Health Care: An Economic Development Opportunity for Public Administrators

A note for our readers: the views reflected by the authors do not reflect the views of ASPA.

By David J. Robinson

Health care is an economic development opportunity for local and state public administrators. Health care is most regions’ largest industry, paying above average wages to the full spectrum of employee types. Health care is also a critical quality of life factor impacting the retention and attraction of high wage jobs in other industries.

Regions dominating the American economic scene accomplish this growth through success in developing the five drivers of economic development in the energy, high-tech, manufacturing, service and global industries. The last 50 years have seen a transition of the American economy from high wage manufacturing jobs to lower wage service jobs. However, not all service jobs are low wage. Health care is an example of service jobs paying above average wages. Hospitals, as the largest employer in the health care industry, are an important regional employer as they provide jobs not just for highly educated doctors but also less educated workers moving up the ladder of the economic opportunity chain.

Hospitals collectively are the General Motors of the 21st century. In most regions and states, hospitals are the largest employer based upon employee headcount. Thirty years ago that was not the case. Thus, hospital employees pay millions in state and local income tax and the hospitals, while mostly not for profit, are paying other fees to support the operation of government. In a 2013 American Hospital Association issue brief titled, “Economic Contributions of Hospitals Often Overlooked,” hospitals:

• Directly employ nearly 5,500,000 people, making them the second largest source of private sector jobs.
• Spend more than $702,000,000,000 on goods and services from other businesses.
• Support 15,000,000 direct and indirect jobs or 1 of 9 jobs in America.

In addition, hospitals are major urban and rural employers. They are a major exporter of regional services and provide an important impact to struggling regional economies as they bring in state and federal funding for their operation.

Future job prospects are positive for health care as well. Data from the Bureau of Labor Statistics show health care occupations should enjoy the largest planned growth of any occupation growing by 29 percent from 2010 to 2020. The health care industry recently added an average of 28,000 jobs per month. Finally, the health care industry is more likely recession-proof than many other industries.

Health care research and development creates jobs and companies in biotechnology, medical devices and many other areas. Institutions such as Johns Hopkins University lead the nation with nearly $2,000,000,000 in medical, science and engineering based research and development. The Cleveland Clinic, Vanderbilt University and others are chasing Johns Hopkins in the development of health care research and development.

Health care is more important than just the high-wage jobs they provide. Access to high quality, affordable health care institutions affects other regional employers. Healthy, longer living workers are more productive. Workers live longer if the health care they receive is high quality. To address the quality issue, many states launched health care quality programs. A report from the Commonwealth Fund noted Hawaii, Wisconsin, Vermont, Minnesota, Massachusetts and Connecticut all rank high in their health care treatment of low-income populations. The Massachusetts health care plan is the most high profile, state based policy but Wisconsin’s statewide Affordable Care Organizations (ACOs) creates important partnerships with employers and health care providers. ACOs are health care teams using technology and knowledge around patient needs to improve health care quality in coordination with private insurance companies and employers. According to Area Development, this Wisconsin ACO saved a Marinette, Wisconsin manufacturer save $2,000,000 in its first year of operation and a Green Bay products manufacturer have kept health care cost growth to less than 2 percent over the last four years.

Health care cost is another major corporate site driver for companies considering a retention or expansion project. As with many other cost of living factors, the South is less expensive than the East, West and Midwest. In a Wall Street Journal article titled, “Health-Care Costs: A State-by-State Comparison,” major states health care cost per employee vary with Georgia at $5,467, Texas at $5,924, Michigan at $6,618, Indiana at $6,666, Illinois at $6,756, Ohio at $7,076, Wisconsin at $7,233, Minnesota at $7,409, and Pennsylvania at $7,730. The availability of high quality, affordable health care is an important company recruitment tool. Health care is consistently a top ranking factor when corporate site selectors are asked to list the most important quality of life issues influencing company location decisions.

Health care institutions also are taking on new roles in leading economic development. Whether it is Mercy St. Vincent’s in Toledo, Ohio State University Wexner Medical Center and Nationwide Children’s Hospital (both in Columbus) or Good Samaritan in Dayton, hospitals in Ohio, as well as other states, are focused on redeveloping the struggling urban neighborhoods surrounding their major facilities. Columbus is an economic success story surrounded in a state transitioning from a major manufacturing center into a service provider. Health care is a major industry in Columbus. However, several of Columbus’ hospitals are surrounded by struggling urban neighborhoods threatening the future of the thousands of workers. Public administrators in Columbus have chosen to develop public-private-partnerships with these major employers who operate as not-for-profit institutions.

The Ohio State University (OSU) and Nationwide Children’s hospitals decided to invest back into these urban facilities and even support the redevelopment of the surrounding neighborhood based upon the creation of a public-private-partnership with the City of Columbus. The Ohio State University agreed to develop a $1,100,000,000 new Wexner Medical Center, retain 12,000 jobs, create 6000 jobs all with a $33.94 an hour average salary. In return, the City of Columbus, Ohio offered a $35,000,000 Columbus Job Creation Tax Credit based upon a rebate of the municipal income tax. Ohio State agreed to invest $10,000,000 in the OSU East Neighborhood to redevelop this struggling urban center.

The Nationwide Children’s Hospital offers another example of local government using tax policy to encourage growth in the health care industry. Nationwide Children’s agreed to undertake an $842,000,000 hospital expansion retaining 5,585 jobs and creating 2,400 jobs in exchange for a $15,000,000 Columbus Job Creation Tax Credit based upon a rebate of the municipal income tax, and priority for federal stimulus and other infrastructure funding. Nationwide Children’s also agreed to create a community development initiative to redevelop housing, education, health care and address crime in the struggling urban area surrounding the hospital.

Successful regional economies need the availability of high quality, affordable health care. These institutions are major employers with employees paying a substantial amount of state and local taxes. They offer important ladders for economic opportunity as well as can serve as innovation platforms for a new generation of high-tech companies. Finally, hospitals are critical infrastructure every company expects their employees to access and communities are beginning to recognize these major institutions as the large employers they now are.

 

Author: David J. Robinson is an adjunct professor at the John Glenn School for Public Affairs at the Ohio State University and Principal of the Montrose Group, LLC. He can be reached at [email protected].

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