McKinsey & Company LogoMcKinsey on Healthcare
Sign in
Stock hero image. Not critical for content.
Provider insights

The impact of expanded coverage on hospital utilization

Filed under: Hospitals, Medicaid, Reform, Strategy

Hospital utilization is under siege. Despite population growth and demographic shifts (such as the gradual increase in the number of elderly patients), hospitals have faced declining growth in inpatient utilization since 2005, driven largely by the ongoing shift of many procedures to the outpatient setting.1 Although outpatient utilization has been a source of revenue for many acute hospitals, most of these facilities have found it exceedingly difficult to achieve organic growth profitably in the current environment.

In the near future, however, a new force could drive healthcare utilization upward: the onetime effect of up to 30 million people gaining insurance coverage for the first time under healthcare reform.2 The newly insured will fall into two categories: those covered under the expanded Medicaid program and those who purchase commercial plans on the exchanges (whether in response to the individual mandate, market reforms, or new subsidies).

A number of previous studies have estimated how insurance coverage can affect healthcare utilization. We have found, though, that these studies have two significant shortcomings: they reached widely varying estimates of projected demand, and their results are difficult to apply in a local market context.

We therefore decided to conduct original research and supplement it with a review of the available literature on hospital utilization. As part of this process, we developed projections to estimate growth in inpatient services, emergency room (ER) care, and outpatient elective procedures. Although we aggregated the data to reveal national patterns, we also examined the potential for regional differences. This paper describes our data-driven approach and the literature review that informed our perspectives. In addition, it presents the key findings of our research, their significance at the market level, and the strategic implications for health systems.

(photo credit: Kaptain Kobold)

Download full article
Also of Interest