Direct-to-consumer (DTC) health care advertising is big business: In 2016, it was a $10 billion enterprise with about $2 billion for hospital ads. In 2025, DTC health care spending totaled $25 billion. Most ads promote prescription drugs, positively affecting health for some patients and finances for drug companies.

Now we know how hospital ads impact care and spending, based on a new study by LDI Senior Fellows Atul Gupta, Abby Alpert, and colleagues. They reveal a cause-and-effect relationship, with ads triggering more emergency care, admissions, and Medicare spending.

“People have studied the effect of drug ads extensively,” Gupta said. “But few have studied hospital ads, even though they’re number two in health care ad spending.”

To make their discoveries, the researchers relied on an unusual research tool: the hot 2016 election.

Donald Trump, Hillary Clinton, and Bernie Sanders Shock the Ad Market

Drug ads target patients broadly, so they can be studied using national data, but hospitals advertise locally. To investigate regional ad effects, the researchers used an innovation first applied to pharmaceutical ads that relies on the “shock” of election commercials flooding ad markets and eliminating space for health care ads.

The 2015 campaign season included Donald Trump’s upset win for the Republican nomination and Hillary Clinton and Bernie Sanders stoking Democratic interest throughout the primaries. Billions of dollars went to election-related commercials, which crowded out other advertisers—especially in highly contested ad markets.

Gupta, Alpert, and colleagues exploited this natural experiment that forced hospitals to run fewer television commercials, which were the most common type of health care advertising during the study period. They used data from the Nielsen “Ad Intel” database, reported as ad exposures, and traditional Medicare claims for the lower 48 states and Hawaii from January 2015 through November 2016. Their study examined seven types of care and costs: inpatient stays, stays originating from the emergency department (ED), ED visits, outpatient visits, and Medicare inpatient, ED, and outpatient spending.

How Ads Drive Inpatient Stays — And What That Means for Patients

As hospital advertising goes, so goes utilization and spending, the researchers found: For a 10% increase in a regional market’s hospital ads (about 150 more ad impressions), the rate of hospital use increased by nine hospital admissions per 100,000 beneficiaries.

That rise in utilization would cost an estimated $3.3 million in Medicare spending per year for the average regional ad market. Actual costs would vary widely, because ad exposures for the 33 million traditional Medicare beneficiaries differ by region, and market sizes range from about 8 million households in New York City to about 4,000 in Glendive, Montana.

Gupta and colleagues uncovered a possible mechanism by which ads lead to hospitalizations. Admissions from the ED were particularly sensitive to advertising, so the researchers hypothesized that ads prompt people to seek care at the ED rather than in primary or urgent care settings. More emergency room visits equal more hospitalizations.

For-profit hospitals saw larger increases in patient volumes and Medicare payments, Gupta said, but ads did not push people to higher- or lower-quality hospitals, as assessed using readmission rates.

“It seems like patients are not worse off,” Gupta said. “That’s the most important thing.”

The study cannot determine whether the additional patients at hospitals that ran ads came from stealing patients from competitors or were patients who otherwise would not have visited a hospital. Nonetheless, the results affect taxpayers, Gupta says, because Medicare is the largest single funder of hospitals. Spending on ads to recruit patients creates a cycle in which some public money is used on advertising to increase patient volume, generating revenue to fund more ads.

“We’re not saying it’s a waste,” Gupta said. “It’s just useful for policymakers to be aware of it.” In fact, more hospital use could benefit patients, based on Alpert and colleagues’ work showing that DTC pharmaceutical ads encourage physician-patient engagement that can lead to treatment of previously undiagnosed conditions.

The study cannot estimate the impact of ads on people without insurance or with plans such as Medicare Advantage that require in-network care or prior authorization. However, because ads might influence patients with non-Medicare plans, and hospitals also advertise with billboards, transportation posters, and social media, Gupta said, “You could argue that what we find is an understatement, a lower bound.”

Practical information for health economists, analysts, and policymakers include the reported elasticity, or responsiveness, of hospital use and spending to changes in advertising volume. Elasticities are percentages rather than patient numbers or dollar values, so analysts can easily apply them to data from any region to predict the impact of hospital advertising. For example, Gupta said, the study found an elasticity of patient volume to advertising of 6%. “That means if advertising impressions go up by 100, you’ll see 6 more patients in hospitals,” he said. The 5% elasticity of spending to advertising means spending should rise proportionally.

With the study illustrating how to use market-level data to determine how ads affect health care, Gupta hopes more researchers will investigate how marketing affects utilization, spending and particularly care quality.

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The study, “Does Advertising Expand the Market for Hospital Services? Evidence From Medicare” was published in January 2026 as National Bureau of Economic Research Working Paper 34657. Authors include Abby Alpert, Atul Gupta, Michael R. Richards, Penn doctoral graduate Sarah D. Schutz, and Christopher M. Whaley.

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