How Rural Health Services
Build Local Economies:
Indiana Examples
February 21, 2003
Indiana Rural Health Association
Public Policy Forum
Indianapolis, Indiana
Paul E. McNamara, PhD, MPP
University of Illinois at Urbana—Champaign
Department of Agricultural and Consumer Economics and
University of Illinois Extension
www.ace.uiuc.edu/ruralhealth and mcnamar1@uiuc.edu
Outline of Presentation
• Rural Health Challenges:
Background
• Randolph and Marshall Counties,
Indiana Health Care Impact Results
• Economic Developers and Health
Care
• Competition and Value Perspectives
• Conclusions and Discussion
Challenges Facing Rural
Health Care Providers
Competition for health
care dollars
• Many rural counties are losing health
care dollars as residents go out-ofcounty for their health care services
• 48% of rural residents believe urban
health services are better
• Health care business is lost to other
counties if local services close down
Changes in health care
affect provision of local
rural health care services
• Movement to managed care
• Purchase of rural health services by
large urban networks
• Public funding squeeze – Medicare
and Medicaid reimbursement
pressures
– Rural providers often serve a
disproportionate share of the elderly,
low-income, and un/underinsured
Why is economic impact
information important?
• Rural residents have little idea of
how important the health sector is
to the local economy and how it
contributes to employment, income,
and retail sales
• Analysis shows the
interconnectedness of economic
activity
How Is A Health Sector
Economic Impact Analysis
Conducted?
• Thorough Examination of the
County’s Economic Make-Up
• Understanding the Roles of the
Health Sector
• Understanding the Interdependence
of Economies
• Using IMPLAN to Illuminate the True
Depth of Health Care’s Influence
IMPLAN
• A computer program that uses
economic data to produce the
economic multipliers
• Uses Data from 528 Industrial
Sectors
• Conducts Input – Output Analysis
• Builds Transaction Tables
• Produces income and employment
multipliers
– Multipliers are mathematical ratios that
describe the different rounds of
spending that occur within the economy
Marshall and Randolph
County Background
• Socio-economic comparison
– income, employment, poverty
• Health care sector comparison
– physicians, Medicare payments
Health Care Flow of Funds
Public Medical Payments
Thousands of Dollars
60000
50000
Marshall Medical
payments
40000
Marshall Medicare
payments
30000
20000
Randolph Medical
payments
10000
Randolph Medicare
payments
0
1996
1997
1998
1999
2000
Employment by Sector
Top Ten Employers in Marshall County, IN and Randolph County, IN
Marshall
Randolph
Industry
Output*
Jobs Jobs
Industry
Output*
Jobs
Total
2702.78 26,146 100%
Total
1,076.71 11,772
Retail Trade
135.35
4,022 15.4%
Retail Trade
50.42 1,600
Rubber products
443.31
2,901 11.1%
Farms
66.63 1,130
Construction
147.73
1,407 5.4%
Govt. - Education
28.33
758
Govt. - Education
49.39
1,304 5.0%
Construction
72.05
709
Farms
67.67
1,188 4.5%
Govt. non-ed
25.32
612
Health services
71.00
1,095 4.2%
Transp. Equip.
123.54
591
Transp. Equip.
234.67
1,081 4.1%
Health services
29.55
523
Industrial machinery
141.91
1,071 4.1%
Miscellaneous mfg
57.59
462
Education services
26.43
933 3.6%
Wholesale Trade
29.91
426
Wholesale Trade
65.25
781 3.0%
Wood products
46.14
425
Source: IMPLAN, 2000
*Millions of dollars
Jobs
100%
13.6%
9.6%
6.4%
6.0%
5.2%
5.0%
4.4%
3.9%
3.6%
3.6%
Health Care’s Employment Impact
Marshall County
Randolph County
Sector Name
Employed
SAM
Total Employed SAM
Total
Multiplier Impact
Multiplier Impact
Doctors and Dentists
296
1.65
490
62
1.54
96
Nursing and Protective Care
300
1.24
373
193
1.19
229
Hospitals
457
1.42
647
213
1.33
283
Other Medical and Health Serv.
42
1.33
56
55
1.23
67
TOTAL
1095
1566
523
675
Health Care as a percentage of
total Employment
• Health care accounts for 4.2% of all
jobs within Marshall County
– Including secondary impacts, health
care accounts for 6.0% of employment
• Health care accounts for 4.4% of all
jobs within Randolph County
– Including secondary impacts, health
care accounts for 5.7% of employment
Health Care’s Income Impact
Earnings
Randolph County, IN
Doctors and Dentists
Nursing and Protective Care
Hospitals
Other Medical and Health Services
Total
Marshall County, IN
Doctors and Dentists
Nursing and Protective Care
Hospitals
Other Medical and Health Services
Total
Type SAM
Income
Multiplier
Total Income
$3,476,000
$4,680,000
$8,576,000
$1,105,000
$17,837,000
1.23
1.16
1.19
1.22
$4,282,953
$5,442,873
$10,174,138
$1,350,406
$21,250,370
$16,593,000
$7,275,000
$18,401,000
$1,052,000
$43,321,000
1.28
1.23
1.25
1.34
$21,310,606
$8,934,195
$22,930,719
$1,404,944
$54,580,463
Economic impact increases as
• The amount of services
exported increases
• The amount of “leakages”
decreases
– “leakages” lower our multipliers
• The local purchase of inputs
(labor, supplies, and other
factors of production) increases
– work force training issues?
Indirect Impact of Health Care
• Attract/retain residents,
retirees, and businesses
– quality of life
• Generate investment funds
• Contribute to local leadership
Why Should Economic Developers
Pay Attention to the
Health Care Industry?
• Less volatility than other sectors
• Health care as a “growth”
industry
– Aging population
– Steady growth in health care
spending
Economic Development’s Role in
the Health Care Industry
• Collaboration With Existing
Industries
– Example: Health Insurance – are
they sending people out of area?
• Advocacy for health care issues
– Example: Proposed Medicaid Cuts
• Grant Assistance
– Data collection
Health Care’s Role In Economic
Development Efforts
• Board positions
• Committee Assignments
• Continued investments in local
health care delivery
• Workforce training programs
and partnerships with
educational institutions
Health Care, Strategic Planning,
and Partnering
• Health care can play a role in
community economic strategic
planning efforts
• Health care and economic
development can partner to
benefit the community
Market
Structure
• Herfindahl Index – sum
of squared market
shares, ranges from 0
to 10,000
• Zip code basis,
quintiles
• IHCCCC 2001
Discharge data – all
Illinois discharges
• White areas most
competitive, dark
areas least
competitive
• Does not account for
cross-state border
migration
What is the Value of a
Rural Hospital?
• Why bother?
– Evidence-Based Public Health and Health Care
Policy
• Travel Cost Economic Framework
• Applied in rural health research
– Clarke (valuing provision of mobile
mammography services in rural Australia)
– Christianson and Bender (valuing the provision
of rural hospital services in Montana)
Motivation
“…federal scrutiny of critical access
hospitals has raised concerns about
‘inappropriate designation,’ and overproliferation of critical access
hospitals. MedPAC, in particular,
has raised questions about the Flex
program, but the GAO has also
expressed concerns.”
Sent to rural health researchers April 2001
Conclusions
• Significant economic impact of
health care in Randolph and Marshall
Counties, Indiana
• Opportunities for health care’s
impact in smaller and rural
communities to be expanded
• For more information:
– www.ace.uiuc.edu/ruralhealth
– copies of slides from this presentation
– flyer on Illinois Rural Health Workshop