a quarter between 2000-1 and 2011-12, from just under 136 000 to around 105 000 2; and, partly as a result of mergers, there are fewer hospital sites and organisational entities.

Now, with tight budgets and efforts to improve productivity, pressure is mounting on hospitals to again rethink their purpose and scope. In the current financial climate hospitals can be increasingly seen as expensive bits of estate doing expensive things to patients that could be better done somewhere else (and more cheaply). But the question is not (and never has been) whether hospitals are needed but, rather, what types of hospital, how big, where located, doing what to whom, and how often?

But what do hospitals do now?

The activities and costs of hospitals could be described in many ways. One view is provided for English NHS hospitals by detailed costs of activities supplied by the National Reference Costs database (NRC).3 The database covers activities at a very detailed level—down to around 2500 separate procedures and activities, from hip operations to audiology tests. In 2009-10, around £44.3bn (€53bn; $70bn) of spending (just over 40% of the total NHS budget) was recorded by the NRC database (figure).


Spending on hospital services in English NHS, 2009-10 (£bn).3 The National Reference Costs database provides spending data for non-overlapping categories—for example, the inpatient bubble (£17.3bn) does not include the inpatient spend for mental health (£2bn). However, the way the NRC data is constructed does not allow completely consistent aggregation of the data into categories such as inpatients and outpatients

Perhaps as expected, most spending on hospital services is devoted to inpatient and outpatient services. Add in day case activities and these services account for two thirds of the NHS spend on hospitals. The highest spending area is emergency care—a total of nearly £14bn for emergency treatment and non-elective admissions.

At a more detailed level, the figures from the NRC database make it clear that, although hospitals are doing more varied things, it’s often a relatively small group of procedures and interventions that account for large amounts of spending. The top 10 elective inpatient procedures (out of 1235) by spending account for nearly 20% of total spend in this area. Knee and hip replacements top the list for elective work, but the most commonly recorded “intervention” is “planned procedure not carried out”—a snip at an average cost of £729.


Cite this as: BMJ 2012;344:e1759


  • Competing interests: The author has completed the ICJME unified disclosure form at (available on request from the corresponding author) and declares no support from any organisation for the submitted work; no financial relationships with any organisation that might have an interest in the submitted work in the previous three years; and no other relationships or activities that could appear to have influenced the submitted work.

  • Provenance and peer review: Commissioned; not externally peer reviewed.

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