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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.
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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
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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.
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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
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Overview of Community Economic
System
Households
Industry
Basic
ServicesGoods &
$
Inputs
Products
Inputs
$ $
$
$
Services
$ $
Labor
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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
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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
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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
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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
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Health Services Promote Job Growth
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Health Services Foster Rural DevelopmentHealth Services Foster Rural Development
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Health Services Attract RetireesHealth Services Attract Retirees
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Example:
The Medicaid Program
on Alaska’s Economy
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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
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$$$
Figure 1 Flow of Goods, Services, and Dollars in Alaska’s
Economy relative to the Medicaid Program
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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
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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
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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
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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
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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
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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.
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• Zip Code Level
• County Level
• Regional Level
• State Level
• National Level
Models can measure impact at:
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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
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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
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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
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Analyze Economic Feasibility
of Health Services Identified
in Community Engagement Process
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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
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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
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Budget Studies Under Construction
Rural Health Clinics
Specialty Physicians
Federally Qualified Health Centers (FQHCs)
• Pharmacy
• Mental
CT Scan
Teleradiology
Ultrasound-Echo System
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Rural Health Works National Website:
www.ruralhealthworks.org