Hospitals are major employers in their local markets; they are often the largest provider of jobs in a community. In its latest TrendWatch report, Beyond Healthcare: The Economic Contribution of Hospitals, the American Hospital Association details the economic impact of hospitals in each of the fifty states.
The bottom-line: hospital employment generates economic ripple effects way beyond the direct jobs provided in health care.
Hospitals employ more than 5 million people nationwide – making them the second-largest employer in the private sector – and account for more than 4% of employment most everywhere. The Department of Labor calculates that private-sector jobs indirectly generated by hospitals is one in 10. That’s huge.
As the chart on the left shows, hospital jobs pay more. That means those workers generally spend more in their local economy, thus providing spillover effects to other local employers like dry cleaners, food establishments, auto repair shops, and other services used by workers going to-and-from their daily jobs.
These ripple effects happen in at least three ways:
1. Purchasing goods and services from other businesses in the community
2. Providing income for employees, who then spend it in the community; and,
3. Paying wages and salaries, which are subject to federal, state and local taxes.
Health Populi’s Hot Points: Always remember that one worker’s income is another one’s cost. For some communities, the hospital is the local monopsony providing the lion’s share of meaningful employment.
The chart on the right from the AHA study illustrates that in many states, hospitals provide at least 1 in 10 jobs: this is true for Maine, North Dakota, Pennsylvania, and nearly 1 in 10 for Massachusetts, Michigan, Missouri, Ohio and West Virginia, among others.
The microeconomy of the hospital is thus a major contributor to the States’ and nation’s macroeconomy.
When there’s talking of closing hospitals, there’s no doubt why it’s so tough to do so. Financing hospitals, appropriately, has implications well beyond “the bed” and the individual patient.