Healthcare market sizing gets messy fast. And one of the biggest mistakes founders tend to make is building a market model around patients instead of buyers.

As a healthtech founder, the “market” you’re actually selling into is really four different things layered on top of each other: the buyers (the people who make purchasing decisions within hospitals, health systems or payers), the budgets those buyers have to spend (often a thin slice of a much bigger pie), the covered lives who determine reimbursement, and the patients who actually have the clinical need that your product addresses.

This cheat sheet exists to give you quick, sourced denominators for each of those four layers. These are the same layers that come up constantly in ICP definition, pricing and ROI discussions, and bottom-up TAM/SAM/SOM math.

If you’re sizing a healthcare market, you’re usually trying to answer four questions:

  1. Who makes the buying decision? (hospitals vs. systems vs. payers)
  2. Where does the money live? (which budget line funds the purchase, and how constrained is it?)
  3. Who’s the patient? (prevalence, eligibility, care setting)
  4. Who ultimately pays? (coverage, reimbursement and payer mix)

Below, we work through each layer.

The Buyer Universe

Founders often say “we’ll sell to hospitals” as if that’s a single, homogenous market. It isn’t. While the U.S. has ~6,100 hospitals in total, most healthcare startups are really targeting the 5,121 community hospitals: nonfederal, short-term general and specialty hospitals that make up the core hospital market.

Here is the number that should shape your go-to-market motion more than any other: 3,567 of those community hospitals — the majority— are affiliated with a health system. In practice, that means your pilot might start with a single facility, but scaling almost always requires buy-in from system-level stakeholders, along with centralized contracting and IT/security review. Plan your GTM motion around networks, not standalone accounts.

For capacity- or volume-based pricing models, two additional benchmarks are useful: U.S. community hospitals have 775,297 staffed beds and handle 33.6 million admissions annually. If your product’s value proposition or pricing scales with facility size or inpatient volume, these are your starting denominators.

The Budget Reality Check

Hospital budgets are big. The budget available to you usually isn’t.

For instance, hospital IT spend is estimated at roughly 2.3% of total operating expenses. IT is a real budget line, but it’s a relatively small one—which is the fastest way to talk yourself out of any pricing assumption that starts with “we’ll just capture 1% of hospital spend.” In practice, you’re not competing for the hospital’s overall budget; you’re competing for a share of a specific department’s budget, often alongside other technology, staffing and operational priorities.

Medical device founders should think the same way. A device doesn’t compete for the hospital’s overall budget any more than software does. It competes for a specific capital or operating budget, often within a particular department or service line. When estimating market size, start with the pool of dollars that could realistically fund your solution, not the organization’s total spend.

Coverage and Payer Mix

Recent data shows that 92% of the U.S. population—about 310 million people—had health insurance for some or all of the year, leaving 8% uninsured. That uninsured slice matters more than it might appear: for many conditions, total prevalence and addressable market aren’t the same thing, because insurance status influences access, utilization, reimbursement and care pathways.

Among the insured, the coverage mix breaks down as:

  • Employment-based coverage: 53.8%
  • Medicare: 19.1%
  • Medicaid: 17.6%
  • Direct purchase: 10.7%

Note: Percentages exceed 100% because some individuals are covered by more than one insurance type.

This is a useful starting point for payer-mix assumptions, though you’ll want to adjust based on the specific population and clinical need you’re targeting. Payer mix shapes not only reimbursement economics, but also who your ultimate customer may be—whether that’s a provider, payer, employer or some combination of the three.

On the utilization side, 85.2% of adults saw a doctor or other healthcare professional in the past year, averaging roughly 2.5 outpatient visits per person annually. If your solution depends on patient encounters, referrals, screenings or care delivery events, these utilization rates can help convert population estimates into more realistic opportunity estimates.

Prevalence Anchors: Going From “Everyone” to “Your ICP”

Two conditions are useful as examples of how enormous prevalence numbers can get, and how quickly you realize you need to segment further:

  • Diabetes: 40.1 million people (12% of the U.S. population) as of 2023
  • Hypertension: 47.7% of adults meet clinical criteria (August 2021-August 2023 data)

Nearly half of American adults have hypertension. That’s not an ICP; it’s a reminder that prevalence is only the first step. For most healthcare products, the funnel looks more like:

Prevalence → Diagnosed → Treated → Eligible → Addressable

The gap between those stages is where realistic TAM, SAM and SOM estimates are built.

On the acute/inpatient side, sepsis is a useful counterexample. While roughly 1.7 million U.S. adults develop sepsis each year, far fewer than the number living with diabetes or hypertension, AHRQ describes sepsis as one of the most expensive and challenging conditions treated in U.S. hospitals. For founders building solutions around early detection, monitoring, care coordination or clinical workflows, it’s a reminder that prevalence is only one input into market size. Cost of care, reimbursement, clinical urgency, workflow burden and buyer incentives matter too.

Remember, great healthcare market sizing isn’t about finding the biggest number. It’s about identifying the smallest number you can confidently defend. Investors are far more persuaded by a realistic, bottom-up market than an enormous top-down TAM that ignores buyers, budgets, reimbursement and adoption.

If you’re building in healthcare, these are exactly the types of questions we help founders work through in JumpStart’s Trailblazer HealthTech Accelerator. From customer discovery and market sizing to reimbursement, buyer mapping and commercialization strategy, the program is designed to help founders turn market hypotheses into validated commercialization plans.

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About The Author

Jaclyn Williams

As Sr. Analyst, Market Research, Jaclyn works with entrepreneurs in Northeast Ohio to validate product and target market assumptions across varied industries and technologies.

She assists entrepreneurs in planning and conducting both primary and secondary market research, and works closely with internal stakeholders across the organization as well as external customers, clients, and partners to understand, document, and analyze data.