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THE ECONOMIC IMPACT of Peacehealth in LANE COUNTY

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THE ECONOMIC IMPACT of Peacehealth in LANE COUNTY THE ECONOMIC IMPACT OF PeaceHealth IN LANE COUNTY Key Findings PeaceHealth operations leave a significant impact on Lane County’s economy, supporting $1.4 billion in overall economic output. The economic activity supported by PeaceHealth supported household earnings of $496 million to $520 million in FY2010. It is estimated that PeaceHealth directly and indirectly accounts for 12,171 to 12,264 jobs in Lane County, or 8.5 percent of regional employment. This activity is not limited to recirculating dollars within the community. By attracting patients from outside the county and retaining patients who would seek treatment elsewhere in the absence of a large medical center, PeaceHealth supports at least 2,700 jobs. Timothy A. Duy Adjunct Assistant Professor and Director, Oregon Economic Forum, Department of Economics, University of Oregon Professor Duy received his B.A. in Economics in 1991 from the University of Puget Sound, and his M.S. and Ph.D. in Economics in 1998 from the University of Oregon. Following graduate school, Tim worked in Washington, D.C. for the United States Department of Treasury as an economist in the International Affairs division and later with the G7 Group, a political and economic consultancy for clients in the financial industry. In the latter position, he was responsible for monitoring the activities of the Federal Reserve and currency markets. Tim returned to the University of Oregon in 2002. He is the Director of the Oregon Economic Forum and the author of the University of Oregon Index of Economic Indicators, the Central Oregon Business Index, the Lane County Business Index, and the Porland Metro Business Index. Tim has published in the Journal of Economics and Business and is currently a member of the Oregon Governor’s Council of Economic Advisors. Introduction his report analyzes the economic impact of TPeaceHealth in Lane County, Oregon. As in most communities, the health care industry both provides a critical service and can serve as a key element of the local economy, providing stable jobs and serving as a source of demand for local firms. Moreover, the presence of high quality medical care can be an attractor for new residents and businesses. As a consequence of these factors, medical services leave a large economic footprint on a community. But how big is that footprint? Using data on patient revenues, employee earnings, and number of employees, we can create estimates of the total economic impact of PeaceHealth on the community. Moreover, by identifying outside and retained revenues – those emanating from either nonresidents or residents who would otherwise have sought services outside of Lane County – we can estimate the net additional economic activity created as a result of having a very large, regional medical provider in the county. It is this ability to export services outside the county that is the primary contributor to local economic development. Results: OVERALL ECONOMIC FOOTPRINT able 1 presents results for the economic impact of patient spending in the PeaceHealth Oregon Region. The spending is broken into three compo- nents,T hospitals (RiverBend, University District and Cottage Grove), clinics, and Sacred Heart Medical Center at RiverBend other revenue. The latter category includes revenues from auxiliary enterprises such as building leases, food services, gifts shops, donations, etc. Notice that these services have smaller multipliers than those of the Sacred Heart Medical Center, hospitals and clinics. University District Combined revenue was $655 million in 20101. The overall impact of this spending on the Lane County economy was $1.2 billion. Households earnings tied to this spending Cottage Grove were $440 million. Moreover, this spending Community Hospital supported 10,399 jobs in Lane County. Alternative estimates of earnings and spending can be derived from the actual earnings of Peace- Health employees. Combined, the 5,408 employ- ees in the PeaceHealth Oregon Region earned $267 million in 2010. These jobs and pay support a total of $410 million of household earnings and 10,296 jobs in Lane County. Table 1: Economic Impact of PeaceHealth Oregon Region Direct Spending on Health Care PATIENT MULTIPLIERS TOTAL IMPACTS REVENUE OUTPUTa EARNINGSb JOBSc OUTPUT EARNINGS JOBS Hospitals $553,181,310 1.81 0.66 15.67 $999,432,674 $364,325,211 8,666 Clinics $94,153,146 1.81 0.77 16.81 $169,965,260 $72,356,693 1,583 Services and otherd $7,755,81 1.58 0.43 19.36 $12,221,865 $3,351,027 150 TOTAL $655,090,268 $1,181,619,799 $440,032,932 10,399 a. Each entry in this column represents the total dollar change in output that occurs in all industries for each additional dollar of output delivered to final demand by the industry corresponding to the entry. b. Each entry in this column represents the total dollar change in earnings of households employed by all industries for each additional dollar of output delivered to final demand by the industry corresponding to the entry. c. Each entry in this column 3 represents the total change in number of jobs that occurs in all industries for each additional 1 million dollars of output delivered to final demand by the industry corresponding to the entry. Because the original RIMS employment multipliers are based on 2007 data, these multipliers are converted to 2010 dollars to match the timing of this study. d. The multipliers for “Service and other” are an average of the multipliers for Real Estate, Retail Trade and Food Service and Drinking Places. Table 2: Economic Impact of PeaceHealth Oregon Region Direct Effect on Earnings and Jobs MULTIPLIERS TOTAL IMPACTS EARNINGSa JOBS EARNINGSb JOBSc EARNINGS JOBS Hospitals Payroll $201,087,189 1.57 $313,535,146 Hospitals Employment 4,720 1.91 9,018 Clinics Payroll $66,157,936 1.46 $96,855,218 Clinics Employment 688 1.86 1,279 TOTAL $267,245,125 5,408 $410,390,363 10,296 a. Wages and salaries plus employer cost of healthcare benefits minus employee contributions for social insurance. b. Each entry in this column represents the total dollar change in earnings employed by all households for each additional dollar of earnings paid directly to households employed by the selected industry. c. Each entry in this column represents the total change in the number of jobs in within the region for each additional job in the selected industry. Notice that these estimates are very close to those derived using patient revenues – a consistency that lends support for the results. Similar estimates can be derived for the PeaceHealth Siuslaw Region, consist- ing of Peace Harbor Hospital, clinics, and services and other categories. Results are reported in Table 3. The net revenue of these entities totaled $55 million in Table 3: Economic Impact of PeaceHealth Siuslaw Region Direct Spending on Health Care PATIENT MULTIPLIERS TOTAL IMPACTS REVENUE OUTPUTa EARNINGSb JOBSc OUTPUT EARNINGS JOBS Hospitals $44,291,129 1.81 0.66 15.67 $80,020,783 $29,170,138 694 Clinics $10,464,644 1.81 0.77 16.81 $18,890,776 $8,042,079 176 Services and otherd $344,883 1.58 0.43 19.36 $527,720 $144,692 6 TOTAL $55,090,656 $99,439,279 $37,356,909 876 a, b, c, d - See table 1 Table 4: Economic Impact of PeaceHealth Siuslaw Region Direct Effect on Earnings and Jobs MULTIPLIERS TOTAL IMPACTS EARNINGSa JOBS EARNINGSb JOBSc EARNINGS JOBS Hospitals Payroll $19,162,151 1.57 $29,877,626 Hospitals Employment 362 1.91 692 Clinics Payroll $11,247,966 1.46 $16,467,022 Clinics Employment 162 1.86 301 TOTAL $30,410,117 524 $46,344,648 993 a,b,c - See table 2. 2010, yielding a total economic impact of $99 million in Lane County, includ- ing $37 million of household earnings and 876 jobs. Using the direct earnings and jobs approach (Table 4) yields a somewhat higher estimate of $46 million of household earnings and 993 jobs. Note, however, the difference is opposite compared to the impact estimates for PeaceHealth Oregon Region, which means in aggregate they will balance out. Finally, I also estimated the impact of PeaceHealth Labs (Tables 5 and 6). The $59 million in lab revenue supported $108 million of overall output in Lane County, with associated household earnings of $43 million and 989 jobs. Ap- plying the earnings and jobs approach yields similar results. The $25 million of earnings for 452 employees multiplies to a total impact of $39 million and 883 jobs in Lane County. Table 7 aggregates the estimated economic impact of all three PeaceHealth divi- sions in Lane County. The services provided by PeaceHealth support an esti- mated $1.4 billion of economic activity in Lane County, supporting $496 million to $520 million of household earnings and 12,171 to 12,264 jobs. Note that in 2010, there were 140,000 employees on nonfarm payrolls in Lane County. Thus the jobs directly and indirectly supported by PeaceHealth equal 8.5 percent of Lane County employment. 1. PeaceHealth staff provided the revenue data incorporated in this report. Note that these figures are net patient revenues, not gross revenues. The net revenues represent funds available to generate economic activity in Lane County. Peace Harbor Hospital in Florence Table 5: Economic Impact of PeaceHealth Labs Direct Spending on Health Care PATIENT MULTIPLIERS TOTAL IMPACTS REVENUE OUTPUTa EARNINGSb JOBSc OUTPUT EARNINGS JOBS Hospitals $58,628,594 1.84 0.73 16.82 $108,111,128 $42,622,988 986 Services and otherd $167,235 1.58 0.43 19.36 $263,534 $72,257 3 TOTAL $58,795,829 $108,374,662 $42,695,245 989 a, b, c, d - See table 1 Table 6: Economic Impact of PeaceHealth Labs Direct Effect on Earnings and Jobs MULTIPLIERS TOTAL IMPACTS EARNINGSa JOBS EARNINGSb JOBSc EARNINGS JOBS Labs Payroll $24,797,605 1.57 $38,835,530 Labs Employment 452 1.95 883 TOTAL $24,797,605 452 $38,835,530 883 a,b,c - See table 2.
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