Economic Impact of the Health CareIndustry on Communities

By:

Gerald A. Doeksen, Ph.D.Regents Professor, Oklahoma Cooperative Extension Service

Oklahoma State University

September 20, 2004

Presentation at the National Public Policy Education Conference, September 19-22, 2004 in St. Louis, Missouri.

To demonstrate the importance of the health sector to the rural economy and

Economic Impacts of the Health Care Industry on Communities

Overall Objective:

To discuss what community leaders can do to improve primary health care

More specifically:

1. Measure the total impact of the health sector on a community’s economy;

2. Illustrate the importance of the health sector for industrial growth;

3. Illustrate the importance of the health sector for retirement growth;

4. Discuss and demonstrate what community leaders can do to maintain and promote their health sector; and

5. Review a community health planning process.

Component Employees Payroll

Hospital Subtotal Physicians, Dentists and Other Professionals Physicians (2) 20.0 $590,670

Dentists (2)8.0 $322,244Optometrists (2)

6.5 $309,200Chiropractors (1) 2.0 $80,000

Subtotal Nursing Homes and Protective Care (2) Subtotal

Other Medical & Health Services Home Health Care (4) County Health Department DME Suppliers

Subtotal

35.0 $583,33311.0 $232,92012.5 $267,200

Pharmacies (3) Subtotal

TOTALS

Local Data Needed for Health Sector Impact AnalysisAtoka County, Oklahoma

303.0 $6,755,067

36.5 $1,302,114

92.0 $1,272,000

19.0 $697,500

97.0 $2,400,000

58.5 $1,083,453

Overview of Community Economic

System

Households

Industry

Basic

ServicesGoods &

$

Inputs

Products

Inputs

$ $

$

$

Services

$ $

Labor

Health Sector EmploymentComponents Employment Multiplier Impact

Hospital

Physicians & Dentists

Nursing & Protective Facilities

Other Medical & Health Services

Pharmacies

1.70

1.79

1.54

1.62

1.49

TOTALS

97.0

36.5

92.0

58.5

19.0

303.0

165

65

142

95

28

495

in Atoka County, OklahomaEconomic Impact of the Health Sector on Employment

Health Sector IncomeComponents Income Multiplier Impact

Hospital

Physicians & Dentists

Nursing & Protective Facilities

Other Medical & Health Services

Pharmacies

1.47

1.34

1.66

1.62

1.61

TOTALS

$2,400,000

$1,302,114

$1,272,000

$1,083,453

$697,500

$6,755,067

$3,528,000

$1,744,833

$2,111,520

$1,755,194

$1,122,975

$10,262,522

Economic Impact of the Health Sector on Incomein Atoka County, Oklahoma

Employment, Income, Retail Sales, and Sales Tax CollectionsResulting from the Health Sector in Atoka County, Oklahoma

Health SectorComponents

EmploymentImpact

IncomeImpact

Retail Sales

3 CentSales Tax

$3,753$375,293

Hospital $1,179,040 $11,790

Physicians & Dentists $583,114 $5,831

Nursing & Protective Facilities $705,659 $7,057

Other Medical &

Health Services $586,577 $5,866

Pharmacies

TOTALS $3,429,683 $34,297

$3,528,000

$1,744,833

$2,111,520

$1,755,194

$1,122,975

$10,262,522

165

65

142

95

28

495

Summary of Research Studies

Direct and secondary health sector employment from 15-20 percent of all employees

Hospital often second largest employer in community

Hospital and nursing homes employ large numbers

Employment multipliers ranged from 1.30 to 1.81

Income multipliers ranged from 1.46 to 1.87

Direct health sector employment from 10-15 percent of all employees

Health Services Promote Job Growth

Health Services Foster Rural DevelopmentHealth Services Foster Rural Development

Health Services Attract RetireesHealth Services Attract Retirees

Example:

The Medicaid Program

on Alaska’s Economy  

Source Totals Percent

Federal (and other) Funds $424,485,900 74%State General Funds $150,061,600 26%

Total Medicaid Funds $574,547,500 100%

Expenditures for Health Care Services $553,191,600 96%Administrative Expenditures Supporting

Payments for Health Care Services 4%Total Medicaid Expendituresa $574,547,500 100%

Source Jobs Income

Division of Medical AssistanceFull Time Employees 73Income (Gross Payroll) $4,037,300

Contract Employeesb

Estimated Full Time Employees 118Estimated Income (Gross Payroll) $5,881,000

Total Combined Estimated Full Time Employees 191Estimated Income (Gross Payroll)c $9,918,300

$21,355,900

Alaska Medicaid Spending by Source of Funds and Type of Expenditure

and Medicaid Program Employment and Income

$$$

Figure 1 Flow of Goods, Services, and Dollars in Alaska’s

Economy relative to the Medicaid Program

Division Combined Govern Total Category Employees Totals Multiplie Impact

Jobs 73 118 191 1.49 285

Income $4,037,300 $5,881,000 $9,918,300 1.22 $12,100,300

Contract Employees

Jobs and Income Impactof Medicaid Program Employees on Alaska’s Economy

Alaska Estimated Total Health Expenditures $2,533,144,000

Alaska Medicaid Expenditures for Health Care Services $553,191,600

Percent Medicaid Expenditures of Total Health Expenditures 22%

Total Jobs in Health Sector 23,447

Jobs Attributed to Medicaid Program (Direct Impact) 5,158Health Sector Employment Multiplier for Alaska 1.69

Indirect and Induced Impact of Medicaid Program Jobs 3,559 Total Medicaid Program Jobs Impact

(Direct, Indirect, and Induced) 8,717

Total Income in Health Sector $999,102,300 Income Attributed to Medicaid Program (Direct Impact) $219,802,500 Health Sector Income Multiplier for Alaska 1.52

Indirect and Induced Impact of Medicaid Program Income $114,297,300 Total Medicaid Program Income Impact

(Direct, Indirect, and Induced) $334,099,800

Jobs and Income Impact ofMedicaid Expenditures on Alaska’s Economy

Category of Impact

JOBS

Division of Medical Assistance

and Contract Employees 191 94 285

Medicaid Expenditures

for Health Care Services 5,158 3,559 8,717

TOTAL JOBS 5,349 3,653 9,002

INCOME

Division of Medical Assistance

and Contract Employees $9,918,300 $2,182,000 $12,100,300

Medicaid Expenditures

for Health Care Services $219,802,500 $114,297,300 $334,099,800

TOTAL INCOME $229,720,800 $116,479,300 $346,200,100

Summary of Jobs and Income Impacts

DirectImpacts

Indirect &InducedImpacts

TotalImpact

Economic Impact of theMedicaid Program on Alaska’s Economy

Medicaid Expenditures1. Each dollar spent is 26 cents State and 74 cents Federal.

2 Each dollar the State spends attracts $2.83 Federal dollars.

Total Federal and State Expenditures = $574.5 MTotal State General Funds = $150.1 M

Medicaid Dollar

26 centsState

74 centsFederal

One State Dollar

2.83 Federal Dollars

Total Business Spending generated throughout Alaska’s Economy from Medicaid Program

$1.011 Billion

Jobs 9,002 Income $346.2 M

DIRECT IMPACT on Jobs and Income

Division and Contract Employees

Jobs 191 Income $9.9 MExpenditures for Health Care Services

Jobs 5,158 Income $219.8 M

INDUCED & INDIRECT IMPACT on the Alaska Economy due to employee and business spending

Division & Contract Employee Spending

Jobs 94 Income $2.2 MHealth Care Providers Spending

Jobs 3,559 Income $114.3 M

TOTAL IMPACT ON JOBS AND INCOMEof the Medicaid Program on Alaska’s Economy

Economic Impact of the Medicaid Program on Alaska’s Economy

In summary, Alaska’s investment

of $150 million

in State General Fund expenditures

for the Medicaid program

created over 9,000 jobs and

more than $346 million income

in Alaska.

• Zip Code Level

• County Level

• Regional Level

• State Level

• National Level

Models can measure impact at:  

Summary of Application

I. Impact of Health Sector on Economy

II. Impact of Programs at State Level

I. Medicaid

II. Hospitals

III. National Corp Physicians

What Can We Do?

Help educate consumers and providers

Help community leaders plan their health delivery system:

Community Engagement Process

Needs Assessment

Feasibility StudiesOverview of Community Engagement

Process

Getting Started

InitiatingGroup

CommunityFacilitator

SteeringCommittee

ResourceTeam

SurveyTask Force

Data & InfoTask Force

PublicityTask Force

InventoryTask Force

DevelopPlan

CommunityReviews Plan

RevisePlan

ImplementAction Plan

Follow-up &Continuation

Overview of Community Engagement

Process

Analyze Economic Feasibility

of Health Services Identified

in Community Engagement Process

Basic Methodology for Analyzing an Issue

STEPS

I. Estimate NeedsII. Project Costs

A. Capital or Start-upB. Annual Operating

III. Estimate RevenueIV. If Doesn’t Break Even, Other

Sources of Funds

Available Budget Studies fromOklahoma Cooperative Extension Service

Primary Care Physician

Obstetrics/Gynecology Physician

Pediatrician

Emergency Medical Services (Basic and Advanced)

First Responder Systems

Outpatient Rehabilitation

Adult Day Services

Kidney Dialysis

Assisted Living Facilities

Federally Qualified Health Centers (FQHCs) – • Primary Care Physician• Dentist

Budget Studies Under Construction

Rural Health Clinics

Specialty Physicians

Federally Qualified Health Centers (FQHCs)

• Pharmacy

• Mental

CT Scan

Teleradiology

Ultrasound-Echo System

Rural Health Works National Website:

www.ruralhealthworks.org