Case records of inpatients in a hospital in Tangshan in 2007 and 2008 are chosen for factor analysis. This paper aims at finding the latent factors influencing inpatients' medical expense. By analysing the factors which controlling and influencing inpatients' medical expense, the practical value of factor analysis in the study of medical expense is evaluated, and an analysis method in line with the structure of hospital medical expenses and its characteristics is tentatively explored. The paper comes to the conclusion that the factor of basic expense, the operation factor and the examination factor are the common factors which control and influence inpantients' medical expense. It is implied that factor analysis is a proper method used in research of hospital medical expenses.