Economic impact of a rural general surgeon and model for forecasting need

              The Economic Impact of a Rural General Surgeon
and Model for Forecasting Need
Fred C. Eilrich
Assistant State Extension Specialist
Email: eilrich@okstate.edu
Jonathan C. Sprague
President, Rocky Coast Consulting
Email: JonathanSprague@RockyCoastConsulting.com
Brian E. Whitacre
Extension Economist
Email: brian.whitacre@okstate.edu
Lara Brooks
Assistant State Extension Specialist
Email: lara.brooks@okstate.edu
Gerald A. Doeksen
Regents Professor and Extension Economist
Email: gad@okstate.edu
Cheryl F. St. Clair
Associate State Extension Specialist
Email: Cheryl@okstate.edu
National Center for Rural Health Works
Oklahoma State University
Oklahoma Cooperative Extension Service
513 Ag Hall
Stillwater, OK 74078
Phone: 405-744-6083
Fax: 405-744-9835
Website: www.ruralhealthworks.org
Funded by Federal Office of Rural Health Policy,
DHHS, and Health Resources and Services Administration
September 2010
1
THE ECONOMIC IMPACT OF A RURAL GENERAL SURGEON
Converging forces are contributing to declines in the availability of rural general surgery
services. A developing crisis will have profound impacts on many rural residents, hospitals,
physicians and communities. While most rural communities’ attention is predominately directed
to assuring primary medical care availability, more specific focus must be directed to general
surgery as a fundamental building block for rural systems of care, and its interconnectedness
with the sustainability of primary care and other rural services.
Without substantive intervention over the next several years, rural residents will
experience unnecessary barriers to access, travel greater distances, and may not receive timely
acute care. There will be more unnecessary and costly emergency transports to larger facilities.
In many settings, patients will defer preventive care (e.g., colonoscopies). In some cases, they
will confront compromised quality due to the skill mix of some replacement providers recruited
in desperation and/or volumes that fall below quality guidelines. [1]
With the declines in locally provided general surgery services, Critical Access Hospitals
and other rural hospitals will experience a reduction in revenues and operating margins. This
will increasingly limit their ability to cross-subsidize programs that are not financially self-sustaining.
Declines in surgeon revenue will weaken support for primary care in many locations.
In rural areas, this will significantly undermine the healthcare safety-net.
The erosion of surgical services may result in a loss of community confidence in other
local care, greater patient migration, and further losses of non-surgical revenue critical to
sustaining rural hospitals. In such cases, rural health care systems will falter and may collapse
with notable negative impacts on access, quality, jobs and local economies.
2
The depth of the developing crisis is likely to be profound. While the scope of the issues
is broad, the focus of this study is addressing the economic impact of a rural general surgeon on
a rural community and on advancing a population-based methodology for estimating the need for
a general surgeon.
Typically, rural residents pay little attention to their health care systems until they are
confronted by the loss of services. Simultaneously, most people are unaware of the importance
of the health care system on the economies of their local communities. The employment
opportunities and resulting wages and salaries make the health care system an extremely
important, if not critical, part of the local economy. Research from the National Center for Rural
Health Works indicates that between ten and fifteen percent of the jobs in many rural counties
are in the health care sector. Hospitals often are the second largest employer in rural counties
trailing only local school systems [2].
Previous studies on rural surgery have outlined challenges that deserve additional
investigation, such as the economic contribution of surgery to small rural hospitals and
mechanisms to identify an adequate surgical workforce [3]. In complimentary studies, Eilrich, et
al. detailed the importance of a primary care physician to a rural health care system [4]. There is
much debate regarding the available supply of trained rural general surgeons [5, 6], but this is a
topic for other research.
The study is divided into two sections:
1. Estimation of the economic benefits generated by a rural general surgeon;
• employment and income generated by a surgeon’s practice;
• employment and income generated by a surgeon in the hospital from inpatient and
outpatient services; and
3
• secondary employment and income created in the community from the general
surgeon’s office and hospital practice.
2. Discussion of a methodology to estimate the potential need for a rural general surgeon;
• constructing national age and gender specific coefficients for general surgery
procedures;
• estimating number of procedures based on demographics of medical service area;
and
• determining number of general surgeons required to meet need in a specific
community.
The potential loss of a general surgeon in a rural hospital represents a substantive
economic risk. A faltering surgical program can represent incremental losses that may ultimately
contribute to broader program failures. For example, patients who go elsewhere for general
surgery are more likely to bypass other local services. A 2006 survey in Louisiana found that
over 90 percent of the patients who went out of town to visit a specialist also had their lab work
at the specialist's location [7]. In addition, the loss of general surgery-linked emergency
department volume can affect not only revenues, but community perceptions of local quality.
Conversely, the ability to expand general surgery represents a potential increase in
hospital revenues and local health expenditures by recapturing dollars lost when health services
are not purchased locally. Beyond direct revenues, additional dollars will be captured because
purchases of related goods and services also occur. Typical related goods and services are those
associated with laboratories, diagnostic imaging and pharmacies. While this study
predominately focuses on the risk of losing general surgery, the potential gains may be
considerable.
4
The Economic Contributions of a Rural General Surgeon
While variable from community to community, rural general surgeons provide
fundamental clinical services in rural America. The need for surgical services in rural areas
seems obvious, but not always clearly recognized. The economic contribution to the rural
economy is typically even less known.
While, the availability of core or fundamental health services is essential for maintaining
a healthy community, it is also critical for economic development. Business and industry will
not locate in a community without quality health services. Likewise, retirees looking for
retirement locations place a heavy emphasis on access and quality. A strong health care system
that includes general surgery provides medical benefits as well as economic benefits. A large
portion of the revenue generated by a rural general surgeon is returned to the local community.
The surgical services create employment opportunities for professional and nonprofessional
support personnel. Most of the related income is in turn spent locally. This personal spending,
along with hospital and office practice purchases of goods and services from other local and
regional businesses, stimulates economic growth in many other parts of the economy. As these
dollars continue to be spent locally, the multiplier effect associated with a surgeon’s practice
takes effect. Simultaneously, much of this economic activity generates additional tax revenues
(e.g., sales, property, excise and income) to be used by the local and state government to fund
important community services, including state Medicaid programs.
The first section of this study estimates the economic value including jobs that a rural
general surgeon provides in an office practice and through inpatient and outpatient hospital
services in a typical critical access hospital. Nonetheless, the relative paucity of available data
underestimates the total value of a general surgeon because the impact on other sectors such as
5
pharmacy and nursing homes, emergency departments, primary care practices and diagnostic
imaging are not included.
Direct Impacts of a General Surgeon
Data in Table 1 present typical direct impacts of a general surgeon’s office practice.
Employment opportunities for practice associated staff are created along with corresponding
wages and salaries. Based on discussions with several general surgeons, a typical general
surgeon’s practice is estimated to have three full-time employees in addition to the surgeon.
Therefore, the total employment impact would be four jobs. The average nonmetropolitan wage
and salary estimates for practice staff were obtained from the U.S. Bureau of Labor Statistics for
Oklahoma, Indiana and Virginia [8]. The 2008 Medical Group Management Association
(MGMA) Physician Compensation and Production Survey provided average wage estimates for
a nonmetropolitan general surgeon. The direct impact for these four jobs totaled $483,082 which
includes 25 percent for benefits [9]. This estimate includes earnings and benefits for a general
surgeon, a registered nurse, medical assistant and a receptionist. The 2008 MGMA Cost Survey
for Specialty Physician provided estimates for total annual revenues from a single general
surgeon practice [10]. Total 2008 national average practice revenue was $653,544. Table 1
does not reflect the full costs of an office practice as it does not include direct and indirect non-employment
practice expenses.
The direct impacts that a general surgeon has on the hospital are shown in Table 2.
Specialty physician services such as general surgery can significantly impact the financial
stability of the hospital [11]. In addition to inpatient visits, general surgeons generate significant
outpatient activity that increases hospital net revenue.
6
Table 1
2008 Estimated Employment, Wage and Salaries and Revenues
at General Surgeon Practice
Employment 4
Wages, and Salaries
General Surgeon $288,126
Registered Nurse $52,421
Medical Assistant $25,605
Receptionist/Bookkeeper $21,313
Total Wages and Salaries $386,465
Benefits (25%) $96,617
TOTAL Wages Salaries and Benefits $483,082
Revenues $653,544
Table 2
General Surgery Procedures, Revenues, Employment and Wage and Salaries
at the Hospital Generated by a General Surgeon
No. of Inpatient Procedures 95
No. of Outpatient Procedures 613
Inpatient Revenue $379,905
Outpatient Revenue $901,723
Laboratory Revenue $64,197
TOTAL Revenue $1,345,825
Employment 15.1
Wage, Salary and Benefits $701,175
Source: Local data from ten rural communities
Eight Oklahoma hospitals, along with one Indiana hospital and one Virginia hospital
were surveyed to collect data regarding their general surgery programs. The surveyed hospitals
7
had established general surgery programs and represented rural hospitals. From these surveys,
data showed that on average, a rural general surgeon generates 95 inpatient procedures ranging
from 40 to 180 and 613 outpatient procedures per year ranging from 182 to 935.
According to survey data, 2008 average revenue collected per inpatient procedure was
estimated at $3,999. The estimated total hospital revenue attributed to general surgery inpatient
procedures was $379,905 (95 x $3,999). Like inpatient revenue, the additional net revenue from
outpatient activity can vary considerably among general surgeons. The average hospital revenue
per outpatient surgical procedure was approximately $1,471 making estimated outpatient
revenue from 613 procedures of $901,723. The average revenue collected by the hospital from
additional laboratory and diagnostic procedures totaled $64,197. In total based on these
estimates, a general surgeon will generate $1,345,825 for the hospital from his/her patient
activity.
As noted, revenue generated by general surgeons supports hospital employment and
generates payroll. The hospital survey data were used to estimate the number of hospital
employees and wages and salaries that were generated from patient revenue. First, average total
employment costs (including benefits) were estimated from total net revenue. An estimated 52.1
percent of hospital revenues were spent on wages and salaries including benefits. Therefore,
wage, salary and benefits at the hospital generated from surgeon activity are estimated to total
$701,175 ($1,345,825 x 0.521). Average cost per employee was $46,548 resulting in direct
hospital employment of 15.1 ($701,175/$46,548) full-time equivalent employees.
The Multiplier Effect
Direct jobs and wages and salaries further benefit the community through increased jobs
and income. As employees of the surgeon’s office and the hospital purchase goods and services,
8
additional employment and income are created in other businesses. The additional employment
and income can be calculated with an input-output model and computer generated data from
IMPLAN. This computer model and data are explained in more detail in Appendix A.
The concept is depicted in Figure 1, which illustrates the major flows of goods, services,
and dollars from a basic industry. The basic industry, in this case the general surgeon office or
hospital, purchases inputs from outside the community (upper left portion of Figure 1), labor
from the residents or "households" of the community (left side of Figure 1), and inputs from
service industries located within the community (right side of Figure 1). 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. The relationships illustrated in Figure 1
show that a change in any one segment of a community's economy will cause reverberations
throughout the entire economic system of the community. These reverberations, known as
multipliers in economic terms, are estimated based on historic linkages between industries and
vary at the county level.
Total Contribution Including Secondary Impacts
Data in Table 3 present the total impacts of the general surgery office practice and
related business that a typical general surgeon brings to a local hospital. For this analysis,
average multipliers for the surveyed rural communities are utilized. The output multiplier
indicates how this revenue moves through a local economy. For example, the office practice
revenue multiplier of 1.33 estimates that for every $1 of revenue collected by the practice,
another $0.33 is generated by other businesses in the community due to local purchases by the
practice and its employees. Table 1 showed that the revenue to the office practice was
$653,544. The total revenue impact of the general surgery office ($869,214) is shown in Table 3
9
Community Economic System
Figure 1
Households
Industry
Basic
Services
Goods &
$
Labor Inputs
Products
Inputs
$ $
$
$
Services
$ $
10
The same methodology used for the hospital yields $1,789,947 of revenue generated
throughout the community. The total revenue generated from the practice and the
hospital is $2,659,161.
Using the employment and payroll data from Tables 1 and 2, an estimate of total
income and employment created from the general surgeon practice and hospital
procedures was made. The general surgeon will generate an estimated $1,418,458 in
income (wages, salaries and benefits) in the community and create 25.9 jobs throughout
the community. Again, the estimate is low because the hospital or community pharmacy
revenue associated with pre- or post-surgery care is not included.
Table 3
Total Impact of a General Surgeon on Revenues, Income and Employment
at Physician Office and Hospital1
Revenue Output Multiplier Total Impact
Office $653,544 1.33 $869,214
Hospital $1,345,825 1.33 $1,789,947
Total $1,999,369 $2,659,161
Income Income Multiplier Total Impact
Office $483,082 1.18 $570,036
Hospital $701,175 1.21 $848,422
Total $1,184,257 $1,418,458
Employment Employment Multiplier Total Impact
Office 4.0 1.30 5.2
Hospital 15.1 1.37 20.7
Total 19.1 25.9
1 Income includes wages, salaries and benefits.
Source: 2007 IMPLAN database, Minnesota IMPLAN Group, Inc., Local data from ten rural
communities
11
This report clearly documents the economic importance of a general surgeon to a
hospital and a community. The surgeon generates approximately $2.7 million in revenue,
$1.4 million in payroll and creates 26 jobs. The relatively large impact is created through
surgeon practice employment, inpatient/outpatient procedures as well as additional
laboratory/diagnostic tests at the hospital and the multiplier effect of these contributions.
Thus, in addition to a surgeon’s clinical contributions, the economic contributions are
critically important. It is beyond the scope of this study, but to the extent that surgical
services has collateral effects on other services such as emergency department and
primary medical care associated volumes, the estimated economic impacts will be much
greater than those associated with just the general surgeon. The economic risks of losing
a surgeon are much greater than those traditionally seen by only looking at the surgeon’s
direct revenue. Some small hospitals will fail or very substantively change with their
inability to sustain general surgery. In these cases, the economic impact on the
community will be profound
Estimating Potential Local General Surgeon Visits
There are several approaches to estimating the number of general surgeons for a
medical service area. Estimation of population-based need has been suggested as the best
tool for planning purposes and will be used here [12]. A need-based approach estimates
the number of potential procedures performed by a general surgeon by constructing age-and
gender-specific coefficients and applying them to a specific service area population.
To construct the coefficients, public use data files were obtained from two National
surveys, the National Hospital Discharge Survey (NHDS) and the National Survey of
12
Ambulatory Surgery (NSAS). Both surveys are conducted periodically by the National
Center for Health Statistics.
The NHDS is conducted annually and covers discharges from noninstitutional
hospitals, excluding Federal, military and Veterans Administration hospitals, located in
the 50 States and the District of Columbia [13]. Only short-stay hospitals (hospitals with
an average length of stay for all patients of less than 30 days) or those whose specialty is
general (medical or surgical) or children’s general are included in the survey. In 2006,
501 hospitals were surveyed and 438 hospitals responded.
The NSAS covers ambulatory surgery procedures performed in hospitals and
freestanding ambulatory surgery centers in the United States [14]. NSAS uses the same
hospital selection criteria used by the NHDS. In 2006, 224 hospitals were surveyed with
142 hospitals responding. The data have several variables detailing each recorded event
including age and gender of patient and procedure identification using the International
Statistical Classification of Disease (ICD-9) [15] coding system along with other
variables such as symptoms, diagnoses, length of stay, provider type, etc. Both data sets
were edited to correct and/or account for sampling errors and each record was weighted
to project national or regional estimates.
Defining Rural General Surgery Programs
Although many rural hospital service areas do not have sufficient population to
support a full-time equivalent (FTE) general surgeon, the demand for a general surgeon is
quite often enough to support a part-time surgeon. Due to community expectation, some
hospitals have 24 hour call coverage and therefore employ additional general surgeons.
There are numerous complications related to economic sustainability of such services.
13
The methodology presented estimates only the population-based need and does not
account for any additional general surgeon time required for extended call coverage.
The field of general surgery is very broad based and the types of procedures
performed by general surgeons can vary dramatically by surgeon and by hospital [16].
Some definitions are simply not very helpful. Defined in the broadest sense by a business
specializing in training and educational materials for health care professionals:
A general surgeon works with a variety of instruments with a variety of
patients under many different conditions [17].
A more meaningful definition by the American Board of Medical Specialties describes a
general surgeon as:
…having expertise in the diagnosis and care of patients with diseases and
disorders affecting the abdomen, digestive tract, endocrine system, breast,
skin and blood vessels. Common problems treated by general surgeons
include hernias, breast tumors, gallstones, appendicitis, pancreatitis, bowel
obstructions, colon inflammation and colon cancer. General surgeons
increasingly provide care through the use of minimally invasive and
endoscopic techniques [18].
The American College of Surgeons adds:
General surgeons often set the standard of surgical care in a community.
���We choose the procedures we feel most comfortable with to provide
services for our patients.” When patients are referred for advanced
medical intervention, general surgeons are commonly the only members of
the local medical staff familiar with the procedure performed or
management required [19].
Furthermore, previous research indicates that the scope of urban and rural general
surgical procedures is often markedly different [20, 21]. Therefore, it is difficult to
identify a single definition that would uniquely describe every rural general surgeon or
the routine procedures that they perform. Experience, personal preference and/or
subspecialty training will impact the types of procedures that general surgeons will
14
perform on a routine basis. For example, some general surgeons will perform
gynecological procedures or diagnostic colonoscopies while others will not. Many rural
hospitals do not deliver babies and therefore procedures on infants would be limited to
only unique emergencies. The variability of general surgeon performed C-sections are
also significant. A hospital’s proximity relative to a nearby surgical center or alternative
specialist will also impact the type of surgery procedures performed. General surgeons in
some communities perform orthopedic procedures such as knee arthroscopy, although
such care is increasingly an outlier. It is impossible to create a list of procedures that
represents the practice patterns of all general surgeons or every rural general surgeon.
Thus, we must look with caution to averages of typical procedures to create tools that
provide estimates that support more detailed local discussions.
Procedure to Estimate Potential Annual General Surgery Procedures
To estimate the need for local general surgery services, typical procedures
performed by rural general surgeons were identified. A methodology was created to
estimate the annual rate of these procedures by age and gender. The list of procedures
presented in Table 4 was compiled from the ten sampled hospitals. The goal was to
compile a condensed list of procedures that were routinely performed by rural general
surgeons. The task proved difficult, because even though the surveyed hospitals were
similar in size and operations, the procedure data were not common to all ten hospitals.
For the purpose of illustrating the methodology, only those procedures that were
performed more than one time during the year were included for this analysis. The
procedure codes were obtained from ICD-9-CM (FY07) classification of procedures list
to correspond with the national survey data.
15
Table 4
Potential List of General Surgery Procedures Performed by Rural General Surgeons1
04.43 CARPAL TUNNEL RELEASE 45.73 RIGHT HEMICOLECTOMY 68.12 HYSTEROSCOPY
08.20 REMOVE EYELID LESION 47.01 LAP APPENDECTOMY 68.23 ENDOMETRIAL ABLATION
08.87 UPPER LID RHYTIDECTOMY 47.09 OTHER APPENDECTOMY 68.49 OTHER TOTAL HYSTERECTOMY
20.09 OTHER MYRINGOTOMY 48.36 POLYPECTOMY OF RECTUM 69.09 DIAGNOSTIC D & C
28.3 TONSILLECTOMY/ADENOIDECTOMY 49.46 HEMORRHOIDECTOMY 83.31 TENDON LESION EXCISION
34.91 THORACENTESIS 51.23 LAP CHOLECYSTECTOMY 85.21 BREAST LESION EXCISION
37.83 INSERT DUAL-CHAMBER PACE MAKER 53.00 UNILATERAL INGUINAL HERNIA REP 85.43 UNILATERAL SIMPLE MASTECTOMY
42.92 ESOPHAGEAL DILATION 53.41 UMBILICAL HERNIA REP 86.04 OTHER SKIN DRAINAGE
43.11 PERCUTANEOUS ENDOSC GASTROSTOMY 53.61 ABDOMINAL HERNIA REP 86.07 INSERTION VAD
45.13 OTHER SMALL INT. ENDOSCOPY (EGD) 53.69 OTHER ABDOMINAL HERNIA REP 86.21 EXCISION PILONIDAL LESION
45.16 EGD WITH CLOSED BIOPSY 54.21 LAPAROSCOPY 86.3 OTHER EXCISION OF SKIN LESION
45.23 COLONOSCOPY 57.32 OTHER CYSTOSCOPY 86.4 RADICAL EXCISION SKIN LESION
45.24 FLEXIBLE SIGMOIDOSCOPY 57.33 TRANSURETHAL BLADDER BX 98.51 ESWL KIDNEY/URETER/BLADDER
45.25 ENDOSCOPIC LARGE INT. BIOPSY 59.71 LEVATOR MUSCLE SUSPENSION
45.42 ENDOSCOPIC POLPECTOMY LARGE INT 66.29 ENDOSCOPIC FALLOPIAN TUBE NEC
1Based on procedures sampled from general rural hospital general surgery programs
16
Procedure volumes performed by general surgeons also vary dramatically.
Research in North Carolina found that one-quarter of the rural general surgeons
performed less than 275 procedures and one-quarter performed more than 783
procedures. Results also indicated that the scope of practice for rural general surgeons
was significantly diverse ranging from less than 30 different procedures to well over 70
[16]. It is especially important to recognize that this list does not in any way represent
the limit of what is possible and appropriate in rural hospitals, but rather serves as a
starting point for planning purposes.
Both the NHDS and NSAS data files were queried to obtain all the records that
corresponded to the final list of procedures. A statistical software package was utilized to
estimate national coefficients from the sample. Data in Table 5 present the potential
number of annual general surgery procedures by specified age and gender. For instance,
for every 1,000 males between the ages of 45 and 64, the average annual number of
specified general surgery procedures was 90.2. Utilization rates per capita in rural areas
might be slightly different than the national average. However, in the absence of specific
rural data, these national coefficients can serve as the best approximations available.
Application of Predicted Surgery Coefficients
To illustrate the use of these coefficients, the population estimates by age and
gender were obtained from the U.S. Census Bureau for an example medical service area
(population 7,677) which typifies a rural community (Table 6). The average annual visit
rates from Table 5 are applied to estimate the potential number of specified general
surgery procedures performed in the medical service area. The results are presented per
1,000 populations in Table 7. For example, the 1,022 males in the medical service area
17
Table 5
Annual General Surgeon Procedures by Age and Gender1
Age Procedure Rate per 1000
Male Female
Under 15 15.8 14.9
15-44 20.4 48.6
45-64 90.2 119.3
65-74 185.7 182.4
75+ 176.8 146.8
1Data based on procedures sampled from rural hospitals
Source: The 2006 National Hospital Discharge Survey and 2006 National Survey of Ambulatory
Surgery, 2008 Census estimated population, U.S. Census Bureau (www.census.gov [Jan
2010]).
Table 6
2006 Population Estimates by Age and Gender
for an Example Medical Service Area
Age Population
Male Female Total
Under 15 780 743 1,523
15-44 1,489 1,473 2,962
45-64 1,022 1,086 2,108
65-74 307 345 652
75+ 206 316 522
3,804 3,963 7,767
Source: 2008 Census estimated population, U.S. Census Bureau (www.census.gov [Jan 2010]).
between the ages of 45 and 64 are estimated to require 92 general surgery procedures
(1.022 x 90.2). Females in the same age group are estimated to require 130 general
surgery procedures. All the residents in the medical service area (7,767) are estimated to
make 549 total general surgery procedures per year.
This methodology can be applied to estimate the need for a general surgeon based
on the demographics of the medical service area. This need reflects patient visits only
and does not account for issues associated with call coverage. The list of procedures can
18
Table 7
Annual General Surgery Procedures Generated
in the Example Medical Service Area
Medical Service Area
Male Female
Age
Population
(000)
Procedure
Rate Procedures
Population
(000)
Procedure
Rate Procedures
Total
Procedures
Under 15 0.780 15.8 12 0.743 14.9 11 23
15-44 1.489 20.4 30 1.473 48.6 72 102
45-64 1.022 90.2 92 1.086 119.3 130 222
65-74 0.307 185.7 57 0.345 182.4 63 120
75+ 0.206 176.8 36 0.316 146.8 46 82
Total 3.804 227 3.963 322 549
1Data based on procedures sampled from rural hospitals
Source: The 2006 National Hospital Discharge Survey and 2006 National Survey of Ambulatory
Surgery, 2008 Census estimated population, U.S. Census Bureau (www.census.gov [Jan
2010])
be adapted to represent a particular general surgeon or hospital scenario. From these
estimates, a hospital administrator can assess the need for a general surgeon and estimate
the required FTEs necessary to meet the demand. Table 8 summarizes the results for the
example community. First, this table shows a quick approach to identifying the need for
a general surgeon by applying national averages to the total population of the medical
service area. For example, given the procedures from the list (Table 4), an estimated
65.3 procedures were performed per 1,000 population in 2006. The 2008 MGMA
Physician Compensation and Production Survey reported an estimated 809 annual
procedures were performed per rural general surgeon. This would result in a population-to-
general surgeon ratio of 12,389 (809/65.3), thereby indicating that the example
community could support a 0.63 (7,677/12,389) FTE general surgeon.
19
Table 8
Two Approaches to Estimating the Number of General Surgeons for an Example
Medical Service Area
National Averages Approach
Procedure Rate/1000 Population1 65.3
Average Annual Procedures per General Surgeon2 809
Population/General Surgeon Ratio 12,389
Estimated Number of General Surgeons for Example Medical Service Area .63
Community Specific Approach
Number of Procedures from Example Medical Service3 549
Example Annual Procedures per General Surgeon from Survey 708
Estimated Number of General Surgeons for Example Medical Service Area .77
1 Data based on procedures sampled from rural hospitals, 2006 NDHD and NSAS surveys.
2 2007 median annual number of surgery cases per non-metro single specialty general surgery
office, 2008 MGMA Physician Compensation and Production Survey
3 Data based on procedures sampled from rural hospitals, 2006 NDHD and NSAS surveys,
applied to example medical service area.
Table 8 also illustrates an approach based on specific general surgeon preferences
and local population demographics. The population of the example service area would
generate 549 surgery procedures from the list. Given this estimate, a community would
require a 0.77 FTE general surgeon (based on an average 708 annual procedures)
assuming 100 percent capture rate. This estimate will be impacted by the out- migration
of surgery procedures to general surgeons outside the service area. Local assessment of
community health care utilization patterns will yield a more accurate estimate. A list of
procedures based on a particular general surgeon’s scope of practice, number of annual
procedures and the need to manage call coverage will also impact these numbers.
20
Summary
A rural general surgeon can make significant clinical contributions in residents'
health and higher quality of life. However, the economic contribution is not typically
quantified. This study clearly demonstrates that the economic contributions as well as the
important medical contributions of a general surgeon are substantial. A rural general
surgeon generates approximately $2.7 million in revenue, $1.4 million in payroll (wages,
salaries and benefits) and creates 26 local jobs. These impacts should be carefully
considered when making physician recruitment and retention decisions.
The methodologies presented here can serve as tools for community leaders to
assess their local health services in terms of general surgery procedures. The results can
serve as templates to identify potential health expenditures that might be lost or
recaptured by losing or introducing general surgeons to the area. All recaptured dollars
can be regarded as new revenue that comes into the community. All revenue changes can
either depress or stimulate growth and economic development. They are further amplified
by the multiplier effect. Spending patterns and income levels vary across regions and
from state to state. Available local data should be utilized to improve accuracy.
Local decision makers should exercise caution when estimating local visits to a
general surgeon particularly when utilizing national coefficients that are implemented in
this study. As discussed earlier, the number and type of visits to a general surgeon can be
significantly different from hospital to hospital depending on scope of a general
surgeon’s practice, the demographics of the population base and the available
alternatives. However, in the absence of local data, these national coefficients serve as
valuable estimators of potential general surgery procedures and anticipated utilization.
21
The process of determining the local need and clinical value of general surgery to a
community as well as the economic risk and potential is likely to expose issues that
prompt the community-specific discussions that are needed to assure appropriate surgical
access as well as the community’s economic health.
22
References
[1] Sprague, J.S., Presented National Organization of State Offices of Rural Health
(NOSORH) Annual Meeting, November 2009, Austin TX.
[2] Doeksen, G.A., Cordes, S., and Shaffer, R., “Health Care’s Contribution to Rural
Economic Development,” National Center for Rural Health Works, Oklahoma State
University, Oklahoma Cooperative Extension, Oklahoma State University, December
1992.
[3] Finlayson, S.R.G., “Surgery in Rural America,” Surgical Innovation, 2005; 12(4):
299-305.
[4].Eilrich, F.C., Doeksen, G.A., and St. Clair, C.F., “The Economic Impact of a Rural Primary
Care Physician and the Potential Health Dollars Lost to Out-migrating Health Services,”
National Center for Rural Health Works, Oklahoma State University, Oklahoma
Cooperative Extension, Oklahoma State University, January 1992.
[5] Zuckerman, R., Doty, B., Gold, M., Bordley, J., Dietz, P., Jenkins, P., and Heneghan,
S., “General Surgery Programs in Small Rural New York State Hospitals,” A Pilot
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[6] Haynes, J.H., Guga, S.C., and Taylor, S.G., “Laparoscopic Cholecystectomy in a
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Cooperative Extension, Oklahoma State University, July 2006.
[8] U.S. Department of Labor, Bureau of Labor Statistics 2008 Wage and Salary
Estimates by Area and Occupation
[9] “2008 MGMA Physician Compensation Survey,” Medical Group Management Association,
www.mgma.com.
[10] “2008 MGMA Cost Survey for Specialty Physican,” Medical Group Management Association,
www.mgma.com.
[11]. Doty, B., Zuckerman, R., Finlayson, S., Jenkins, P., Reib, N., and Heneghan, S.,
“General Surgery at Rural Hospitals: A National Survey of Rural Hospital
Administrators, Surgery, 2008; 143(5): 599-606.
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Need in Rural Areas? Three Approaches to Physician Resource Planning in Southern
Manitoba,” Canadian Medical Association Journal, 1996; 155(4): 395-401.
23
[13] “2006 National Hospital Discharge Survey,” Centers for Disease Control and
Prevention, http://www.cdc.gov/nchs/nhds.htm
[14] “2006 National Survey of Ambulatory Surgery,” Centers for Disease Control and
Prevention, http://www.cdc.gov/nchs/nsas.htm
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[16] King, J., Fraher, E.P., Ricketts, T.C., Charles, A., Sheldon, G.F., and Meyer, A.A.,
“Characteristics of Practice among Rural and Urban General Surgeons in North
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[19] American College of Surgeons, http://www.facs.org.
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Surgeons: Motivations for Practice Location, Practice Patterns, and Education
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Appendix A
Model and Data Used to Estimate
Employment and Income Multipliers
Appendix A
Model and Data Used to Estimate
Employment and Income Multipliers
A computer spreadsheet that uses state IMPLAN (Impact Analysis for Planning)
multipliers was developed to enable community development specialists to easily
measure the secondary benefits of the health sector on a state, regional or county
economy. The complete methodology, which includes an aggregate version, a
disaggregate version, and a dynamic version, is presented in Measuring the Economic
Importance of the Health Sector on a Local Economy: A Brief Literature Review and
Procedures to Measure Local Impacts (Doeksen, et al., 1997). A brief review of input-output
analysis and IMPLAN are presented here.
A Review of Input-Output Analysis
Input-output (I/O) (Miernyk, 1965) was designed to analyze the transactions
among the industries in an economy. These models are largely based on the work of
Wassily Leontief (1936). Detailed I/O analysis captures the indirect and induced
interrelated circular behavior of the economy. For example, an increase in the demand
for health services requires more equipment, more labor, and more supplies, which, in
turn, requires more labor to produce the supplies, etc. By simultaneously accounting for
structural interaction between sectors and industries, I/O analysis gives expression to the
general economic equilibrium system. The analysis utilizes assumptions based on linear
and fixed coefficients and limited substitutions among inputs and outputs. The analysis
also assumes that average and marginal I/O coefficients are equal.
Nonetheless, the framework has been widely accepted and used. I/O analysis is
useful when carefully executed and interpreted in defining the structure of a region, the
interdependencies among industries, and forecasting economic outcomes.
The I/O model coefficients describe the structural interdependence of an
economy. From the coefficients, various predictive devices can be computed, which can
be useful in analyzing economic changes in a state, a region or a county. Multipliers
indicate the relationship between some observed change in the economy and the total
change in economic activity created throughout the economy.
MicroIMPLAN
MicroIMPLAN is a computer program developed by the United States Forest
Service (Alward, et al., 1989) to construct I/O accounts and models. Typically, the
complexity of I/O modeling has hindered practitioners from constructing models specific
to a community requesting an analysis. Too often, inappropriate U.S. multipliers have
been used to estimate local economic impacts. In contrast, IMPLAN can construct a
model for any county, region, state, or zip code area in the United States by using
available state, county, and zip code level data. Impact analysis can be performed once a
regional I/O model is constructed.
Five different sets of multipliers are estimated by IMPLAN, corresponding to five
measures of regional economic activity. These are: total industry output, personal
income, total income, value added, and employment. 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 addition of another
physician and corresponding medical staff to the medical service area. The increased
purchases of inputs by the new physician practice office as a result of the direct impact
are the indirect impact on the business sectors.
Two types of multipliers are generated. Type I multipliers measure the impact in
terms of direct and indirect effects. However, the total impact of a change in the
economy consists of direct, indirect, and induced changes. Both the direct and indirect
impacts change the flow of dollars to the state, region, or county’s households.
Subsequently, the households alter their consumption accordingly. The effect of the
changes in household consumption on businesses in a community is referred to as an
induced effect. To measure the total impact, a Type II multiplier is used. The Type II
multiplier compares direct, indirect, and induced effects with the direct effects generated
by a change in final demand (the sum of direct, indirect, and induced divided by direct).
IMPLAN also estimates a modified Type II multiplier, called a Type SAM multiplier that
also includes the direct, indirect, and induced effects. The Type SAM multiplier further
modifies the induced effect to include spending patterns of households based on a
breakdown of households by nine difference income groups.
Minnesota IMPLAN Group, Inc. (MIG)
Dr. Wilbur Maki at the University of Minnesota utilized the input/output model
and database work from the U. S. Forest Service’s Land Management Planning Unit in
Fort Collins to further develop the methodology and to expand the data sources. Scott
Lindall and Doug Olson joined the University of Minnesota in 1984 and worked with
Maki and the model.
As an outgrowth of their work with the University of Minnesota, Lindall and
Olson entered into a technology transfer agreement with the University of Minnesota that
allowed them to form MIG. At first, MIG focused on database development and
provided data that could be used in the Forest Service version of the software. In 1995,
MIG took on the task of writing a Version 2 of the IMPLAN software. This new version
extended the previous Forest Service version by creating an entirely new modeling
system that included creating Social Accounting Matrices (SAMs) – an extension of
input-output accounts, and resulting SAM multipliers. Version 3 of the new IMPLAN
software became available in the Fall of 2009. For more information about Minnesota
IMPLAN Group, Inc., please contact Scott Lindall or Doug Olson by phone at 651-439-
4421 or by email at info@implan.com or review their website at www.implan.com.
References
Miernyk, W.H. The Element of Input-Output Analysis, New York, NY, Random House,
1965.
Doeksen, G.A., Johnson, T. and Willoughby, C., "Measuring the Economic Importance
of the Health Sector on a Local Economy: A Brief Literature Review and
Procedures to Measure Local Impacts, Southern Rural Development Center,"
SRDC Pub. No. 202, 1997.
Minnesota IMPLAN Group, Inc., User's Guide, Analysis Guide, Data Guide: IMPLAN
Professional Version 2.0 Social Accounting and Impact Analysis Software, 2nd
Ed., June 2000.