Received: 28 January 2020 - Revised: 7 July 2020 - Accepted: 31 August 2020 DOI: 10.1002/hec.4157 RESEARCH ARTICLE The effect of Affordable Care Act Medicaid expansion on hospital revenue Ali Moghtaderi 1 | Jesse Pines 2 | Mark Zocchi 3 | Bernard Black 4 1 Milken Institute School of Public Health, George Washington University, Washington, District of Columbia, USA 2 US Acute Care Solutions, Canton, Ohio, USA 3 Heller School for Social Policy and Management, Brandeis University, Waltham, Massachusetts, USA 4 Law School, Northwestern University, Chicago, Illinois, USA Correspondence Ali Moghtaderi, Milken Institute School of Public Health, George Washington University, 950 New Hampshire Ave NW Offce 609, Washington, DC 20052, USA. Email: Moghtaderi@gwu.edu Abstract Prior research has found that in states which expanded Medicaid under the Affordable Care Act, hospital Medicaid revenue rose sharply, and uncom- pensated care costs fell sharply, relative to hospitals in nonexpansion states. This suggests that Medicaid expansion may have been a boon for hospital revenue. We conduct a difference‐in‐differences analysis covering the frst four expansion years (2014–2017) and confrm prior results for Medicaid revenue and uncompensated care cost, over this longer period. However, we fnd that hospitals in expansion states showed no signifcant relative gains in either total patient revenue or operating margins. Instead, the relative rise in Medicaid revenue was offset by relative declines in commercial insurance revenue. In subsample analyses, we fnd higher revenue and margins for rural hospitals in expansion states, little change for small urban hospitals, and a revenue decline for large urban hospitals. KEYWORDS ACA Medicaid expansion, hospital revenue, hospital uncompensated care cost 1 | INTRODUCTION The goals of the Patient Protection and Affordable Care Act of 2010 (ACA) included increasing health insurance coverage, and decreasing the burden on hospitals from providing uncompensated care. One core ACA provision pro- vides federal funding to support expanding Medicaid insurance to cover all adults with family incomes up to 138% of the Federal Poverty Level (FPL). A majority of states expanded Medicaid under the ACA, but a signifcant minority did not. A second core provision creates private insurance exchanges, with premiums subsidized for lower‐income households. As the ACA was implemented, subsidized exchange‐based insurance was available for persons with incomes from 138%–400% of FPL in expansion states; the lower threshold dropped to income of 100% of FPL in nonexpansion states. Both reforms were implemented principally in 2014. The ACA resulted in a large drop in the percentage of uninsured patients in both expansion and nonexpansion states (Kaiser Family Foundation, 2018; see also Figure 1). In 2013, the last pre‐ACA year, 5.8% of hospital inpatient stays and 17.0% of emergency department (ED) visits were uninsured (HCUPnet, 2013), with hospitals providing an estimated $45 billion in uncompensated care to uninsured individuals (Coughlin, Holahan, Caswell, & McGrath, 2014). State and federal governments paid for some of these costs, principally through disproportionate share hospital payments and state funding of public hospitals, but hospitals bore the remainder. Health Economics. 2020;1–23. wileyonlinelibrary.com/journal/hec © 2020 John Wiley & Sons Ltd. - 1