Leading social capital into the medical and health system reform is the trend of reform and direction of development at preasent. Carrying out cost management in public hosptal is indispensable to cope with the market competition and the medical and health system reform, which is conducive to allocate health resources rationally, optimise process of services, realize cost control, and promote the economic and social benefits of public hospital. Taking the Annual Report of Shandong Province Health Finance as date source, the author analyzes the current situation and reasons of cost management of the hospitals in health and family planning department in Shandong Province, and puts forward some suggestions.