The economic impact of the health sector on the Seiling Community Hospital medical service area

              The Economic Impact of the Health Sector
on the Seiling Community Hospital
Medical Service Area
Hospitals Nursing Homes
Physicians, etc. Other Services Pharmacies
Oklahoma State Department of Health
Office of Rural Health
Oklahoma Cooperative Extension Service
Oklahoma State University
May 2010 AE-10013
The Economic Impact of the Health Sector
on the Seiling Community Hospital Medical Service Area
Community Health Engagement Process documents available online at:
www.okruralhealthworks.org
Lara Brooks, Assistant Extension Specialist, OSU, Stillwater
Phone: 405-744-6083, Fax: 405-744-9835, Email: lara.brooks@okstate.edu
Brian Whitacre, Assistant Professor and Extension Economist, OSU, Stillwater
405-744-6083
Stan Raltsin, Area Extension Rural Development Specialist, OSU, Enid
580-237-7677
Michael Weber, Dewey County Extension Director, Taloga
580-328-5351
Corie Kaiser, Health Consultant, Oklahoma Center for Rural Health, Oklahoma City
405-840-6505
Val Schott, Director, Oklahoma Center for Rural Health, Oklahoma City & Tulsa
405-840-6505
Oklahoma State Department of Health
Office of Rural Health
Oklahoma Cooperative Extension Service
Oklahoma State University
May 2010 1
The Economic Impact of the Health Sector
on the Seiling Community Hospital Medical Service Area
Medical facilities have a tremendous medical and economic impact on the community in which they are located. This is especially true with health care facilities, such as hospitals and nursing homes. These facilities not only employ a large number of people and have a significant payroll, but they also draw a large number of people from rural areas that need medical services into the community. The overall objective of this study is to measure the economic impact of the health sector on the Seiling Community Hospital medical service area. The specific objectives of this report are to:
1. Review economic trends of the health sector for the U.S. and Dewey County;
2. Identify the population for the medical service area of Seiling Community Hospital;
3. Summarize the direct economic activities of the health sector;
4. Review concepts of community economics and multipliers; and
5. Estimate the secondary and total impacts of the health sector on the Seiling Community Hospital medical service area.
No recommendations will be made in this report.
Health Services and Rural Development
The nexus between health care services and rural development is often overlooked. At least three primary areas of commonality exist. A strong health care system can help attract and maintain business and industry growth, and attract and retain retirees. A strong health care system can also create jobs in the local area. The following section looks at how the health care sector impacts these areas.
2
Services that Impact Rural Development
Type of Growth
Services Important to Attract Growth
Industrial and Business
Health and Education
Retirees
Health and Safety
Business and Industry Growth
Studies have found that quality-of-life (QOL) factors are playing a dramatic role in business and industry location decisions. Among the most significant of the QOL variables are health care services, which are important for at least three reasons.
First, as noted by a member of the Board of Directors of a community economic development corporation, the presence of good health and education services is imperative to industrial and business leaders as they select a community for location. Employees and participating management may offer strong resistance if they are asked to move into a community with substandard or inconveniently located health services.
Secondly, when a business or industry makes a location decision, it wants to ensure that the local labor force will be productive, and a key factor in productivity is good health. Thus, investments in health care services can be expected to yield dividends in the form of increased labor productivity.
The cost of health care services is the third factor that is considered by business and industry in development decisions. Research shows that corporations take a serious look at health care costs in determining site locations. Sites that provide health care services at a lower cost are given higher consideration for new industry than sites with much higher health care costs.
Health Services and Attracting Retirees 3
A strong and convenient health care system is important to retirees, a special group of residents whose spending and purchasing can be a significant source of income for the local economy. Many rural areas have environments (e.g., moderate climate and outdoor activities) that enable them to be in a good position to attract and retain retirees. The amount of spending embodied in this population, including the purchasing power associated with Social Security, Medicare, and other transfer payments, is substantial. Additionally, middle and upper income retirees often have substantial net worth. Although the data are limited, several studies suggest health services may be a critical variable that influences the location decision of retirees. For example, one study found that four items were the best predictors of retirement locations: safety, recreational facilities, dwelling units, and health care. Another study found that nearly 60 percent of potential retirees said health services were in the “must have” category when considering a retirement community. Only protective services were mentioned more often than health services as a “must have” service.
Health Services and Job Growth
A factor important to the success of rural economic development is job creation. The health care sector is an extremely fast growing sector, and based on the current demographics, there is every reason to expect this trend to continue. Data in Table 1 provide selected health expenditures and employment data for the United States. Several highlights from the national data are:
 In 1970, health care services as a share of the national gross domestic product (GDP) were 7.2 percent. This increased to 16.2 percent in 2008;
 Per capita health expenditures increased from $356 in 1970 to $7,681 in 2008;
 Employment in the health sector increased almost 341.0 percent from 1970 to 2008; and 4
 Annual increases in employment from 2003 to 2008 ranged from 2.0 percent to 4.0 percent.
In addition, the Bureau of Labor Statistics projects substantial increases in health care expenditures from 2009 through 2018. In fact, the U. S. Department of Health and Human Services, Centers for Medicare and Medicaid Services predict that health care expenditures will account for 18.9 percent of GDP by 2015 and increase to 20.3 percent of GDP in 2018. Per capita health care expenditures are projected to increase to $10,929 in 2015 and to $13,100 in 2018. Total health expenditures are projected to increase to almost $4.4 trillion in 2018. 5
Table 1
United States Health Expenditures and Employment Data
1970-2008; Projected for 2009, 2012, 2015 & 2018
Total
Per Capita
Health
Health
Ave. Annual
Year
Health
Health
as %
Sector
Increase in
Expenditures
Expenditures
of GDP
Employment
Employment
($Billions)
($)
(%)
(000)
(%)
1970
$74.9
$356
7.2%
3,052
a
1980
253.4
1,100
9.1%
5,278
a
7.3%
1990
714.1
2,814
12.3%
7,814
a
4.8%
2000
1,352.9
4,789
13.6%
10,858
a
3.9%
2001
1,469.2
5,150
14.3%
11,188
a
3.0%
2002
1,602.4
5,564
15.1%
11,536
a
3.1%
2003
1,735.2
5,973
15.6%
11,817
b
N/A
2004
1,855.4
6,328
15.6%
12,055
b
2.0%
2005
1,982.5
6,701
15.7%
12,314
b
2.1%
2006
2,112.5
7,071
15.8%
12,602
b
2.3%
2007
2,239.7
7,423
15.9%
12,946
b
2.7%
2008
2,338.7
7,681
16.2%
13,469
b
4.0%
Projections
2009
2,509.5
8,160
17.6%
2012
2,930.7
9,282
18.0%
2015
3,541.3
10,929
18.9%
2018
4,353.2
13,100
20.3%
SOURCES: Bureau of Labor Statistics (www.bls.gov [January 2010]); 2010 Centers for Medicare & Medicaid Services, National Health Expenditures 1970-2008 and National Health Expenditure Projections 2008-2018 (http://www.cms.hhs.gov/nationalhealthexpenddata [January 2010]).
N/A - Not Available.
a Based on Standard Industrial Classification (SIC) codes for health sector employment.
b Based on North American Industrial Classification System (NAICS) for health sector employment. 6
Figure 1 illustrates that health services accounted for 16.2% of all national expenditures (as repeatedly the gross domestic product). This figure also breaks the amount spent on health services into various categories. The largest health service type was hospital care, representing 31.0 percent of the total. The next largest type of health services was physician services with 21.0 percent of the total. Community health centers are allocated in “other” category, which accounts for 32.0 percent.
7
Dewey County Economic Trends
Data relative to the health sector for Dewey County are provided in Table 2. Data in Table 2 are from the U. S. Census Bureau County Business Patterns, based on the North American Industry Classification System (NAICS). The table shows employment and payroll for both health services and total county services for Dewey County. Further, it indicates the percentage of total employment and payroll that health services make up, at the county and state level. This table states how health services have changed over time. Health services employment in Dewey County decreased 14.5 percent from 83 employees in 1999 to 71 employees in 2006 (Table 2). The number of healthcare employees and income was not disclosed for 2007 for confidentiality reasons. Therefore, for examining percent change, the estimates for 2006 will be used. During the same time period, the total county employment increased 15.0 percent. County health services employment as a percent of total county employment decreased from 11.3 percent in 1999 to 9.4 percent in 2006, while the state health services employment as a percent of total state employment increased from 14.2 percent in 1999 to 15.3 percent in 2007. The county saw a decrease of 1.9 percent over this seven year period, while the state grew 1.1 percent.
The county health services payroll experienced a different trend than employment. Dewey County’s health services payroll increased 6.9 percent from about $1.3 million in 1999 to almost $1.4 million in 2006; this compares to an increase of 28.7 percent for the total county payroll (Table 2). State health services payroll as a percent of state payroll increased 1.2 percent from 1999 to 2007. County health services payroll as a percent of total county payroll increased from 6.8 percent in 1999 to 7.1 percent in 2006. Again, the 2007 values are not available due to confidentiality.8
Table 2
Employment and Payroll for County Business Patterns*
Dewey County and the State of Oklahoma
Employment
Based
Health
Total
Health Services
Health Services
on
Services
County
as a % of Total
as a % of Total
NAICS1
Employment
Employment
County Employment
State Employment
1999
83
735
11.3%
14.2%
2000
80
745
10.7%
14.1%
2001
71
712
10.0%
14.3%
2002
78
717
10.9%
15.1%
2003
87
698
12.5%
15.2%
2004
100-249**
775
**
15.4%
2005
83
723
11.5%
15.4%
2006
71
755
9.4%
15.1%
2007
20-99**
845
**
15.3%
% Change '99 - '07
-14.5%
15.0%
Payroll
Based
Health
Total
Health Services
Health Services
on
Services
County
as a % of Total
as a % of Total
NAICS1
Payroll ($1,000s)
Payroll ($1,000s)
County Payroll
State Payroll
1999
1,309
19,283
6.8%
14.1%
2000
1,330
16,276
8.2%
14.0%
2001
1,428
15,701
9.1%
14.5%
2002
1,435
13,738
10.4%
15.2%
2003
1,333
13,759
9.7%
15.2%
2004
(D)
22,241
**
15.7%
2005
1,333
16,975
7.9%
15.5%
2006
1,399
19,696
7.1%
15.1%
2007
(D)
24,824
**
15.3%
% Change '99 - '07
6.9%
28.7%
Source: U.S. Census Bureau, County Business Patterns; 1998-2007 data (www.census.gov [April 2010]).
1 The Health Care and Social Assistance NAICS sector comprises establishments providing health care and social assistance for individuals. The sector includes both health care and social assistance because it is sometimes difficult to distinguish between the boundaries of these two activities. Industries in this sector are arranged on a continuum starting with those establishments providing medical care exclusively, continuing with those providing health care and social assistance, and finally finishing with those providing only social assistance. The services provided by establishments in this sector are delivered by trained professionals. All industries in the sector shared this commonality of process, namely, labor inputs of health practitioners or social workers with the requisite expertise. Many of the industries in the sector are defined based on the educational degree held by the practitioners included in the industry.
* Data from County Business Patterns exclude self-employed persons, employees of private households, railroad employees, agricultural production workers, and for most government employees (except for those working in wholesale liquor establishments, retail liquor stores, Federally-chartered savings institutions, Federally-chartered credit unions, and hospitals).
** Due to nondisclosure of confidential data, no percentages are available. 9
Basic economic indicators of the Dewey County economy are illustrated in Table 3. Based on Bureau of Economic Analysis data, the 2008 per capita income for Dewey County of $33,681 is slightly lower than the per capita income for the state of Oklahoma and the United States.
Table 3
Economic Indicators for Dewey County,
the State of Oklahoma and the Nation
Indicator
County
State
U.S.
Total Personal Income (2008)
$148,736,000
$131,070,218,000
$12,238,800,000,000
Per Capita Income (2008)
$33,681
$35,969
$35,450
Employment (2009)
2,648
1,659,607
139,877,000
Unemployment (2009)
121
113,579
14,265,000
Unemployment Rate (2009)
4.4%
6.4%
9.3%
Employment (February 2010)
2,560
1,637,976
137,203,000
Unemployment (February 2010)
123
129,948
15,991,000
Unemployment Rate (February 2010)
4.6%
7.4%
10.4%
Percentage of People in Poverty (2008)
12.9%
15.7%
13.2%
Percentage of Under 18 in Poverty (2008)
20.5%
22.0%
18.2%
Transfer Dollars (2008)
$32,090,000
$23,242,704,000
$1,875,558,000,000
Transfer Dollars as Percentage of
21.6%
17.7%
15.3%
Total Personal Income (2008)
SOURCES: 2010 Bureau of Labor Statistics; 2010 Bureau of Economic Analysis; 2010 U.S. Census Bureau.
According to the Bureau of Labor Statistics, the unemployment rate for Dewey County was 4.4 percent for 2009, which was the lower than the state (6.4 percent) and significantly lower than the national (9.3 percent) rates. Moreover, in February 2010, the unemployment rate 10
for Dewey County had increased to only 4.6 percent, which was lower than the state (7.4 percent) and the nation (10.4 percent). Also, the number of people employed in Dewey County decreased 3.3 percent from 2009 to February 2010, while the number of people unemployed increased 1.7 percent during that same time period.
From the U. S. Census Bureau, the percent of people in poverty in Dewey County was 12.9 percent in 2008, as compared to 15.7 percent for the state and 13.2 percent nationally. The percentage of people under age 18 in poverty in 2008 followed similar trends, with Dewey County being slightly lower than the state but slightly higher than the nation. Another economic indicator is the percent of personal income that is from transfer payments. Based on Bureau of Economic Analysis data, Dewey County had 21.6 percent of total personal income from transfer payments, which is higher than both the state and the nation. Transfer payments represent that portion of total personal income whose source is state and federal funds. These typically include social security, Medicare, and retirement / disability payments.
Demographic Trends for the Seiling Community Hospital Medical Service Area and Dewey County
The Seiling Community Hospital medical service area is delineated in Figure 2. The primary medical service area is the immediate area surrounding Seiling including the zip code areas of Seiling, 73663; Camargo, 73835; Chester, 73838; Putnam, 73659; Taloga, 73667; and Vici, 73859. According to the U.S. Census Bureau, the 2000 census population of this primary medical service area was 4,138 (Table 4a). Seiling Community Hospital also serves a secondary medical service area, which consists of the zip code areas of Fairview, 73737; Leedey, 73654; 11
Mutual, 73853; Oakwood, 73658; and Sharon, 73857. According to the U.S. Census Bureau, the 2000 census population of this secondary medical service area was 5,605 (Table 4a).
Since the U. S. Census Bureau only has zip code population for the 2000 census year, another source for more current populations by zip code was researched. ESRI, a company specializing in geographic information systems software, has illustrated zip code populations for the 2000 census year and projected zip code populations for 2009 and projections for 2014. The zip code populations do not match exactly due to a variance in zip code boundaries and based on the methodology for determining population by zip code. However, when comparing the 2000 census and the 2000 ESRI data, total populations for the medical service area do not vary considerably. The ESRI projection of the primary medical service area shows an decrease in population of 3.6 percent from 2000 to 2009 and a projected 5.9 percent decrease from 2000 to 2014 (Table 4a).
Table 4b also shows population trends for the state of Oklahoma, Dewey County, and numerous cities in the primary and secondary medical service are of Seiling Community Hospital for the years 1990, 2000, and 2008. The city level estimates are place estimates rather than zip code estimates that were discussed in the previous table. From 1990 to 2000, Dewey County had a population decrease of 14.56 percent. The state experienced a population growth of 9.70 percent. During the same time period, Mutual and Sharon experienced the largest increase of 12.96 and 11.76 percent, respectively. Many communities also reported a decrease in population. Camargo experienced a decrease of 37.84 percent, and Oakwood reported a decline of 32.71 percent during the same time period. From 2000 to 2008, Dewey County saw another population decrease of 7.46 percent. The state of Oklahoma at experienced an increase of 5.56 percent. 12
City
County
Hospital
No. of Beds
Okeene
Blaine
Okeene Municipal Hospital
17
Watonga
Blaine
Watonga Municipal Hospital
25
Clinton
Custer
INTEGRIS Clinton Regional Hospital
56
Weatherford
Custer
Weatherford Regional Hospital
25
Seiling
Dewey
Seiling Community Hospital
18
Buffalo
Harper
Harper County Community Hospital
25
Fairview
Major
Fairview Regional Medical Center
25
Cheyenne
Roger Mills
Roger Mills Memorial Hospital
15
Alva
Woods
Share Memorial Hospital
37
Woodward
Woodward
Woodward Regional Hospital
87
Figure 2
Seiling Community Hospital Medical Service Area
Figure 2
Logan Medical Center Medical Service Area
Primary Medical Services Area
Secondary Medical Services Area 13
Sharon and Mutual were the only communities to experience an increase in population during this time period. Sharon reported an increase of 5.74 percent, and Mutual followed closely with an increase of 5.26 percent. Seiling reported the largest decrease in population of 10.63 percent, and Fairview followed with a decrease of 7.65 percent. It should be noted that population place estimates were not available for the town of Chester in the Census 1990 data, Census 2000 data, and Census 2008 estimates data.
Table 4a
Population of Seiling Community Hospital
Medical Service Area
Populations
Population by Zip Code
City
2000 Census
2000 ESRI
2009 ESRI
2014 ESRI
Primary Medical Service Area
73663
Seiling
1,332
1,613
1,562
1,526
73835
Camargo
204
139
133
129
73838
Chester
486
462
442
427
73659
Putnam
182
105
101
99
73667
Taloga
639
681
654
639
73859
Vici
1,295
1,211
1,169
1,142
Total
4,138
4,211
4,061
3,962
% Change from 2000 ESRI
-3.6%
-5.9%
Secondary Medical Service Area
73737
Fairview
3,587
3,785
3,641
3,539
73654
Leedey
887
769
738
720
73853
Mutual
353
230
236
245
73658
Oakwood
275
262
252
246
73857
Sharon
503
1,200
1,261
1,299
Total
5,605
6,246
6,128
6,049
% Change from 2000 ESRI
-1.9%
-3.3%
14
Table 4b
Population Trends for Dewey County and the State of Oklahoma
1990
2000
2008
% Change
% Change
Population
Population
Population
1990-2000
2000-2008
State of Oklahoma
3,145,585
3,450,654
3,642,361
9.70%
5.56%
Dewey County
5,551
4,743
4,389
-14.56%
-7.46%
Population by City
Seiling
1,031
875
782
-15.13%
10.63%
Camargo
185
115
106
-37.84%
-7.83%
Chester
n/a
n/a
n/a
n/a
n/a
Putnam
44
46
43
4.55%
-6.52%
Taloga
415
372
348
-10.36%
-6.45%
Vici
751
668
624
-11.05%
-6.59%
Fairview
2,936
2,733
2,524
-6.91%
-7.65%
Leedey
468
345
320
-26.28%
-7.25%
Mutual
68
76
80
11.76%
5.26%
Oakwood
107
72
67
-32.71%
-6.94%
Sharon
108
122
129
12.96%
5.74%
Cities Total
6,113
5,424
5,023
SOURCE: Population data from the U.S. Bureau of Census, 1990, 2000; U. S. Bureau of the Census, Population Estimates Branch, 2008; Community Sourcebook of Zip Code Demographics, 23rd Edition, 2008, ESRI, ESRI 2000 census population and 2009 and 2014 projected populations.
Tables 5 and 6 provide further details about the demographic trends of Dewey County. Table 5 presents the breakdown by age group for Dewey County and the State of Oklahoma from the census years 1990 and 2000 and the 2007 census estimates. The lowest age group, age 0-14, experienced a decrease from 1990-2000 and 2008. The age group of 45-64, however, has seen a consistent increase over time. In Dewey County, those age 45-64 made up 19.1 percent of 15
the total population in 1990, and this went up to 25.2 percent in 2008. This same trend holds true for the state of Oklahoma as well.
Table 6 shows the race and ethnic group percentages for Dewey County and the state of Oklahoma for the census years 1990 and 2000 and the 2008 census estimates. The state has experienced a significant increase in people of Hispanic origin, increasing from 2.7 percent in 1990 to 7.6 percent in 2008. Dewey County has experienced this same trend to an extent. In 1990, those of Hispanic origin made up 1.3 percent of the population. In 2000, this number increased to 2.7 percent. This number again increased in the 2008 estimates to 4.6 percent. 16
Table 5
Age Groups -
for Population Numbers and Percent of Total Population
Dewey County and the State of Oklahoma
Dewey County
State of Oklahoma
Age Groups
Number
Percent
Number
Percent
1990 Census
0-14
1,226
22.1%
702,537
22.3%
15-19
329
5.9%
233,093
7.4%
20-24
229
4.1%
222,766
7.1%
25-44
1,455
26.2%
961,560
30.6%
45-64
1,107
19.9%
601,416
19.1%
65+
1,205
21.7%
424,213
13.5%
Totals
5,551
100.0%
3,145,585
100.0%
2000 Census
0-14
851
17.9%
732,907
21.2%
15-19
390
8.2%
269,373
7.8%
20-24
201
4.2%
247,165
7.2%
25-44
1,087
22.9%
975,169
28.3%
45-64
1,219
25.7%
770,090
22.3%
65+
995
21.0%
455,950
13.2%
Totals
4,743
100.0%
3,450,654
100.0%
2008 Estimates
0-14
782
17.8%
753,870
20.7%
15-19
262
6.0%
251,880
6.9%
20-24
272
6.2%
270,201
7.4%
25-44
884
20.1%
957,085
26.3%
45-64
1,297
29.6%
918,688
25.2%
65+
892
20.3%
490,637
13.5%
Totals
4,389
100.0%
3,642,361
100.0%
SOURCE: U.S. Census Bureau, Census data for 1990 and 2000, estimated population for 2008 (www.census.gov [April 2010]).
17
Table 6
Race and Ethnic Groups -
for Population Numbers and Percent of Total Population
Dewey County and the State of Oklahoma
Dewey County
State of Oklahoma
Race/Ethnic Groups
Number
Percent
Number
Percent
1990 Census
White
5,160
93.0%
2,547,588
81.0%
Black
5
0.1%
231,462
7.4%
Native American 1
306
5.5%
246,631
7.8%
Other 2
1
0.0%
33,744
1.1%
Two or more Races 3
NA
--
NA
--
Hispanic Origin 4
73
1.3%
86,160
2.7%
2000 Census
White
4,299
90.6%
2,556,368
74.1%
Black
6
0.1%
257,981
7.5%
Native American 1
214
4.5%
266,158
7.7%
Other 2
6
0.1%
50,594
1.5%
Two or more Races 3
91
1.9%
140,249
4.1%
Hispanic Origin 4
127
2.7%
179,304
5.2%
2008 Estimates
White
3,820
87.0%
2,600,115
71.4%
Black
6
0.1%
280,290
7.7%
Native American 1
246
5.6%
278,659
7.7%
Other 2
3
0.1%
63,856
1.8%
Two or more Races 3
114
2.6%
140,821
3.9%
Hispanic Origin 4
200
4.6%
278,620
7.6%
SOURCE: U.S. Census Bureau, Census data for 1990 and 2000, estimated population for 2008 (www.census.gov [April 2010]).
1 Native American includes American Indians and Alaska Natives.
2 Other is defined as Asian Americans, Native Hawaiians, Pacific Islanders and all others.
3 Two or more races indicate a person is included in more than one race group.
4 Hispanic population is not a race group but rather a description of ethnic origin; Hispanics are
included in the five race groups.
n/a - Not available; 1990 census did not report this category
18
The Direct Economic Activities
The health sector creates employment and payroll impacts, which are important direct economic activities for the Seiling Community Hospital service area. The health sector is divided into the following six components:
 Hospital
 Physicians, Dentists, and Other Medical Professionals
 Nursing and Protective Care
 Home Health
 Pharmacies
 Other Medical and Health Services
The health sector in the Seiling Hospital medical service area employs 164 full-time and part-time employees and has an estimated payroll of $6,093,894 (Table 7). The health sector in Dewey County is fairly typical of counties of its size, with a hospital, two physician offices, one optometrist office, two nursing homes, one EMS service, one county health department, and three pharmacies.
The Hospital component provides 30 full and part-time jobs with an estimated annual payroll of $1,247,479 (including benefits1). The Physicians, Dentists, and Other Medical Professionals sector employs 8 total full and part-time employees with an estimated payroll of $862,840. The Nursing and Protective Care component employs 107 total full-time and part-time employees with an estimated annual payroll of $3,280,139. The Other Medical and Health Services component which includes one EMS service and one county health department employs 12 total full-time and part-time employees and has an estimated annual payroll of $248,335. The Pharmacy component, including three pharmacies, employs 7 full and part-time employees with an annual payroll of $455,100.
1 The ratios for benefits are derived from the 2002 Economic Census Data-Oklahoma Health Care and Social Assistance by industry, U.S. Census Bureau. 19
The health sector is vitally important as both a community employer and a source of income to the community's economy. As demonstrated in Table 7, the health sector employs a large number of residents.
Table 7
Direct Economic Activities of the Health Sector
in the Seiling Community Hospital Medical Service Area
Component
Full-Time & Part-Time Employment
Total Payroll with Benefits
Hospital
30
$1,247,479
Includes Seiling Community Hospital
Physicians, Dentists, & Other Medical Professionals
8
$862,840
Includes two physician offices and one optometrist office
Nursing and Protective Care
107
$3,280,139
Includes two nursing homes
Other Medical & Health Services/Pharmacies
12
$248,335
One EMS service and one county health department
Pharmacies
7
$455,100
Includes three pharmacies
Totals
164
$6,093,894
SOURCE: Local survey and estimates from research.
These residents, along with businesses in the health sector, purchase a large amount of goods and services from businesses in the Seiling Community Hospital medical service area. These impacts are referred to as secondary impacts or benefits to the economy. Before the secondary impacts of the health sector are discussed, the basic concepts of community economics will be reviewed. 20
Basic Concepts of Community Economics and
Income and Employment Multipliers
Figure 3 illustrates the major flows of goods, services, and dollars of any economy. The foundations of a community's economy are those businesses that sell some or all of their goods and services to buyers outside of the community. Such a business is a basic industry. The two arrows in the upper right portion of Figure 3 represent the flow of products out of, and dollars into, a community. To produce these goods and services for "export" outside the community, the basic industry purchases inputs from outside of the community (upper left portion of Figure 3), labor from the residents or "households" of the community (left side of Figure 3), and inputs from service industries located within the community (right side of Figure 3). Households using their earnings to purchase goods and services from the community’s service industries complete the flow of labor, goods, and services in the community (bottom of Figure 3). It is evident from the relationships illustrated in Figure 3 that a change in any one segment of a community's economy will cause reverberations throughout the entire economic system of the community.
HouseholdsIndustryBasicServicesGoods &$LaborInputsProductsInputs$$$$Services$$
Figure 3
Community Economic System 21
Consider, for instance, the closing of a hospital. The services section will no longer pay employees and the dollars flowing into households from these jobs will stop. Likewise, the hospital will not purchase goods from other businesses, and the dollar flow to other businesses will stop. This decreases income in the "households" segment of the economy. Since earnings would decrease, households decrease their purchases of goods and services from businesses within the "services" segment of the economy. This, in turn, decreases the amount of labor and input that these businesses' purchase. Thus, the change in the economic base works its way throughout the entire local economy. The total impact of a change in the economy consists of direct, indirect, and induced impacts. Direct impacts are the changes in the activities of the impacting industry, such as the closing of a hospital. The impacting business, such as the hospital, changes its purchase of inputs as a result of the direct impact. This produces an indirect impact in the business sectors.
Both the direct and indirect impacts change the flow of dollars to the community's households. The households alter their consumption accordingly. The effect of this change in household consumption upon businesses in a community is referred to as an induced impact. A measure is needed that yields the effects created by an increase or decrease in economic activity. In economics, this measure is called the multiplier effect. The multipliers used in this report are defined as:
“…the ratio between direct employment (or income), or that employment (or income) used by the industry initially experiencing a change in final demand and the direct, indirect, and induced employment (or income).”
An employment multiplier of 3.0 indicates that if one job is created by a new industry, 2.0 jobs are created in other sectors due to business (indirect) and household (induced) spending. 22
Secondary Impacts of the Health Sector
on the Economy of Seiling Community Hospital
Employment and income multipliers for the area have been calculated by use of the IMPLAN model. This model was developed by the U.S. Forest Service2 and allows for the development of multipliers for various sectors of an economy. The employment multipliers for the components of the health sector are shown in Table 8, column 3. The employment multiplier for the Hospital component is 1.35. This indicates that for each job in that component, an additional 0.35 jobs are created throughout the area due to business (indirect) and household (induced) spending. The employment multipliers for the other health sector components are also shown in Table 8, column 3.
Applying the employment multipliers to the employment for each component yields an estimate of the impact on the economy (Table 8, columns 2, 3, and 4). For example, the hospital has a direct employment of 30 full-time and part-time employees; applying the employment multiplier of 1.35 to the employment number of 30 brings the total employment impact of the hospital to 41 employees. The Physicians, Dentists, and Other Professionals component employs 8 people; however, the total impact is 10 employees once the multiplier of 1.24 is applied. The Nursing and Protective Care component has a total employment of 115 after the multiplier of 1.08 is applied to the direct employment of 107. The Other Medical and Health Services component has 12 full-time and part-time employees and an employment multiplier of 1.16, for a total employment impact of 14. The Pharmacies component has a total impact of 8 employees after applying the multiplier of 1.21 to 7. The total employment impact of the health sector in Seiling Community Hospital medical service area is estimated to be 188 employees (Table 8, total of column 4).
2 For complete details of model, see [1], [2], and [3]. 23
Table 8
Seiling Community Hospital Medical Service Area Health Sector Impact
on Employment and Income, and Retail Sales and Sales Tax
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Employment
Income
Retail
1 Cent
Health Sectors
Employed
Multiplier
Impact
Income
Multiplier
Impact
Sales*
Sales Tax
Hospitals
30
1.35
41
$1,247,479
1.18
$1,469,812
$209,742
$2,097
Physicians, Dentists, & Other Medical Professionals
8
1.24
10
$862,840
1.08
$935,081
$133,436
$1,334
Nursing and Protective Care
107
1.08
115
$3,280,139
1.09
$3,570,734
$509,544
$5,095
Other Medical & Health Services
12
1.16
14
$248,335
1.12
$277,342
$39,577
$396
Pharmacies
7
1.21
8
$455,100
1.09
$498,304
$71,108
$711
Total
164
188
$6,093,894
$6,751,273
$963,407
$9,634
SOURCE: 2008 IMPLAN database, Minnesota IMPLAN Group, Inc.; Local data for employment, employee compensation and proprietor's income; income estimated based on state average incomes if local data not available
* Based on the ratio between Dewey County retail sales and income (14.27%) – from 2009 County Sales Tax Data and Personal Income Estimates from the Bureau of Economic Analysis. 24
Applying the income multipliers to the income (payroll including benefits) for each of the health sector components yields an estimate of each component’s income impact on the Seiling Community Hospital medical service area (Table 8, columns 5, 6, and 7). The income multiplier for the Hospital component is 1.18 (Table 8, column 6). This indicates that for each dollar in that component, an additional 0.18 dollars are created throughout the area due to business (indirect) and household (induced) spending. The Hospital component has a total payroll of $1,247,479; applying the income multiplier of 1.18 brings the total Hospital component income impact to $1,469,812. The income multipliers for the other health sector components are also shown in Table 8, column 6. The Physicians, Dentists, and Other Medical Professionals component has a total income impact of $935,081, based on the application of the income multiplier of 1.08 to the $862,840 payroll. The Nursing and Protective Care component has a multiplier of 1.09 which yields a total income impact of $3,570,734. The Other Medical and Health Services component has a total payroll of $248,335 and an income multiplier of 1.12 leading to a total income impact of $277,342. The Pharmacies component has a total income impact of $498,304 after the multiplier of 1.09 is applied to the direct income of $455,100. The total income impact of the health sector on the economy of Seiling Community Hospital medical service area is projected to be $6,751,273 (Table 8, total of column 7).
Income also has an impact on retail sales, and the health sector has its own distinct effect on these retail sales. The local retail sales capture ratio is used to estimate the effect of the health sector on retail sales. This ratio indicates the percentage of personal income spent locally on items that generate local sales tax. If the county ratio between retail sales and income continues as it has in the past several years (around 14.27 percent), then direct and secondary retail sales generated by the health sector equals $963,407 (Table 8, total of column 8). Each of the components’ income impacts is utilized to determine the retail sales and a one-cent sales tax collection for each component. A one-cent sales tax collection is estimated to generate $9,634 in 25
the Seiling Community Hospital medical service area economy as a result of the health sector income impact (Table 8, total of column 9). This estimate is probably low, as many health care employees tend to spend a larger portion of their income in local establishments that collect sales tax. The bottom line is that the health sector in Seiling Community Hospital medical service area not only contributes greatly to the medical health of the community, but also to the economic health of the community.
Summary
The economic impact of the health sector on the economy of Seiling Community Hospital medical service area is tremendous. The health sector employs a large number of residents, similar to a large industrial firm. The secondary impact occurring in the community is extremely large and is a testament to the importance of the health sector. If the health sector increases or decreases in size, the medical health of the community, as well as the economic health of the community, is greatly affected. For the attraction of industrial firms, businesses, and retirees, it is crucial that the area have a quality health sector. The fact that a prosperous health sector also contributes to the economic health of the community is often overlooked.
References
[1] IMPLAN Professional Version 2.0 Social Accounting & Impact Analysis Software – USER’S GUIDE, ANALYSIS GUIDE, DATA GUIDE, MIG, Minnesota IMPLAN Group, 2nd Edition, June 2000.
[2] Palmer, Charles and Eric Siverts, IMPLAN ANALYSIS GUIDE. U.S. Department of Agriculture, Forest Service Land Management Planning Systems Section, Rocky Mountain Forest and Range Experiment Station, Fort Collins, Colorado, 1985.
[3] Siverts, Eric, Charles Palmer, Ken Walters, and Greg Alward, IMPLAN USER'S GUIDE, U.S. Department of Agriculture, Forest Service, Systems Application Unit, Land Management Planning, Fort Collins, Colorado, 1983.