5 takeaways from our provider volume forecast updates

Takeaway #1: The pandemic effectively put a two-year pause on health system volume growth—recovery beyond pre-pandemic baselines will be slowed by the pandemic’s ripple effects, including a tight labor market and accelerated site-of-care shifts.

As detailed in our recent blog, volume in 2021 had approached, but not exceeded, pre-pandemic levels for most hospital-based volume categories, including emergency department visits, inpatient admissions, and inpatient surgeries. In 2022 and beyond, many Covid-19 related volume suppression factors will resolve, including care avoidance for safety concerns and elective surgery postponements due to capacity limitations. But ripple effects will continue to suppress volumes and slow recovery compared to expectations pre-pandemic. For instance, nationwide ambulatory care jobs were down 5.1% and hospital jobs were down 4.1% at the end of 2021 compared to where employment would have been without a pandemic, according to one report.

Despite near-term headwinds, we expect outpatient volume to increase 7.3% by 2026 and 14.9% by 2031. Inpatient volume is expected to decline -1.0% by 2026 and then grow 0.6% by 2031.

Takeaway #2: Despite declining birth rates and nearly one million Covid-19 fatalities, demographic trends, including population aging and immigration, is driving positive long-term demand for health care services.

The U.S. population is expected to grow from 333 million today to 355 million by 2030. The population is expected to grow older too. By 2031, nearly 20 million baby boomers will be added to the Medicare rolls and the oldest among them will surpass 85 years of age. These demographic trends will create ample demand for health care services long-term and offset other factors dampening utilization, including cost-sharing obligations in benefit designs, utilization management tactics, and value-based payment reforms.

Takeaway #3: The number of patients with complications and comorbidities will rise as the population ages and chronic diseases become more prevalent.

Prevalence of chronic disease has been steadily rising due to an aging population and due to higher rates of chronic disease in younger populations compared to their forbearers. One-third of millennials have a health condition that will reduce their life expectancy, and it is well documented that young adults are suffering with greater rates of psychological distress. The pandemic exacerbated this trend. Social isolation increased mental health and substance abuse issues. Patients who had delayed care are presenting with more advanced-stage illness. And a portion of patients continue to struggle with prolonged clinical complications from Covid-19 infection. For these reasons, we expect inpatient cases for patients with complications or comorbidities to rise by 7.1% across five years—even though overall inpatient volume is expected to decline by -1% in the same period.

Takeaway #4: Hospitals will experience sustained declines in inpatient surgical volume due to outpatient care migration—especially for orthopedic and cardiovascular procedures.

In 2021, CMS reinstated the inpatient only list and removed 255 procedures from the ASC payable list. Despite this change, key high-volume surgeries are still eligible for outpatient reimbursement, including total knee arthroplasty, total hip arthroplasty and some percutaneous coronary interventions. These recent changes contribute to strong outpatient growth expectations, including a near 50% increase in the number of joint replacements performed outpatient by 2026.

Takeaway #5: Freestanding sites of care will grow at quicker rates than the hospital outpatient department.

The hospital outpatient department is expected to grow volume by 3.4% by 2026. Ambulatory surgery centers and physician office settings are expected to grow much faster—6.2% and 8.2%, respectively. These sites will continue to grow due to technological advancements enabling same-day procedures, financial incentives promoting the use of low-cost ambulatory sites, and increased investment from physician groups and ambulatory disruptors.

Advisory Board’s baseline volumes are estimated from national-level, per-1,000 utilization rates derived from several data sources, including Medicare data from CMS, national sample data from AHRQ, and other proprietary commercial claim sets. Our service line experts then project changes to those utilization rates across five and ten years to arrive at our national forecasting model. Forecasts are localized by applying demographic growth projections and age and sex distributions for the market of interest.

This year, we continued to make improvements to our forecasting methodology. Most notably, we have based this year’s forecasts on historical trends in national utilization rates from an expanded claims database. The database now includes more outpatient data and claims from commercially insured populations. Our service line experts then adjust forecasts based on qualitative factors not represented in historical trends, such as: payment updates, insurance benefit design trends, technological innovations, and care management initiatives.

Our team will continue to monitor the evolution of qualitative factors shaping demand in 2022, including:

• Price inflation and the resulting impact on consumer willingness to seek out care
• Labor market shortages and resulting limitations to provider capacity
• Demand caused by new Covid-19 infections, as well as persistence of demand created by Covid-19 “long-haulers”
• Changes to CMS payment and waiver programs, and resulting site-of-care shifts

Updates will be made to our forecasting model to account for major disruptions across the year if necessary. For additional information on our data sources and forecasting methodology, please refer to our Market Scenario Planner FAQs located here.