A Publication of WTVP

Over the past five years, hospitals across the country have begun to experience material increases in demand for health care services and have experienced a corresponding strain on their current infrastructures. Many factors are affecting the growing demand for health care services. For hospitals, these factors take the form of a greater number of hospital admissions and more ambulatory care procedures.

The aging of the population is one key driver of the increased demand over the past few years and is projected to continue to increase demand for health care services. The average age of a baby boomer was 45 years old in 2000 and will be 55 by 2010. The inpatient admission rate for a 55-year-old is approximately 40 percent greater than the overall admission rate for the 45-year-old. Nationally the 55 to 64 age cohort is expected to increase approximately 25 percent, and with it, increased demand for health care services. In the central Illinois market, that age cohort is expected to increase 30 percent from 2000 levels.

In addition to the aging of the population, it’s also evident another key reason for the upward trend in inpatient admission is increased demand from the patient, due to emerging technology and/or societal health issues. Obesity and diabetes are still a major health risk, and the incidence rates for these diseases, which have a dramatic impact on overall health care demand, are growing.

According to the American Diabetes Association, in 2002 the nearly 17 million people who have this disease incurred more than $90 billion in direct medical costs and $40 billion in indirect costs such as disability, work loss, and premature mortality. Typical complications of diabetes include heart disease, stroke, high blood pressure, kidney disease, amputations, and blindness—all of which need medical attention, and in many cases, lots of health care resources.

Advances in technology have improved patient outcomes and enhanced patient convenience, though they’ve proven to not reduce utilization. As technology continues to advance, this trend will likely continue as well. National data sources and our own analysis indicate demand for inpatient and outpatient services will continue to grow, despite a relatively flat population growth overall in central Illinois. The Health Care Advisory Board has predicted an increase of 10 to 15 percent inpatient growth nationally, with approximately half of this increase due to aging.

Given the increase in demand for services, hospitals will continue to assess their ability to expand to meet the communities’ needs. The capital need to fund this re-investment is increasingly scarce. Hospital average revenue per case has averaged 2 to 3 percent lower for multiple years than the average percent increase in the cost per case. In some settings, increased competition from non-traditional providers, which attract the better paying patients, exacerbates this problem for the tertiary and community hospitals. These kinds of stress points have resulted in shrinking net income that’s needed to support the re-investment.

The demand for hospital services is expected to continue to grow, and we believe central Illinois is no different from the rest of the country. Given the economic factors impacting hospitals today, the challenge for all—employers, payors, physicians, and hospitals—will be to determine how to work together to address this increased demand. IBI