Why are the major cost controls by the states and the federal government focused primarily on hospitals?
Please refer to my file response (alos below). In my response, I have underlined the main reasons for this phenomena. I hope this helps and take care.
1. "Why are the major cost controls by the states and the federal government focused primarily on hospitals?"
Why? The reason for cost controls in hospitals has to do with reform, and to costs down, provide quality care and offer universal access. The focus is primarily is on hospitals because that is where the federal and state governments, both in US and Canada, spend the most money and, thus, need reform:
"As in Canada, hospitals represent the single largest category of health care spending in the United States. The organization of the American hospital sector is, however, one of the most complex in the world with a heterogeneous collection of hospitals, payers and funding methods.  In 1998, 28% of hospitals were classified as public (state or local government) hospitals, 58% as private, not-for-profit hospitals and 14% as private for-profit hospitals.  Financing for hospital services comes from a number of private insurers, out-of-pocket costs and from the Medicaid and Medicare programs. 
In 1983, the Health Care Financing Administration (now Centers for Medicare and Medicaid Services) introduced the Prospective Payment System (PPS), under which hospitals were paid according to a case mix-based approach, the Diagnostic Related Groups (DRGs) classification. Eighty-one percent of hospitals are now remunerated using the DRG system.  The rates that are paid to hospitals are based on the average costs of a specific treatment and are independent of a patient's actual length of stay in hospital.  These rates may be adjusted upward if a hospital services a population with a disproportionately high number of low-income residents. While most hospitals use a common rate-setting methodology, actual rates are determined by each individual state. All rates are reviewed annually by the United States Congress. Private insurance companies and managed care plans are free to set their own ...
This solution explains why the major cost controls by the states and the federal government are focused primarily on hospitals.