<%BANNER%>

UFIR IFAS



Economic Impacts of Healthcare in the Rural Health Networks of Florida
http://edis.ifas.ufl.edu/ ( Publisher's URL )
CITATION PDF VIEWER
Full Citation
STANDARD VIEW MARC VIEW
Permanent Link: http://ufdc.ufl.edu/IR00001950/00001
 Material Information
Title: Economic Impacts of Healthcare in the Rural Health Networks of Florida
Physical Description: Fact Sheet
Creator: Philippakos, Effie
Publisher: University of Florida Cooperative Extension Service, Institute of Food and Agriculture Sciences, EDIS
Place of Publication: Gainesville, Fla.
Publication Date: 2002
 Notes
Acquisition: Collected for University of Florida's Institutional Repository by the UFIR Self-Submittal tool. Submitted by Melanie Mercer.
Publication Status: Published
General Note: "Published July 2002."
General Note: "FE 339"
 Record Information
Source Institution: University of Florida Institutional Repository
Holding Location: University of Florida
Rights Management: All rights reserved by the submitter.
System ID: IR00001950:00001

Downloads

This item is only available as the following downloads:

FE33900 ( PDF )


Full Text

PAGE 1

Economic Impacts of Healthcare in the Rural Health Networks of Florida1 Effie Philippakos, Alan W. Hodges, and David Mulkey2 1. This is EDIS document FE 339, a publication of the Department of Food and Resource Economics, Florida Cooperative Extension Service, Institute of Food and Agricultural Sciences, University of Florida, Gainesville, FL. Published July 2002. Please visit the EDIS website at http://edis.ifas.ufl.edu. 2. Effie Philippakos, research assistant; Alan W. Hodges, Assistant-In FRE; and David Mulkey, Professor; Department of Food and Resource Economics, Florida Cooperative Extension Service, Institute of Food and Agricultural Sciences, University of Florida, Gainesville, FL. The use of trade names in this publication is solely for the purpose of providing specific information. UF/IFAS does not guarantee or warranty the products named, and references to them in this publication does not signify our approval to the exclusion of other products of suitable composition. The Institute of Food and Agricultural Sciences is an equal opportunity/affirmative action employer authorized to provide research, educational information and other services only to individuals and institutions that function without regard to race, color, sex, age, handicap, or national origin. For information on obtaining other extension publications, contact your county Cooperative Extension Service office. Florida Cooperative Extension Service/Institute of Food and Agricultural Sciences/University of Florida/Christine Taylor Waddill, Dean. Introduction Healthcare in Regional Economies The healthcare sector is important to state and regional economies, particularly in rural areas where it is a major employer second only to public schools. Healthcare is also an important element of rural economic development. Quality healthcare services and facilities help attract new businesses to an area and retain existing firms. Indeed, healthcare quality in a community may be a critical factor for businesses investigating potential locations. It is also a major consideration for retirees, which is significant in Florida since the state attracts many retirees. The healthcare sector, as with any basic industry, has both direct and secondary economic impacts. Direct economic impacts include output, employment, and value added contributions directly associated with healthcare providers. These businesses make purchases from other regional suppliers, which experience increased sales and employment as a result (indirect effects). Subsequently, the income accruing to employees in the region from direct and indirect activities leads to increased spending by regional households (induced effects). For example, in the case of a local hospital, the facility employs staff and provides medical services in exchange for monetary payment (direct impacts). The hospital also purchases inputs from other regional businesses such as office and medical suppliers (indirect impacts). Workers from hospitals and complementary businesses, whose jobs are supported by the hospital, make personal consumption expenditures to grocery stores, restaurants, and the like (induced impacts). These impacts are magnified if the hospital purchases inputs predominantly from regional businesses and receives service payments from sources located outside the region. The total impact to the regional economy is the sum of the direct, indirect, and induced effects. Florida's Rural Health Networks This report summarizes the economic impacts of existing healthcare institutions in Florida's eight Rural Health Networks. A list of Florida counties included in each Rural Health Network is provided in Table 1. Note that only a portion of the counties of

PAGE 2

Economic Impacts of Healthcare in the Rural Health Networks of Florida 2 Alachua, Clay, Escambia, Leon, Martin, Palm Beach, St. Johns, and Santa Rosa are part of a Rural Health Network. Additionally, the economic impacts of healthcare institutions in Florida counties that are not part of a Rural Health Network were estimated for comparison. This study is part of a larger project involving compilation of data pertinent to Rural Health Network planners, including demographic information, economic indicators, number of healthcare providers and facilities, and community health status in addition to the economic impact analysis featured in the present study (http://economicimpact.ifas.ufl.edu, 2001). Methodology Healthcare Sector Definition Five economic sectors make up the healthcare industry and are analyzed in this report: 1. Doctors and dentists. 2. Nursing and protective care. 3. Hospitals. 4. Other medical services. 5. Pharmaceuticals. The doctors and dentists sector includes offices and clinics of doctors of medicine, dentists, doctors of osteopathy, chiropractors, optometrists, and podiatrists. Nursing and protective care includes skilled nursing care and intermediate care facilities. The hospital sector includes general medical, surgical, psychiatric, and other specialty hospitals. Other medical services include medical and dental laboratories, home health care services, kidney dialysis centers, and other specialty outpatient facilities. The pharmaceutical sector represents pharmaceutical-related sales by drug stores. Data Sources A variety of data sources were used for this analysis. Data for Doctors and Dentists, and Other Medical Services were obtained from Implan data for Florida counties (MIG, 2001). Output data for the Hospitals and Nursing and Protective Care sectors were provided by the Florida Agency for Health Care Administration. Revenue information on drugstore retail sales were provided by the Florida Department of Revenue. Since drugstores sell non-pharmaceutical products as well, 50 percent of drugstore sales were estimated to represent pharmaceutical sales, based on market research data (Florida Trend Magazine, 2001). Industry output associated with retail drug sales was estimated using an average gross margin of 0.267 for Florida drug stores (U.S. Census Bureau). Economic Impact Analysis An input-output (I-O), social accounting matrix framework was used to estimate the direct, indirect, and induced economic impacts of the healthcare industry in Florida. Input-output analysis is a technique that captures the regional economic interdependence between different industries, households and government institutions (Miller and Blair, 1985; Mulkey and Hodges, 2000). Specifically, it describes the relationship between economic sectors and the final demand for goods and services, including purchases for final consumption by households, businesses and government, capital investment, and exports to buyers outside the region. The premise of input-output analysis is that the structure of the economy is technologically fixed, such that for a given change in the final demand, output, or employment for a particular industry or region, there will be predictable changes in other linked sectors of the economy. These changes are measured by estimating the regional economic multipliers associated with the particular industry, using a matrix inversion procedure applied to the matrix of inter-industry transactions. Input-output models have proven useful to policymakers, industry officials, and others interested in estimating regional impacts attributed to economic activity by specific sector(s) and have been applied to a wide array of research problems such as assessing the importance of agriculture, evaluating the economic structure of rural communities, and investigating the economic repercussions of plant openings. The input-output analysis was conducted using the IMPLAN PRO software package and associated

PAGE 3

Economic Impacts of Healthcare in the Rural Health Networks of Florida 3 databases for Florida counties (MIG, 1999). The IMPLAN database offers economic and sociodemographic descriptions for all United States counties across 528 economic sectors that correspond to the U.S. Department of Commerce four digit Standard Industrial Classification (SIC) system. The software component of the IMPLAN modeling system performs calculations for a pre-defined study area to assess economic impacts to the region. Multipliers are available from IMPLAN for economic output, total value added, employment, employee compensation, personal income, other proprietary income, and indirect business taxes and are provided for direct, indirect, and induced impact effects. IMPLAN was used to estimate the total economic impacts associated with Florida's healthcare sector by multiplying the value of output against the direct effects multiplier and multiplying non-local funding values (health insurance-covered expenditures) against the indirect and induced effects multipliers and subsequently summing as indicated in Figure 1. Figure 1. Total economic impact calculation. Economic impacts were estimated for the measures of output, value added, and employment. Value added represents the value of output less the value of inputs used by firms in the production of a good or service (COGS). It is a measure of income and is a useful economic indicator because it avoids the double counting of expenditures on intermediate and final goods inherent in output measures. Local Versus Non-Local Funding For the current study, output represents the value of total healthcare expenditures in the region and non-local funding represents the portion of healthcare expenditures covered by health insurance, including Medicare and Medicaid. Expenditures covered by insurance are assumed to be a non-local funding source, and out-of-pocket patient expenses not covered by insurance are assumed to be internal to the region. Non-local funding represented 77.9 percent of output, based on personal communications with the Florida Department of Health. Regional Population Adjustments A number of Florida counties have only a portion of their area as part of a Rural Health Network, including Alachua, Clay, Escambia, Leon, Martin, Palm Beach, Santa Rosa, St. Johns, and Volusia Counties. However, the IMPLAN model does not classify regions on a sub-county level. This could lead to an overestimation of economic impacts if both the urbanized and rural portions of these counties are included in Rural Health Network county definitions. In order to more accurately estimate economic impacts, county populations were expressed as a proportion of rural populations, as indicated by the 1990 Bureau of the Census, and health expenditures were then adjusted downward proportional to the reduction in county populations. As an example, according to the 1990 Bureau of the Census, 34.2 percent of Alachua County's population was rural. Total county health expenditures were multiplied by 34.2 percent to reflect the portion of health expenditures attributed to rural residents. Per-capita economic impact estimates were based on these adjusted population levels. Total impact values for the state of Florida include both the urbanized and rural portions of all Rural Health Network counties in addition to the non-Rural Health Network counties. Therefore, state totals are greater than the sum of impacts for non-Rural Health Network counties and Rural Health Networks. Findings The total economic impacts of the healthcare services sector in the Rural Health Networks of Florida include $13.9 billion in output, 222,836 jobs, and $9.1 billion in value added. These impacts were considerably lower than those estimated for the non-Rural Health Network counties of Florida, amounting to $123.2 billion in output, 1.8 million

PAGE 4

Economic Impacts of Healthcare in the Rural Health Networks of Florida 4 jobs, and $80.4 million in value added. Total per-capita output impacts were $6,928 in the Rural Health Networks of Florida and $11,502 in the non-Rural Health Network counties of Florida. The fact that non-Rural Health Network counties receive greater impacts on a total and per-capita basis is not surprising, given that greater populated areas attract proportionately higher levels of economic activity. Two Rural Health Network regions had particularly low economic impacts in relation to the population base: the Panhandle and Rural Health Network of Monroe County. The Heartland, Lake Okeechobee, and Northwest Florida Rural Health Networks had relatively higher economic impacts. Output Impacts Total output impacts across all healthcare sectors in the Rural Health Networks of Florida totaled $13.9 billion (Table 2). By comparison, the non-Rural Health Network counties generated $123.2 billion in total output impacts. The Heartland Rural Health Network had the largest output impacts ($5.5 billion) followed by Northwest Florida ($2.4 billion), St. Johns River ($1.8 billion), Health Partnership of North Central Florida ($1.4 billion), Lake Okeechobee ($1.2 billion), Big Bend ($825.7 million), Rural Health Network of Monroe County ($421.8 million), and the Panhandle Area Health Network ($404.7 million). Among all Rural Health Networks, the Hospital sector accounted for the majority of total output impacts (70 percent), followed by Doctors and Dentists (13 percent), Nursing and Protective Care (nine percent), Other Medical Services (seven percent), and Pharmaceuticals (one percent). Employment Impacts Annual total employment impacts related to the healthcare sector of the Rural Health Networks of Florida were 222,836 jobs (Table 3). By comparison, the non-Rural Health Network counties of Florida had total employment impacts of 1.8 million jobs. The Heartland Rural Health Network had the largest employment impacts (87,117 jobs), followed by Northwest Florida (39,111 jobs), St. Johns River (29,862 jobs), Health Partnership of North Central Florida (23,043 jobs), Lake Okeechobee (17,211 jobs), Big Bend (12,954 jobs), Panhandle Area (6,895 jobs), and the Rural Health Network of Monroe County (6,643 jobs). Among all Rural Health Networks, the Hospital sector captured the majority of total employment impacts (65 percent), followed by Nursing and Protective Care (13 percent), Doctors and Dentists (12 percent), Other Medical Services (eight percent), and Pharmaceuticals (two percent). Value Added Impacts The healthcare services sector in the Rural Health Networks of Florida generated annual total value added impacts of $9.1 billion (Table 4). By comparison, the non-Rural Health Network counties of Florida yielded total value added impacts of $80.4 billion. The Heartland Rural Health Network had the largest value added impacts at $3.6 billion, followed by Northwest Florida ($1.6 billion), St. Johns River ($1.2 billion), Health Partnership of North Central Florida ($915.3 million), Lake Okeechobee ($785.9 million), Big Bend ($481.7 million), Rural Health Network of Monroe County ($279.1 million), and the Panhandle Area Health Network ($276.2 million). Among all Rural Health Networks, the Hospital sector accounted for the majority of total output impacts (68 percent), followed by Doctors and Dentists sector (14 percent), Nursing and Protective Care (10 percent), Other Medical Services (seven percent), and Pharmaceuticals (one percent). Per-Capita Output Impacts Given the wide range in overall size of the Rural Health Network regions of Florida, economic impacts are more meaningfully expressed on a per-capita basis. For example, the Rural Health Network of Monroe County consists of only one county, whereas the Lake Okeechobee Rural health Network consists of five counties. Total per-capita output impacts were $6,928 among all healthcare sectors in the Rural Health Networks of Florida (Table 5). The Doctors and Dentists sector had per-capita output impacts of $1723, the Nursing and Protective Care sector had $550, Hospitals claimed $4139, Other Medical Services were $444, and Pharmaceuticals had $71 in per-capita output impacts. Total per-capita output impacts were $11,502 for the non-Rural Health Network counties across all sectors. Lake Okeechobee had the greatest per-capita output

PAGE 5

Economic Impacts of Healthcare in the Rural Health Networks of Florida 5 impacts at $8,287, followed by Northwest Florida ($7,817), Heartland ($7,726), Health Partnership of North Central Florida ($6,620), St. Johns River ($5,884), Big Bend ($5,502), Rural Health Network of Monroe County ($5,217), and the Panhandle Area Health Network ($3,948). References Rural Health Network data reports. (2002). Available on the World Wide Web at http://economicimpact.ifas.ufl.edu. Minnesota Implan Group. (2001). Stillwater, MN: MIG, Inc. Florida Trend Magazine. (September 2001). U.S. Census Bureau. (2000). Annual benchmark report for retail trade and food services. Washington, D.C. Miller, R.E., and P.D. Blair. (1985). Input-output analysis: Foundations and extensions. Englewood Cliffs, NJ: Prentice-Hall Publishers. Mulkey, W.D., and A.W. Hodges. (2000). Using IMPLAN to assess local economic impacts. Extension Digital Information Source (EDIS) FE168, University of Florida, Gainesville, FL. Available on the World Wide Web at http://edis.ifas.ufl.edu/FE168. IMPLAN Professional, Version 2.0. (1999). Social Accounting and Impact Analysis Software, User's Guide, Analysis Guide, and Data Guide. Stillwater, MN: MIG, Inc.

PAGE 6

Economic Impacts of Healthcare in the Rural Health Networks of Florida 6 Table 1. Counties in the Rural Health Networks of Florida. Name of Agency Number of Counties Names of Counties Within Agency Big Bend Rural Health Network 6Gadsden, Jefferson, Leon,* Madison, Taylor, and Wakulla Health Partnership of North Central Florida 8Alachua,* Bradford, Dixie, Gilchrist, Hamilton, Levy, Suwannee, and Union Heartland Rural Health Network 5Charlotte, DeSoto, Hardee, Highlands, and Polk Lake Okeechobee Rural Health Network 5Glades, Hendry, Martin,* Okeechobee, and Palm Beach* Northwest Florida Rural Health Network 4Escambia,* Okaloosa, Santa Rosa,* and Walton Panhandle Area Health Network 5Calhoun, Holmes, Jackson, Liberty, and Washington Rural Health Network of Monroe County 1Monroe St. Johns River Rural Health Network 6Baker, Clay,* Flagler, Putnam, St. Johns,* and Volusia* Non-Rural Health Network Counties 27 Bay, Brevard, Broward, Citrus, Collier, Columbia, Duval, Franklin, Gulf, Hernando, Hillsborough, Indian River, Lafayette, Lake, Lee, Manatgee, Marion, Miami-Dade, Nassua, Orange, Osceola, Pasco, Pinellas, St. Lucie, Sarasota, Seminole, and Sumter Portion of county

PAGE 7

Economic Impacts of Healthcare in the Rural Health Networks of Florida 7 Table 2. Total output impacts in the Rural Health Networks of Florida ($ millions), 1998-99. Rural Health Network Doctors & Dentists Nursing & Protective Care Hospitals Other Medical Services Pharmaceuticals Total Healthcare Sectors ($ millions) Big Bend Rural Health Network 182.7176.1411.348.3 7.3825.7 Health Partnership of North Central Florida 317.5 96.3823.8136.1 8.01,381.7 Heartland Rural Health Network 1,405.1360.43,357.1292.9 54.95,470.4 Lake Okeechobee Rural Health Network 282.3 71.4735.792.3 13.01,194.7 Northwest Florida Rural Health Network 624.1122.81,511.9154.4 21.32,434.5 Panhandle Area Health Network 105.9 78.3194.823.0 2.7404.7 Rural Health Network of Monroe County, Florida 86.1 20.9270.928.6 15.3421.8 St. Johns River Rural Health Network 457.4178.41,009.1117.1 20.11,782.1 Total Rural Health Networks 3,461.11,104.68,314.6892.7142.613,915.6 Non-Rural Health Network Counties in Florida 32,214.96,703.974,556.48,265.01,454.6123,194.8 Total Florida* 41,748.4 9,607.3 94,488.4 10,802.1 2,898.8 162,545.0 Source: MIG, Florida Department of Revenue, Agency for Health Care Administration. *Florida totals reflect the urbanized and rural portions of all Rural Health Network counties in addition to the on-Rural Health Network counties.

PAGE 8

Economic Impacts of Healthcare in the Rural Health Networks of Florida 8 Table 3. Total employment impacts in the Rural Health Networks of Florida (jobs), 1998-99. Rural Health Network Doctors & Dentists Nursing & Protective Care Hospitals Other Medical Services Pharmaceuticals Total Healthcare Sectors (jobs) Big Bend Rural Health Network 2,4324,2585,173 892 19912,954 Health Partnership of North Central Florida 4,4662,38513,4662,513 21323,043 Heartland Rural Health Network 18,3948,38554,0414,9421,35587,117 Lake Okeechobee Rural Health Network 3,1631,50510,8741,412 25717,211 Northwest Florida Rural Health Network 8,2212,88024,8272,685 49839,111 Panhandle Area Health Network 1,3951,8363,200 400 646,895 Rural Health Network of Monroe County, Florida 1,106 4634,240 495 3396,643 St. Johns River Rural Health Network 6,1874,23616,8212,109 50929,862 Total Rural Health Networks 45,36425,948132,64215,4483,434222,836 Non-Rural Health Network Counties in Florida 394,139136,9271,113,813127,57728,4301,800,886 Total Florida* 513,976 204,248 1,469,454 169,830 61,362 2,418,870 Source: MIG, Florida Department of Revenue, Agency for Health Care Administration. *Florida totals reflect the urbanized and rural portions of all Rural Health Network counties in addition to the on-Rural Health Network counties.

PAGE 9

Economic Impacts of Healthcare in the Rural Health Networks of Florida 9 Table 4. Total value added* impacts in the Rural Health Networks of Florida ($ millions), 1998-99. Rural Health Network Doctors & Dentists Nursing & Protective Care Hospitals Other Medical Services Pharmaceuticals Total Healthcare Sectors ($ millions) Big Bend Rural Health Network 124.5126.8195.529.1 5.8481.7 Health Partnership of North Central Florida 212.6 68.4546.281.9 6.2915.3 Heartland Rural Health Network 927.5252.72,156.8177.0 42.03,556.0 Lake Okeechobee Rural Health Network 191.1 50.4477.656.9 9.9785.9 Northwest Florida Rural Health Network 433.0 88.51,007.596.9 16.71,642.6 Panhandle Area Health Network 73.5 56.4129.814.4 2.1276.2 Rural Health Network of Monroe County, Florida 57.4 15.0177.717.2 11.8279.1 St. Johns River Rural Health Network 299.7124.8642.769.1 15.31,151.8 Total Rural Health Networks 2,319.3783.05,333.8542.5109.89,088.4 Non-Rural Health Network Counties in Florida 21,385.54,673.548,135.95,089.41,086.580,370.8 Total Florida** 27,813.2 6,735.0 62,736.9 6,638.4 2,195.9 106,119.4 Source: MIG, Florida Department of Revenue, Agency for Health Care Administration. Represents the value of output less the value of inputs used by firms in the produciton of goods and services. **Florida totals reflect the urbanized and rural portions of all Rural Health Network counties in addition to the on-Rural Health Network counties.

PAGE 10

Economic Impacts of Healthcare in the Rural Health Networks of Florida 10 Table 5. Total per-capital output impacts in the Rural Health Networks of Florida, 1998-99. Rural Health Network Doctors & Dentists Nursing & Protective Care Hospitals Other Medical Services Pharmaceuticals Total Healthcare Sectors (dollars) Big Bend Rural Health Network 1,2171,1732,741 322 495,502 Health Partnership of North Central Florida 1,521 4613,947 652 386,620 Heartland Rural Health Network 1,984 5094,741 414 787,726 Lake Okeechobee Rural Health Network 1,958 4955,103 640 908,287 Northwest Florida Rural Health Network 2,004 3944,855 496 687,817 Panhandle Area Health Network 1,033 7641,900 224 263,948 Rural Health Network of Monroe County, Florida 1,065 2583,351 354 1895,217 St. Johns River Rural Health Network 1,510 5893,332 387 665,884 Total Rural Health Networks 1,723 5504,139 444 716,928 Non-Rural Health Network Counties in Florida 3,008 6266,961 772 13611,502 Total Florida* 2,800 644 6,539 725 194 10,903 Source: MIG, Florida Department of Revenue, Agency for Health Care Administration. *Florida totals reflect the urbanized and rural portions of all Rural Health Network counties in addition to the on-Rural Health Network counties.