The economic impact of the health sector on the EPIC Medical Center in Eufaula, OK, Medical Service Area

              The Economic Impact of the Health Sector
on the EPIC Medical Center in Eufaula, OK,
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
November 2010 AE-10121
The Economic Impact of the Health Sector
on the EPIC Medical Center in Eufaula, OK, 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
Jack Frye, Area Extension Rural Development Specialist, OSU, Ada
580-332-4100
Randell Burris, Dewey County Extension Director, Eufaula
918-689-7772
Corie Kaiser, Assistant Director, Oklahoma Center for Rural Health, Oklahoma City
405-840-6500
Val Schott, Director, Oklahoma Center for Rural Health, Oklahoma City
405-840-6500
Oklahoma State Department of Health
Office of Rural Health
Oklahoma Cooperative Extension Service
Oklahoma State University
November 2010 1
The Economic Impact of the Health Sector
on the EPIC Medical Center in Eufaula, OK, 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 EPIC Medical Center in Eufaula, OK medical service area. The specific objectives of this report are to:
1. Review economic trends of the health sector for the U.S. and McIntosh County;
2. Identify the population for the medical service area of EPIC Medical Center in Eufaula, OK;
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 EPIC Medical Center in Eufaula, OK, 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.
3
Health Services and Attracting Retirees
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
McIntosh County Economic Trends
Data relative to the health sector for McIntosh 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 McIntosh 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 McIntosh County increased 2.7 percent from 736 employees in 2000 to 756 employees in 2008 (Table 2). During the same time period, the total county employment increased 5.8 percent. County health services employment as a percent of total county employment decreased from 23.5 percent in 2000 to 22.8 percent in 2008, while the state health services employment as a percent of total state employment increased from 14.1 percent in 2000 to 15.3 percent in 2008. The county saw a decrease of 0.7 percent over this eight year period, while the state grew 1.2 percent.
The county health services payroll experienced a different trend than employment. McIntosh County’s health services payroll increased 61 percent from about $10.7 million in 2000 to $17.2 million in 2008; this compares to an increase of 51.1 percent for the total county payroll (Table 2). State health services payroll as a percent of state payroll increased 1.2 percent from 2000 to 2008. County health services payroll as a percent of total county payroll increased from 21.4 percent in 2000 to 22.8 percent in 2008. 8
Table 2
EPIC Medical Center
Employment and Payroll for County Business Patterns*
McIntosh County and the State of Oklahoma
Employment
Based
Health
Total
Hlth Svcs as a
Hlth Svcs as a
on
Services
County
% of Total
% of Total
NAICS1
Employment
Employment
County Employment
State Employment
2000
736
3,130
23.5%
14.1%
2001
690
3,111
22.2%
14.3%
2002
773
3,133
24.7%
15.1%
2003
612
3,060
20.0%
15.2%
2004
749
3,254
23.0%
15.4%
2005
822
3,314
24.8%
15.4%
2006
922
3,310
27.9%
15.1%
2007
762
3,037
25.1%
15.3%
2008
756
3,310
22.8%
15.3%
% Change '00 - '08
2.7%
5.8%
Payroll
Based
Health
Total
Hlth Svcs as a
Hlth Svcs as as
on
Services
County
% of Total
% of Total
NAICS1
Payroll ($1000s)
Payroll ($1000s)
County Payroll
State Payroll
2000
$10,711
$50,068
21.4%
14.0%
2001
$13,892
$56,040
24.8%
14.5%
2002
$14,171
$57,413
24.7%
15.2%
2003
$11,467
$58,068
19.7%
15.2%
2004
$3,481
$61,670
5.6%
15.7%
2005
$14,481
$63,181
22.9%
15.5%
2006
$15,914
$62,221
25.6%
15.1%
2007
$14,824
$66,124
22.4%
15.3%
2008
$17,247
$75,657
22.8%
15.2%
% Change '00 - '08
61.0%
51.1%
Source: U.S. Census Bureau, County Business Patterns; 2000-2008 data (www.census.gov [July 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-charted credit unions, and hospitals).
9
Basic economic indicators of the McIntosh County economy are illustrated in Table 3. Based on Bureau of Economic Analysis data, the 2008 per capita income for McIntosh County of $27,232 is lower than the per capita income for the state of Oklahoma and the United States.
Table 3
Economic Indicators for McIntosh County,
the State of Oklahoma and the Nation
Indicator
County
State
U.S.
Total Personal Income (2008)
$534,535,000
$131,070,218,000
$12,238,800,000,000
Per Capita Income (2008)
$27,232
$35,969
$40,166
Employment (2009)
8,252
1,659,607
139,877,000
Unemployment (2009)
718
113,579
14,265,000
Unemployment Rate (2009)
8.0%
6.4%
9.3%
Employment (September 2010)*
8,136
1,643,054
139,715,000
Unemployment (September 2010)*
777
113,974
14,140,000
Unemployment Rate (September 2010)*
8.7%
6.5%
9.2%
Percentage of People in Poverty (2008)
20.8%
15.7%
13.2%
Percentage of Under 18 in Poverty (2008)
32.4%
22.0%
18.2%
Transfer Dollars (2008)
$186,824,000
$23,242,704,000
$1,875,558,000,000
Transfer Dollars as Percentage of
21.6%
17.7%
15.3%
Total Personal Income (2008)
*County and State estimates are considered preliminary
SOURCES: 2009 Bureau of Labor Statistics; 2008 Bureau of Economic Analysis; 2009 U.S. Census Bureau.
According to the Bureau of Labor Statistics, the unemployment rate for McIntosh County was 8.0 percent for 2009, which was higher than the state (6.4 percent) rate but lower than the national (9.3 percent) rate. Moreover, in September 2010, the unemployment rate for McIntosh County had increased to only 8.7 percent, which was higher than the state (6.5 percent) and 10
lower than the nation (9.2 percent). Also, the number of people employed in McIntosh County decreased 1.4 percent from 2009 to September 2010. This is a common trend across the state. The number of people unemployed increased 8.2 percent during that same time period.
From the U. S. Census Bureau, the percent of people in poverty in McIntosh County was 20.8 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 McIntosh County being higher than the state and the nation. Another economic indicator is the percent of personal income that is from transfer payments. Based on Bureau of Economic Analysis data, McIntosh County had 35 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.
Sales tax collections from retail sales are extremely important to the city of Eufaula and McIntosh County. Figure 2 displays the trend of city level sales tax collections for Eufaula. In nominal terms, Eufaula has experienced a significant increase in sales tax collections. However, when the CPI is applied, inflation-adjusted collections still display a significant increase, especially from 1999 to present. Eufaula is a smaller community in Oklahoma that does exceptionally well in sales tax collections. For 2009, Eufaula reported $20 million more in retail sales than the average of cities of similar size (population 2,500-3,000). As stated earlier, a healthy health sector is vital in rural development efforts. Local health services can also be very beneficial for local retail activity.
11
$0.00
$500,000.00
$1,000,000.00
$1,500,000.00
$2,000,000.00
$2,500,000.00
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Figure. 2 City Sales Tax Collections for Eufaula, Actual and Inflation-Adjusted for 1980-2009
Actual
Inflation-Adjusted12
Demographic Trends for the EPIC Medical Center in Eufaula, OK, Medical Service Area and McIntosh County
The EPIC Medical Center in Eufaula, OK, medical service area is delineated in Figure 3. The primary medical service area is the immediate area surrounding Eufaula including the zip code areas of Eufaula, 74432; Checotah, 74426; Council Hill, 74428; and Stidham, 74461. According to the U.S. Census Bureau, the 2000 census population of this primary medical service area was 19,368 (Table 4a). EPIC Medical Center also serves a secondary medical service area, which consists of the zip code areas of Canadian, 74425; Indianola, 74442; Quinton, 74561; and Hanna, 74845. According to the U.S. Census Bureau, the 2000 census population of this secondary medical service area was 4,858 (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 increase in population of 3.8 percent from 2000 to 2009 and a projected 5.8 percent increase from 2000 to 2014 (Table 4a). It should be noted that ESRI estimates were not available for Stidham (74461).
Table 4b also shows population trends for the state of Oklahoma, McIntosh County, and numerous cities in the primary and secondary medical service are of EPIC Medical Center for the years 1990, 2000, and 2009. The city level estimates are place estimates rather than zip code 13
estimates that were discussed in the previous table. From 1990 to 2000, McIntosh County had a population increase of 15.95 percent. The state experienced a population growth of 9.70 percent. During the same time period, Hanna and Indianola experienced the largest increase of 34.34 and 11.70 percent, respectively. Many communities also reported a decrease in population. Stidham experienced a decrease of 52.08 percent, and Canadian reported a decline of 8.43 percent during the same time period. From 2000 to 2009, McIntosh County saw another population increase of 1.77 percent. The state of Oklahoma at experienced an increase of 6.85 percent. 14
City
County
Hospital
No. of Beds
Stigler
Haskell
Haskell County Healthcare System
40
Holdenville
Hughes
Holdenville General Hospital
25
Wilburton
Latimer
Latimer County General Hospital
33
Eufaula
McIntosh
EPIC Medical Center
33
Muskogee
Muskogee
Muskogee Community Hospital, LLC
45
Muskogee
Muskogee
Muskogee Regional Medical Center
275
Henryetta
Okmulgee
Henryetta Medical Center
41
Okmulgee
Okmulgee
Okmulgee Memorial Hospital
66
McAlester
Pittsburg
McAlester Regional Health Center
171
Figure 3
EPIC Medical Center in Eufaula, OK, Medical Service Area
Figure 2
Logan Medical Center Medical Service Area
Primary Medical Services Area
Secondary Medical Services Area 15
Eufaula experienced the largest increase during this time period of 4.89 percent. Canadian and Council Hill followed with increases of 3.35 percent and 3.10 percent, respectively. Checotah was the only community to report a decline in population. Checotah’s population decreased at a rate of 0.50 percent for the years of 2000-2009. In addition, two communities, Stidham and Hanna reported no change in their population from 2000 to 2009.
Table 4a
Population of EPIC Medical Center
Medical Service Area
Populations
Population by Zip Code
City
2000 Census
2000 ESRI
2009 ESRI
2014 ESRI
Primary Medical Service Area
74432
Eufaula
8,900
5,623
5,585
5,610
74426
Checotah
9,237
11,815
12,543
12,875
74428
Council Hill
933
1,029
1,043
1,061
74461
Stidham
298
n/a
n/a
n/a
Total
19,368
18,467
19,171
19,546
% Change from 2000 ESRI
3.8%
5.8%
Secondary Medical Service Area
74425
Canadian
813
1,676
1,760
1,805
74442
Indianola
1,187
1,109
145
1,166
74561
Quinton
2,296
4,426
4,605
4,681
74845
Hanna
562
520
512
518
Total
4,858
7,731
7,022
8,170
% Change from 2000 ESRI
-9.2%
5.4%
16
Table 4b
Population Trends for McIntosh County and the State of Oklahoma
1990
2000
2009
% Change
% Change
Population
Population
Population
1990-2000
2000-2009
State of Oklahoma
3,145,585
3,450,654
3,687,050
9.70%
6.85%
McIntosh County
16,779
19,456
19,801
15.95%
1.77%
Population by City
Eufaula
2,652
2,639
2,768
-0.49%
4.89%
Checotah
3,290
3,481
3,460
5.81%
-0.60%
Council Hill
139
129
133
-7.19%
3.10%
Stidham
48
23
23
-52.08%
0.00%
Canadian
261
239
247
-8.43%
3.35%
Indianola
171
191
194
11.70%
1.57%
Quinton
1,133
1,071
1,087
-5.47%
1.49%
Hanna
99
133
133
34.34%
0.00%
Cities Total
7,793
7,906
8,045
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 McIntosh County. Table 5 presents the breakdown by age group for McIntosh County and the State of Oklahoma from the census years 1990 and 2000 and the 2009 census estimates. The lowest age group, age 0-14, experienced a decrease from 1990-2000 and 2009. The age group of 45-64, however, has seen a consistent increase over time. In McIntosh County, those age 45-64 made up 25.3 percent of the total population in 1990, and this went up to 28.9 percent in 2009. This same trend holds true for the state of Oklahoma as well. 17
Table 6 shows the race and ethnic group percentages for McIntosh County and the state of Oklahoma for the census years 1990 and 2000 and the 2009 census estimates. The state has experienced a significant increase in people of Hispanic origin, increasing from 2.7 percent in 1990 to 8.2 percent in 2009. McIntosh County has experienced this same trend to an extent. In 1990, those of Hispanic origin made up 0.9 percent of the population. In 2000, this number increased to 1.3 percent. This number again increased in the 2009 estimates to 2.1 percent. 18
Table5
Age Groups -
for Population Numbers and Percent of Total Population
McIntosh County and the State of Oklahoma
McIntosh County
State of Oklahoma
Age Groups
Number
Percent
Number
Percent
1990 Census
0-14
3,205
19.1%
702,537
22.3%
15-19
1,120
6.7%
233,093
7.4%
20-24
786
4.7%
222,766
7.1%
25-44
3,809
22.7%
961,560
30.6%
45-64
4,238
25.3%
601,416
19.1%
65+
3,621
21.6%
424,213
13.5%
Totals
16,779
100.0%
3,145,585
100.0%
2000 Census
0-14
3,560
18.3%
732,907
21.2%
15-19
1,307
6.7%
269,373
7.8%
20-24
785
4.0%
247,165
7.2%
25-44
4,340
22.3%
975,169
28.3%
45-64
5,226
26.9%
770,090
22.3%
65+
4,238
21.8%
455,950
13.2%
Totals
19,456
100.0%
3,450,654
100.0%
2009 Estimates
0-14
3,520
17.8%
767,758
20.8%
15-19
1,201
6.1%
256,841
7.0%
20-24
976
4.9%
280,782
7.6%
25-44
4,031
20.4%
957,235
26.0%
45-64
5,723
28.9%
928,472
25.2%
65+
4,350
22.0%
495,962
13.5%
Totals
19,801
100.0%
3,687,050
100.0%
SOURCE: U.S. Census Bureau, Census data for 1990 and 2000, estimated population for 2009 (www.census.gov [July 2010]).
Table 6
19
Table6
Race and Ethnic Groups -
for Population Numbers and Percent of Total Population
McIntosh County and the State of Oklahoma
McIntosh County
State of Oklahoma
Race/Ethnic Groups
Number
Percent
Number
Percent
1990 Census
White
12,674
75.5%
2,547,588
81.0%
Black
880
5.2%
231,462
7.4%
Native American 1
3,038
18.1%
246,631
7.8%
Other 2
37
0.2%
33,744
1.1%
Two or more Races 3
NA
--
NA
--
Hispanic Origin 4
150
0.9%
86,160
2.7%
2000 Census
White
14,013
72.0%
2,556,368
74.1%
Black
772
4.0%
257,981
7.5%
Native American 1
3,129
16.1%
266,158
7.7%
Other 2
39
0.2%
50,594
1.5%
Two or more Races 3
1,255
6.5%
140,249
4.1%
Hispanic Origin 4
248
1.3%
179,304
5.2%
2009 Estimates
White
14,073
71.1%
2,611,957
70.8%
Black
778
3.9%
285,921
7.8%
Native American 1
3,101
15.7%
282,029
7.6%
Other 2
43
0.2%
64,009
1.7%
Two or more Races 3
1,383
7.0%
141,294
3.8%
Hispanic Origin 4
423
2.1%
301,840
8.2%
SOURCE: U.S. Census Bureau, Census data for 1990 and 2000, estimated population for 2009 (www.census.gov [July 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.
NA - Not available; 1990 census did not report this category.
20
The Direct Economic Activities
The health sector creates employment and payroll impacts, which are important direct economic activities for the EPIC Medical Center in Eufaula, OK, 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 EPIC Medical Center in Eufaula, OK, medical service area employs 378 full-time and part-time employees and has an estimated payroll of $14,634,575 (Table 7). The health sector in McIntosh County is fairly typical of counties of its size, with a hospital, five physician offices, two dental offices, two chiropractor offices, one optometrist office, two nursing homes, three home health services, one county health department, and two pharmacies.
The Hospital component provides 57 full and part-time jobs with an estimated annual payroll of $1,829,947 (including benefits1). The Physicians, Dentists, and Other Medical Professionals sector employs 39 total full and part-time employees with an estimated payroll of $2,998,348. The Nursing and Protective Care component employs 156 total full-time and part-time employees with an estimated annual payroll of $5,017,932. The Other Medical and Health Services component which includes three home health services and one county health department employs 110 total full-time and part-time employees and has an estimated annual payroll of $3,904,476. The Pharmacy component, including two pharmacies, employs 16 full and part-time employees with an annual payroll of $883,872.
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. 21
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 EPIC Medical Center in Eufaula, OK, Medical Service Area
Component
Full-Time & Part-Time Employment
Total Payroll with Benefits
Hospital
57
$1,829,947
Includes EPIC Medical Center, and EPIC Home Health
Physicians, Dentists, & Other Medical Professionals
39
$2,998,348
Includes five physician offices, two dental offices, one optometrist office, and two chiropractor offices
Nursing and Protective Care
156
$5,017,932
Includes two nursing homes
Other Medical & Health Services
110
$3,904,476
Includes three home health services and McIntosh County Health Department
Pharmacies
16
$883,872
Includes two pharmacies
Totals
378
$14,634,575
SOURCE: Local survey and estimates from research.
These residents, along with businesses in the health sector, purchase a large amount of goods and services from businesses in the EPIC Medical Center in Eufaula, OK, medical service area. These impacts are referred to as secondary impacts or benefits to the economy. Before the secondary impacts of the health sector are discussed, the basic concepts of community economics will be reviewed. 22
Basic Concepts of Community Economics and
Income and Employment Multipliers
Figure 4 illustrates the major flows of goods, services, and dollars of any economy. The foundations of a community's economy are those businesses that sell some or all of their goods and services to buyers outside of the community. Such a business is a basic industry. The two arrows in the upper right portion of Figure 4 represent the flow of products out of, and dollars into, a community. To produce these goods and services for "export" outside the community, the basic industry purchases inputs from outside of the community (upper left portion of Figure 4), labor from the residents or "households" of the community (left side of Figure 4), and inputs from service industries located within the community (right side of Figure 4). Households using their earnings to purchase goods and services from the community’s service industries complete the flow of labor, goods, and services in the community (bottom of Figure 4). It is evident from the relationships illustrated in Figure 4 that a change in any one segment of a community's economy will cause reverberations throughout the entire economic system of the community.
HouseholdsIndustryBasicServicesGoods &$LaborInputsProductsInputs$$$$Services$$
Figure 4
Community Economic System 23
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. 24
Secondary Impacts of the Health Sector
on the Economy of EPIC Medical Center in Eufaula, OK
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 1.25. This indicates that for each job in that component, an additional 0.25 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 57 full-time and part-time employees; applying the employment multiplier of 1.25 to the employment number of 57 brings the total employment impact of the hospital to 71 employees. The Physicians, Dentists, and Other Professionals component employs 39 people; however, the total impact is 51 employees once the multiplier of 1.31 is applied. The Nursing and Protective Care component has a total employment of 156 after the multiplier of 1.10 is applied to the direct employment of 172. The Other Medical and Health Services component has 110 full-time and part-time employees and an employment multiplier of 1.10, for a total employment impact of 121. The Pharmacies component has a total impact of 16 employees after applying the multiplier of 1.15 to 18. The total employment impact of the health sector in EPIC Medical Center in Eufaula, OK, medical service area is estimated to be 434 employees (Table 8, total of column 4).
2 For complete details of model, see [1], [2], and [3]. 25
Table 8
EPIC Medical Center in Eufaula, OK, 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
57
1.25
71
$1,829,947
1.13
$2,073,164
$543,169
$5,432
Physicians, Dentists, & Other Medical Professionals
39
1.31
51
$2,998,348
1.12
$3,365,010
$881,633
$8,816
Nursing and Protective Care
156
1.10
172
$5,017,932
1.11
$5,585,540
$1,463,412
$14,634
Other Medical & Health Services
110
1.10
121
$3,904,476
1.12
$4,357,382
$1,141,634
$11,416
Pharmacies
16
1.15
18
$883,872
1.13
$1,001,164
$262,305
$2,623
Total
332
434
$14,634,575
$16,382,260
$4,292,152
$42,922
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 McIntosh County retail sales and income (26.20%) – from 2009 County Sales Tax Data and Personal Income Estimates from the Bureau of Economic Analysis. 26
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 EPIC Medical Center in Eufaula, OK, medical service area (Table 8, columns 5, 6, and 7). The income multiplier for the Hospital component is 1.13 (Table 8, column 6). This indicates that for each dollar in that component, an additional 0.13 dollars are created throughout the area due to business (indirect) and household (induced) spending. The Hospital component has a total payroll of $1,829,947; applying the income multiplier of 1.13 brings the total Hospital component income impact to $2,073,164. 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 $2,998,348, based on the application of the income multiplier of 1.12 to the $3,365,010 payroll. The Nursing and Protective Care component has a multiplier of 1.11 which yields a total income impact of $5,585,540. The Other Medical and Health Services component has a total payroll of $3,904,476 and an income multiplier of 1.12 leading to a total income impact of $4,357,382. The Pharmacies component has a total income impact of $1,001,164 after the multiplier of 1.13 is applied to the direct income of $883,872. The total income impact of the health sector on the economy of EPIC Medical Center in Eufaula, OK, medical service area is projected to be $16,382,260 (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 is currently (around 26.20 percent), then direct and secondary retail sales generated by the health sector equals $4,292,152 (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 27
component. A one-cent sales tax collection is estimated to generate $42,922 in the EPIC Medical Center in Eufaula, OK, 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 EPIC Medical Center in Eufaula, OK, 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 EPIC Medical Center in Eufaula, OK, 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.