Economic Impact of the Health Care
Industry 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.
Economic Impacts of the
Health Care Industry on Communities
Overall Objective:
To demonstrate the importance of the health
sector to the rural economy and
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.
Local Data Needed for Health Sector Impact Analysis
Atoka County, Oklahoma
Component
Hospital
Employees
Payroll
97.0
$2,400,000
Subtotal
20.0
8.0
6.5
2.0
36.5
$590,670
$322,244
$309,200
$80,000
$1,302,114
Subtotal
92.0
$1,272,000
35.0
11.0
12.5
58.5
$583,333
$232,920
$267,200
$1,083,453
19.0
303.0
$697,500
$6,755,067
Subtotal
Physicians, Dentists and Other Professionals
Physicians (2)
Optometrists (2)
Dentists (2)
Chiropractors (1)
Nursing Homes and
Protective Care (2)
Other Medical & Health Services
Home Health Care (4)
County Health Department
DME Suppliers
Subtotal
Pharmacies (3)
TOTALS
Subtotal
Inputs
$
Overview of
Community
Economic
System
$
Products
Basic
Industry
Labor
$
$
Inputs
Goods &
Services
Households
$
$
Services
$
Economic Impact of the Health Sector on Employment
in Atoka County, Oklahoma
Health Sector
Components
Employment
Employment
Multiplier
Impact
Hospital
97.0
1.70
165
Physicians & Dentists
36.5
1.79
65
Nursing & Protective
Facilities
92.0
1.54
142
Other Medical &
Health Services
58.5
1.62
95
Pharmacies
19.0
1.49
28
TOTALS
303.0
495
Economic Impact of the Health Sector on Income
in Atoka County, Oklahoma
Health Sector
Components
Income
Multiplier
Income
Impact
Hospital
$2,400,000
1.47
$3,528,000
Physicians & Dentists
$1,302,114
1.34
$1,744,833
Nursing & Protective
Facilities
$1,272,000
1.66
$2,111,520
Other Medical &
Health Services
$1,083,453
1.62
$1,755,194
$697,500
1.61
$1,122,975
Pharmacies
TOTALS
$6,755,067
$10,262,522
Employment, Income, Retail Sales, and Sales Tax Collections
Resulting from the Health Sector in Atoka County, Oklahoma
Health Sector
Components
Employment
Impact
Income
Impact
Retail
Sales
3 Cent
Sales Tax
165
$3,528,000
$1,179,040
$11,790
Physicians & Dentists
65
$1,744,833
$583,114
$5,831
Nursing & Protective
Facilities
142
$2,111,520
$705,659
$7,057
Other Medical &
Health Services
95
$1,755,194
$586,577
$5,866
Pharmacies
28
$1,122,975
$375,293
$3,753
$10,262,522 $3,429,683
$34,297
Hospital
TOTALS
495
Summary of Research Studies
 Direct health sector employment from 10-15 percent of
all employees
 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
Health Services Promote Job Growth
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Health Services Attract Retirees
Example:
The Medicaid Program
on Alaska’s Economy
Alaska Medicaid Spending by Source of Funds and Type of Expenditure
and Medicaid Program Employment and Income
Source
Totals
Percent
Federal (and other) Funds
State General Funds
Total Medicaid Funds
$424,485,900
$150,061,600
$574,547,500
74%
26%
100%
Expenditures for Health Care Services
Administrative Expenditures Supporting
Payments for Health Care Services
Total Medicaid Expenditures a
$553,191,600
96%
$21,355,900
$574,547,500
4%
100%
Source
Division of Medical Assistance
Full Time Employees
Income (Gross Payroll)
Jobs
Income
73
$4,037,300
b
Contract Employees
Estimated Full Time Employees
Estimated Income (Gross Payroll)
118
Total Combined
Estimated Full Time Employees
Estimated Income (Gross Payroll)c
191
$5,881,000
$9,918,300
$$$
Figure 1
Flow of Goods, Services, and Dollars in Alaska’s
Economy relative to the Medicaid Program
Jobs and Income Impact
of Medicaid Program Employees on Alaska’s Economy
Division
Category Employees
Jobs
Income
73
Contract
Employees
Combined
Totals
Govern
Multiplie
Total
Impact
118
191
1.49
285
$9,918,300
1.22
$12,100,300
$4,037,300 $5,881,000
Jobs and Income Impact of
Medicaid Expenditures on Alaska’s Economy
Alaska Estimated Total Health Expenditures
Alaska Medicaid Expenditures for Health Care Services
Percent Medicaid Expenditures of Total Health Expenditures
Total Jobs in Health Sector
Jobs Attributed to Medicaid Program (Direct Impact)
Health Sector Employment Multiplier for Alaska
Indirect and Induced Impact of Medicaid Program Jobs
Total Medicaid Program Jobs Impact
(Direct, Indirect, and Induced)
$2,533,144,000
$553,191,600
22%
23,447
5,158
1.69
3,559
8,717
Health Sector Income Multiplier for Alaska
$999,102,300
$219,802,500
1.52
Indirect and Induced Impact of Medicaid Program Income
$114,297,300
Total Income in Health Sector
Income Attributed to Medicaid Program (Direct Impact)
Total Medicaid Program Income Impact
(Direct, Indirect, and Induced)
$334,099,800
Summary of Jobs and Income Impacts
Category of Impact
Indirect &
Induced
Impacts
Direct
Impacts
Total
Impact
JOBS
Division of Medical Assistance
and Contract Employees
191
94
285
5,158
3,559
8,717
Medicaid Expenditures
for Health Care Services
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
$219,802,500
$114,297,300
$334,099,800
Medicaid Expenditures
for Health Care Services
TOTAL INCOME
$229,720,800 $116,479,300 $346,200,100
Economic Impact of the
Medicaid Program on Alaska’s Economy
Medicaid Dollar
26 cents
State
One State Dollar
2.83 Federal Dollars
74 cents
Federal
1.
Medicaid Expenditures
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 M
Total State General Funds = $150.1 M
Total Business Spending generated throughout Alaska’s Economy from Medicaid Program
$1.011 Billion
DIRECT IMPACT on Jobs and Income
Division and Contract Employees
Jobs
191
Income
$9.9 M
Expenditures for Health Care Services
5,158
Jobs
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 M
Health Care Providers Spending
Jobs
3,559 Income
TOTAL IMPACT ON JOBS AND INCOME
of the Medicaid Program on Alaska’s Economy
Jobs
9,002
Income $346.2 M
$114.3 M
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.
Models can measure impact at:
• Zip Code Level
• County Level
• Regional Level
• State Level
• National Level
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 Studies
Overview of
Community
Engagement
Process
Initiating
Group
Getting
Started
Community
Facilitator
Resource
Team
Steering
Committee
Publicity
Task Force
Inventory
Task Force
Survey
Task Force
Data & Info
Task Force
Develop
Plan
Community
Reviews Plan
Revise
Plan
Implement
Action 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.
II.
III.
IV.
Estimate Needs
Project Costs
A. Capital or Start-up
B. Annual Operating
Estimate Revenue
If Doesn’t Break Even, Other
Sources of Funds
Available Budget Studies from
Oklahoma 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