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Economic Impact of the Queen of Peace Hospital and Related Health Sectors of Scott County

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Economic Impact of the Queen of Peace Hospital and Related Health Sectors of Scott County March 17, 2011 Minnesota Department of Health- Office of Rural Health and Primary Care The health care sector is
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Economic Impact of the Queen of Peace Hospital and Related Health Sectors of Scott County March 17, 2011 Minnesota Department of Health- Office of Rural Health and Primary Care The health care sector is often the largest rural employer and frequently is directly responsible for 10 to 15 percent of jobs. A strong health care sector promotes job growth within other industries and attracts retirees and young families. This report measures the primary and secondary impact of health care jobs and income for Scott County. Scott County is in central Minnesota. The county has square miles with a population density of people per square mile, compared to 61.8 people per square mile statewide. There are 30,692 households. The Queen of Peace Hospital service area of 57,404 people includes surrounding cities and townships primarily in Scott County. Health Care s Economic Impact The health care industry has a tremendous impact on a community s economy and quality of life. This is especially true with hospitals, clinics and nursing homes. These facilities purchase goods and services from other local businesses and employ a number of people who shop at local businesses and pay taxes. The health care sector includes five components: Hospitals Doctors and dentists (includes chiropractors, optometrists) Nursing and protective care (nursing and group homes) Other medical and health services (includes home health care, veterinarians, rehabilitation and the county health departments) Pharmacies. Minnesota Department of Health-Office of Rural Health and Primary Care 1 The actual employment, income and sales of goods and services the industry provides are key aspects of the overall local economic impact. Some of the goods and services are sold to buyers outside of the community, which creates a flow of dollars into the community (Figure 1). Figure 1. Community Economic System Inputs $ Basic Industry $ $ Labor Inputs Goods & Services $ Products To produce these goods and services for export, the basic industry purchases inputs from outside the community, labor from the $ households and inputs from service industries Household $ Service located in the community. The flow of labor, goods and services in the community is completed when households use their earnings to purchase goods and services from the community s service industries such as health care. This theory can be demonstrated by considering the impact of a hospital closing. The service sector will no longer pay employees, and dollars going to households will stop. The hospital will not purchase goods, halting the flow of dollars to other businesses. This decreases income in the Household segment of the economy. When earnings drop, households decrease their purchases of goods and services from businesses within the Service segment of the economy. In turn, these businesses decrease their purchases of labor and inputs. The change works its way throughout the entire local economy. An economic change includes direct, indirect and induced impacts. Direct impacts are the changes in the activities of the impacting industry, such as the hospital opening a new birthing center service. The impacting business (hospital), changes its purchases of inputs. 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. This change is referred to as an induced impact. Economic Impact of Health Care 2 There are four major roles, including financial and non-financial linkages, for health care in rural economic development: 1) keeping local health care dollars at home and addressing supplydemand gaps, 2) attracting external patients as an export-based industry, 3) helping recruit businesses and workers, and 4) promoting a healthy and productive workforce. Figure 2. The Linkages of the Health Care Sector Trade Employee Households Employer & Purchaser backward linkages Health Care Sector Service Provider forward linkages Industry Retirees Services 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. a It is defined as the ratio between employment of the industry initially experiencing a change and the direct, indirect and induced employment. For example, an employment multiplier of 2.0 indicates that if one job is created by a new industry, one other job is created in other sectors due to business (indirect) and household (induced) spending. a Employment and income multipliers have been calculated using the IMPLAN model. The U.S. Forest Service developed IMPLAN as a model that allows for development of county multipliers. A Type SAM multiplier is used in this report. Type SAM multipliers are calculated using a social accounting matrix methodology that accounts for commuting, social security tax payments, household income taxes and savings. Type SAM multipliers separate the effects of market income such as employment payrolls, from government expenditures such as social security payments. Thus, Type SAM multipliers give estimates that are more accurate than the earlier Type II and Type III multipliers. Also see References [1]. Minnesota Department of Health-Office of Rural Health and Primary Care 3 Economic Potential Job creation is vital to rural economic development. It is also important to note that the health sector is growing. Nationally, employment in health care services increased by 28 percent from 1990 to 2000, and by more than 200 percent since 1970 (Table 1). Table 1 illustrates how health services, as a share of gross domestic product (GDP), have increased over time. In 1970, Americans spent $73.1 billion on health care, which accounted for 7 percent of the GDP. In 2000, health care costs ballooned to nearly $1.3 trillion, or about 13.2 percent of the GDP. Capturing this economic growth can only help a rural community. The secondary impact of increased health care spending, such as higher retail sales in non-health areas or new housing starts, may also have a sizeable impact on the community. Table 1. National Health Expenditures and Employment Data Total Expenditures ($ Billion) Per Capita Expenditures ($) Expenditures as a Percent of GDP Health Sector Employment (million jobs) Annual Increase in Employment Year , , , % , , % ,300 4, , % ,500 8, , % Centers for Medicare and Medicaid Services, National Health Expenditures and Selected Economic Indicators, and Bureau of Labor Statistics (BLS) U.S. health care spending decelerated in 2009, increasing 4.0 percent compared to 4.7 percent in Total health expenditures reached 2.5 trillion, which translates to $8,086 per person or 17.6 percent of the nation s Gross Domestic Product (GDP). Economic Impact of Health Care 4 Determining Importance of Health Care to Your Economy First, determine the health services your community uses and the expenditures for those services. Table 2 shows the 2004 Minnesota per capita expenditures by major categories of health care. The estimated population of the Queen of Peace Hospital market area is 57,404 consisting mainly of Scott County and surrounding townships. The last column multiplies the per capita expenditures by that estimated service area population to arrive at the estimated economic impact of providing services in Scott County: $222,153,480 (Detailed analysis in Appendix) Table 2. Estimated Potential Expenditures 2004 Percent Primary Market Area Minnesota Primary Care Per Potential Per Capita Health Services ($) b Care Capita ($) Expenditures($) c Hospital Care 1,965 61% 2 1,199 68,827,396 Physician and Other Professional Services 1,428 75% 3 1,290 74,051,160 Home Health Care % ,634,732 Nursing Home Care % ,692,860 Dental Services % ,178,788 Pharmaceutical Drugs/ Other Non-Durables % ,768,544 Medical Durables Other Personal Health Care Total $5,503 69% $3,780 $222,153,480 Centers for Medicare and Medicaid Services 1 Numbered footnotes are presented in Appendix. b Per capita expenditures are 1998 data adjusted for inflation using the GDP implicit price deflator. c Based on per capita amounts and a market area population estimate of 57,404 people. By comparing the potential impact with local data, your community can determine if there is an opportunity to expand health care and bring more health dollars into the local economy. For example, the hospital will have an annual estimate of total billings. If this figure is below the potential, there may be room to expand hospital services and retain more dollars in your community. An example of a service that can be provided completely within the service area is nursing homes. If there are waiting lists at existing facilities, or residents are using facilities outside the service area, there is a potential to expand locally. Minnesota Department of Health-Office of Rural Health and Primary Care 5 Another economic potential is the growth in health-related occupations. Statewide, health care represented 228,681 jobs in 2006, or about 8 percent of all jobs in the state. Health-related jobs are expected to increase 24 percent by When both employment increases and replacements are considered, total openings through 2016 are expected to be 36,780. Health care jobs are roughly two-thirds professional and technician positions, and one-third service and related occupations. Employment projections are not available on a county basis, but for the seven county metro area health care represented 120,521 jobs in 2006 and is expected to increase percent by Economic Indicators Table 3 shows economic indicators for Scott County, Minnesota and statewide. The average per capita income in Scott County was $40,851 compared to $42,953 for Minnesota. An estimated 4.4 percent of Scott County s population was below the poverty rate compared to the state rate of 9.5 percent. The data indicates that 8.3 percent of total personal income for Scott County came from transfer payments (income subsidy such as Social Security, Medicare or Medicaid). Table 3. Economic Indicators for Scott County, Minnesota and the Nation Indicator County Minnesota Nation Total Personal Income (2008) $5,278,744 billion $224,670,738 billion $12,225 trillion Per Capita Income (2008) $40,851 $42,953 $40,166 Civilian Labor Force (2010) d 74,692 2,993, million Unemployment (2010) , million Unemployment Rate (2010) 6.6% 6.8% 9.7% Poverty Rate (2008) 4.4% 9.6% 13.2% Transfer Dollars (2008) $437,801 million Transfer Dollars as Percentage of Total Personal Income (2008) $ billion $1.875 trillion 8.3% 13.6% 15.3% U.S. Bureau of Economic Analysis, Bureau of Labor Statistics, and Census Bureau d Labor force estimates are from the U.S. Bureau of Labor Statistics Current Population Survey. Employed persons holding more than one job are only counted once. Economic Impact of Health Care 6 Population Scott County experienced a population gain of 54.7 percent from 1990 to 2000 (compared to 12.4 percent gain statewide), reaching 57,846 (Table 4).The Scott County population is projected to increase slightly through Table 4. Selected Demographic Data for Scott County and Minnesota Selected Item Scott County Population Change ( ) 43,784 57,846 ( ) 57,846 89,498 Population Projections: Year 2005 = 106,400 Year 2010 = 122,260 Year 2015 = 137,970 County Percent State Percent Population by Race (2000) White Native American e Asian Black Other f Two or more races g 118, ,388 3, , Hispanic ethnic background h SOURCE: U.S. Census Bureau, 2000 data available from Minnesota Planning, Minnesota State Demographer s Office estimates for e Native American includes American Indian and Alaska Natives f Other defined as: Asian Americans, Native Hawaiian, Pacific Islander and all others. g Two or more races indicate a person is included in more than one race group. h Hispanic is not a race group but rather a description of ethnic origin; Hispanics are included in all four race groups. The age range of the Scott County population generally reflects the rest of Minnesota (Figure 3). Figure 3. Population by Age Group for Scott County and Minnesota Minnesota Department of Health-Office of Rural Health and Primary Care 7 Employment Total employment in Scott County was 58,680 in 2008 and health care services accounted for 8 percent (Figure 4). The sectors with the largest employment are still non-health care services, manufacturing and retail trade, making up over half of Scott County s economic base. Figure 4. Employment by Sector for Scott County Other Medical 7% Government 10% Education 10% Hospital 1% Farm 1% Construction 8% Manufacturing 9% Wholesale Trade 4% Transportation 3% Farm Construction Manufacturing Wholesale Trade Transportation Retail Trade Financial/Realty Non-Healthcare Services Non-Healthcare Services 32% Financial/Realty 8% Retail Trade 9% Government Other Medical Hospital Education Bureau of Economic Analysis, Regional Economic Information System, 2008 In 2008, the total health sector in Scott County employed 3,362 individuals and produced a payroll of $149,439,520. The county has one critical access hospitals, one perspective payment system hospital, four nursing homes, 22 home care agencies, and 13 assisted living facilities. The Queen of Peace Hospital employs 324 people with an annual payroll of $19,693,000. Services at the hospital include primary care, surgery, emergency care and rehabilitation. Many rural communities have a large number of elderly people and farmers who often retire in the towns. Thus, nursing and protective care facilities are an important component of the health sector. The Scott County health sector purchased goods and services totaling $134,495,568 in Together with payroll, health sector expenditures amounted to $283,935,088 in Economic Impact of Health Care 8 Table 5. Direct Economic Activities of the Health Sector in Queen of Peace Hospital, Service Area and Scott County, Minnesota 2009 Component Estimated Employees Estimated Expenditures Hospital 824 $55,520,000 Doctors and Dentists (Includes physician offices, plus chiropractors, optometrists, and visiting specialists) Nursing and Protective Care (Nursing homes and supervised living facilities) ,053, ,435,000 Other Medical and Health Services ,520 Home Health Care Services 112 2,636,000 Pharmacies 249 7,181,000 TOTAL EMPLOYEES AND PAYROLL 3362 $149,439,520 Expenditures for Goods and Services Other Than Payroll $134,495,568 TOTAL EXPENDITURES $283,935,088 SOURCE: Local survey and 2009 IMPLAN data estimated from U.S. Census Bureau County Business Patterns and U.S. Bureau of Economic Analysis reports, indexed to 2009 dollars. Minnesota Department of Health-Office of Rural Health and Primary Care 9 The Impact The employment and income impacts for Scott County have been calculated using IMPLAN i multipliers (See Reference [1]). A multiplier is the ratio between employment or income from one industry and the sum of its direct, indirect and induced effects, defined here as the total impact on the rest of the local economy. Table 6 summarizes the employment and income impact of the health care industry in Scott County. Table Economic Impact of Health Sector on Employment & Income in Scott County Employment Type Employment Estimated Type SAM Impact Expenditures SAM Multiplier i Multiplier j Health Sector Component Hospitals Income Impact $55,520, $71,620,800 Doctors and ,053, ,505,720 Dentists Nursing and ,435, ,391,150 Protective Care Other Health , ,473 Services Home Health Care ,636, ,321,360 Services Pharmacies and ,181, ,976,520 Related TOTALS 3, $149,439,520 $189,682,023 Health-Related as Percent of Scott County Total Expenditures Other Than Payroll TOTAL EXPENDITURES Percent of Scott County Total Economic Output 6.0% 8.0% $134,495,568 $201,743,352 $283,935,088 $391,425, % 7.3% i A Type SAM employment multiplier is calculated using the formula: (direct employment in these industries + employment generated indirectly in input supplier firms additional employment induced by the employees consumer spending)/(direct employment). A type SAM income multiplier is calculated in a similar fashion. j 2000 IMPLAN Data Base indexed to 2009 dollars; 2000 Minnesota County Business Patterns, U.S. Bureau of Economic Analysis, Regional Economic Information System. Economic Impact of Health Care 10 The total employment impact of the health care sector in Scott County is 4,613 jobs. There are approximately 3,362 actual jobs in the health care industry in Scott County. The health care sector supports approximately 1,251 additional jobs in Scott County through the multiplier effect. The combined effect represents 8 percent of Scott County s total employment. The total income impact of the health care industry in Scott County is $186 million. The health care industry provides approximately $149 million in income annually in Scott County. The health care sector generates approximately $37 million in additional income in Scott County through the multiplier effect. The $134 million spent in the health care sector of Scott County has created another $67 million of spending in other sectors of the county s economy. Therefore, the combined effect represents 7.3 percent of the county s total economic output. Table 7. Economic Impact of the Health Sector on Employment and Income for Queen of Peace Hospital in Scott County, 2010 Employment Type SAM Employment Estimated Type SAM Multiplier k Impact Expenditures Multiplier a Health Sector Component Queen of Peace Hospital Income Impact $19,693, $25,503,970 TOTALS $19,693,000 $25,503,970 Health-Related as % of Scott County Total Expenditures $21,465,370 $32,198,055 Other Than Payroll TOTAL $41,158,370 $57,702,025 EXPENDITURES k Type SAM employment multiplier is calculated using the formula: (direct employment in these industries + employment generated indirectly in input supplier firms + additional employment induced by the employees consumer spending)/(direct employment). A type SAM income multiplier is calculated in a similar fashion. SOURCE: 2006 IMPLAN Data Base indexed to 2006 dollars; 2000 Minnesota County Business Patterns, U.S. Bureau of Economic Analysis, Regional Economic Information System. Minnesota Department of Health-Office of Rural Health and Primary Care 11 The total employment impact of the health care sector for Queen of Peace Hospital in Scott County is 505 jobs. There are approximately 324 actual jobs at Queen of Peace Hospital in Scott County. Approximately 181 additional jobs are supported through the multiplier effect. The total income impact for the Queen of Peace Hospital in Scott County is $25.5 million. The Queen of Peace Hospital provides approximately $19,6 million in income annually in Scott County. Approximately $5.9 million in additional income is supported by the multiplier effect. The $21.4 million spent in the health care sector for Queen of Peace Hospital has created another $10.7 million of spending in other sectors of the County s economy. The overall impact due to Queen of Peace Hospital is $57.7 million. On the average, Minnesota Critical Access Hospitals have seen at least a 5 percent greater economic impact since becoming a Critical Access Hospital. Economic Impact of Health Care 12 The Next Steps The economic impact of the health sector upon the economy of Scott County and the rest of the Queen of Peace Hospital service area is significant. The health sector employs a large number of residents, similar to a large industrial firm. The secondary impact occurring in the community illustrates the total impact of the health sector. If the health sector increases or decreases in size, the medical health, and the economic health of the community are greatly affected. For the retention and attraction of industrial firms, businesses and retirees, it is crucial that the area have a quality health sector. A prosperous health sector contributes to the economic hea
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