Healthcare Impact Study

Conducted by:
The Area Development Partnership and
Economic Development Resource Center at The University of Southern Mississippi
Healthcare Impact Study
CONDUCTED BY:
The Area Development Partnership (ADP) &
Economic Development Resource Center at
The University of Southern Mississippi (EDRC)

AUTHORS:
Brian Richard, EDRC
Ron Tharp, ADP
Healthcare Impact Study
EXECUTIVE SUMMARY

The healthcare industry has a significant impact on the

Greater Hattiesburg Area. The various types of health-
care facilities have multipliers ranging from 1.30 for home
healthcare services to 1.55 for hospitals.

The healthcare industry employs 8,209 individuals, generat-

ing $393,547,769 in labor income and $21,645,127 in state
general fund revenue. Secondary employment contributes
an additional 3,773 jobs, $138,816,134 in labor income,
and $7,634,887 in state general fund revenue. Economic
activity associated with this industry accounts for about
17 percent of the total Greater Hattiesburg Area economy,
employing 11,982 individuals with an annual payroll of
$532,363,903, and creating $29,280,015 in state general
fund revenue. Regardless of how it is analyzed, the Hat-
tiesburg MSA’s healthcare industry is a major driving force
of the local economy.

Planned construction over the next five years will result in

direct and secondary investments of $375,220,000. These
investments will create approximately 5,476 jobs, with a
labor income of $139,981,000 and general fund revenue of
$7,698,955.
Healthcare Impact Study
INTRODUCTION

The Area Development Partnership (ADP) and the Economic Development Re-
source Center (EDRC) at The University of Southern Mississippi partnered to com-
plete a study of the economic activity associated with the healthcare industry in
the Greater Hattiesburg Area. This study was initiated to quantify the direct and
secondary impacts of the healthcare industry on the Greater Hattiesburg Area
economy. When the process began we knew that the healthcare industry had seen
significant growth and was already flourishing before the early 1990’s.

In fact, in the 1993 Area Development Partnership’s Retirement Guide, it was

reported that there were 240 physicians for every 100,000 people. Today, accord-
ing to Sperling’s Best Places, the Greater Hattiesburg Area has 464.7 physicians
per 100,000 people, while the United States’ average is only 169.7 physicians per
100,000 people (see Graph 1). These physicians, along with area colleges and
universities, who graduated 336 RN’s and granted 43 graduate degrees in nursing
in the academic year of 2006, and many other medical professionals, provide sup-
port for our healthcare industry. The human capital found within the healthcare
sector ensures that our 835 hospital beds and 136 healthcare entities, represent-
ing nearly 200 locations, provide quality care. This medical infrastructure allows
our community to serve as a medical hub for a 17-county region with nearly a half
million people.

Graph 1
Number of physicians per 100,000 people

500 464.7

400

1993 ADP Retirement Guide

300
240
200 169.7 2006 Greater Hattiesburg Area

100
2006 National Average
0
DEFINITIONS

For the purpose of this study, direct impacts refer to the employment and payroll
or income generated by the 136 healthcare entities. Secondary impacts are cre-
ated as a result of local spending by healthcare facilities and their employees.
Furthermore, this study emphasizes a few basic measures of economic impact,
specifically:

• Employment
• Labor Income
• General Fund Revenue

For this study, the term employment refers to the number of jobs created by virtue
of the existence of the facilities. Labor income consists of the income generated by
those jobs. The term general fund revenue refers to the sales, income, corporate,
gaming and other taxes that the State of Mississippi receives as a result of expen-
ditures that originate from the calculated labor income.

Multipliers
Input-output analysis generates estimates of indirect and induced economic im-
pacts commonly referred to as “multipliers.” Multiplier effects measure the im-
pacts on output, income, and employment that result from an increase in final
demand. A unit increase in final demand (an additional dollar of output or em-
ployee compensation, or one additional job in the sector) results in a total increase
in output, income, or employment in the economy equal to its multiplier. That is,
multipliers estimate the amount of direct, indirect, and induced effects on income
or employment that result from each additional dollar of output, additional job and
additional dollar of employee compensation in a sector. Further details regarding
the techniques used can be found in the appendix.

Multipliers vary from sector to sector. Industries that buy a significant amount
of their inputs in the local economy will have higher multipliers. Also, industries
that have higher average wages tend to have higher multipliers. The employment
multipliers for the sectors being analyzed in this report are as follows:

Home Health Care Services 1.30

Offices of Physicians, Dentists, and Other Professionals 1.40
Hospitals 1.55
Nursing Homes 1.35
These multipliers, when applied to the employment figures for each sector, give us
the total employment impacts.

FINDINGS

Impact of Healthcare Activities

The direct impact of the healthcare industry is significant. Over 8,200 people are
directly employed by the healthcare industry. These employees earn over $390 mil-
lion annually, generating $21.6 million in general fund revenues for the State of
Mississippi.

Furthermore, those who are directly employed indirectly generate almost 3,800
jobs and an additional payroll of nearly $139 million in secondary impacts. These
secondary impacts produce another $7.6 million in general fund revenue.

As a result of the direct and secondary impacts, the healthcare industry accounts
for almost 12,000 jobs. This employment generates just over half a billion dollars
in total payroll or income within the Greater Hattiesburg Area economy annually
(see Table 1 for details). The income from these jobs generated over $29 million
in general fund revenue for the State of Mississippi.

Table 1
Impact of Activities

Direct Secondary Total

Employment 8,209 3,773 11,982
Labor Income $393,547,769 $138,816,134 $532,363,903
General Fund Revenue $21,645,127 $7,634,887 $29,280,015

Impact of Construction Projects

In addition to employment and payroll impacts, planned expansions and construc-
tion projects will result in significant impacts on the local economy. Data collected
indicates that healthcare facilities in the Greater Hattiesburg Area plan to spend over
$239 million within the next five years on new construction or expansions.

The direct impacts of this investment will create over 3,600 jobs within the construc-
tion industry and generate over $92 million in labor income. This will contribute over
$5 million in general fund revenue.
The secondary effects of this capital investment will result in expenditures over
$135 million dollars and create over 1,800 jobs. This will result in an additional
$47.6 million in labor income and contribute $2.6 million to general fund rev-
enue.

These direct and secondary effects of construction activity are expected to gener-
ate over $375 million in total expenditures in Mississippi (Table 2). When com-
pleted, these activities will have created almost 5,500 jobs with a total payroll of
almost $140 million. The income from these jobs generated about $7.7 million in
state general fund revenue.

Table 2
Impact of Construction Projects

Direct Secondary Total

Expenditures $239,470,000 $135,750,000 $375,220,000
Employment 3,636 1,840 5,476
Labor Income $92,381,000 $47,600,000 $139,981,000
General Fund Revenue $5,080,955 $2,618,000 $7,698,955

Tax Revenues Generated

An important result of the direct and indirect health care activities is the additional
tax revenues generated. Tax revenues presented here are statewide estimates.
However, most of the impacts will occur in the Greater Hattiesburg & south Mis-
sissippi areas.

State tax collections come primarily from sales, personal income and corporate in-
come taxes. However, many other taxes fund state government including gaming,
alcoholic beverage, estate and auto tag taxes. Based on EDRC analysis of Missis-
sippi Tax Commission collections and total personal income in the state, about 5.5
percent of total personal income in Mississippi lands in the state general fund. In
other words, for every $100 in personal income in Mississippi, about $5.50 is col-
lected by the tax commission and deposited into the general fund.

Annual state tax revenues associated with healthcare employment in the Greater
Hattiesburg Area total about $29 million. While less than 1 percent of total state
General Fund revenues, it is still significant. By comparison, $29 million is about
50 percent of statewide tax revenues associated with tobacco sales.
Healthcare in the Overall Economy
Direct payroll in the Greater Hattiesburg Area’s healthcare industry represents
about 12 percent of total income in the Metropolitan Statistical Area (MSA). This
compares with a figure of less than 7 percent for the state of Mississippi. In other
words, the healthcare industry is almost twice as important to the Hattiesburg
MSA economy as it is for the state of Mississippi’s economy as a whole. Part of
this disparity comes from the fact that the Greater Hattiesburg Area is more urban
than most of Mississippi. However, it also stems from the fact that the Greater
Hattiesburg Area is recognized as a hub for healthcare activity. When secondary
impacts of the industry are included, economic activity associated with the health-
care industry is responsible for about 17 percent of total income in the Hattiesburg
MSA.

In terms of employment, the numbers are similar. Direct employment in the

healthcare industry makes up over 11 percent of total employment in the Hatties-
burg MSA. When secondary employment is included, the industry is responsible
for about 16.5 percent of total employment. No matter how it is analyzed, Hatties-
burg’s healthcare industry is a major driving force of the local economy.

Assumptions and estimation techniques can be found in the appendix to this report.
Technical Appendix
SCOPE OF STUDY

For the purposes of this study, the scope was limited to the following NAICS Codes
of 2002:

6211-Offices of Physicians- This industry comprises establishments of health prac-

titioners having the degree of M.D. (Doctor of Medicine) or D.O. (Doctor of Oste-
opathy) primarily engaged in the independent practice of general or specialized
medicine (e.g., anesthesiology, oncology, ophthalmology, psychiatry) or surgery.
These practitioners operate private or group practices in their own offices (e.g.,
centers, clinics) or in the facilities of others, such as hospitals or HMO medical
centers.

6212-Offices of Dentists- This industry comprises establishments of health practi-

tioners having the degree of D.M.D. (Doctor of Dental Medicine), D.D.S. (Doctor
of Dental Surgery), or D.D.Sc. (Doctor of Dental Science) primarily engaged in the
independent practice of general or specialized dentistry or dental surgery. These
practitioners operate private or group practices in their own offices (e.g., centers,
clinics) or in the facilities of others, such as hospitals or HMO medical centers.
They can provide either comprehensive preventive, cosmetic, or emergency care,
or specialize in a single field of dentistry.

62131-Offices of Chiropractors- This industry comprises establishments of health

practitioners having the degree of D.C. (Doctor of Chiropractic) primarily engaged
in the independent practice of chiropractic. These practitioners provide diagnostic
and therapeutic treatment of neuromusculoskeletal and related disorders through
the manipulation and adjustment of the spinal column and extremities, and oper-
ate private or group practices in their own offices (e.g., centers, clinics) or in the
facilities of others, such as hospitals or HMO medical centers.

62132-Offices of Optometrist- This industry comprises establishments of health

practitioners having the degree of O.D. (Doctor of Optometry) primarily engaged
in the independent practice of optometry. These practitioners provide eye examina-
tions to determine visual acuity or the presence of vision problems and to prescribe
eyeglasses, contact lenses, and eye exercises. They operate private or group prac-
tices in their own offices (e.g., centers, clinics) or in the facilities of others, such
as hospitals or HMO medical centers, and may also provide the same service as
opticians, such as selling and fitting prescription eyeglasses and contact lenses.
62133-Offices of Mental Health Professionals- This industry comprises establish-
ments of independent mental health practitioners (except physicians) primarily
engaged in (1) the diagnosis and treatment of mental, emotional and behavioral
disorders and/or (2) the diagnosis and treatment of individual or group social dys-
function brought about by such causes as mental illness, alcohol and substance
abuse, physical and emotional trauma, or stress. These practitioners operate pri-
vate or group practices in their own offices (e.g., centers, clinics) or in the facilities
of others, such as hospitals or HMO medical centers.

621391-Offices of Podiatrist- This U.S. industry comprises establishments of health

practitioners having the degree of D.P. (Doctor of Podiatry) primarily engaged in
the independent practice of podiatry. These practitioners diagnose and treat dis-
eases and deformities of the foot and operate private or group practices in their
own offices (e.g., centers, clinics) or in the facilities of others, such as hospitals or
HMO medical centers.

6216-Home Health Care Services- This industry comprises establishments primar-

ily engaged in providing skilled nursing services in the home, along with a range of
the following: personal care services; homemaker and companion services; physi-
cal therapy; medical social services; medications; medical equipment and supplies;
counseling; 24-hour home care; occupation and vocational therapy; dietary and
nutritional services; speech therapy; audiology; and high-tech care, such as intra-
venous therapy.

622-Hospitals- Industries in the Hospitals subsector provide medical, diagnostic,

and treatment services that include physician, nursing, and other health services
to inpatients and the specialized accommodation services required by inpatients.
Hospitals may also provide outpatient services as a secondary activity. Establish-
ments in the Hospitals subsector provide inpatient health services, many of which
can only be provided using the specialized facilities and equipment that form a
significant and integral part of the production process.

623-Nursing and Residential Care Facilities- Industries in the Nursing and Residen-
tial Care Facilities subsector provide residential care combined with either nursing,
supervisory or other types of care as required by the residents. In this subsector,
the facilities are a significant part of the production process and the care provided
is a mix of health and social services with the health services being largely some
level of nursing services.
To limit the scope of this study within the NAICS definitions, there were three de-
viations. First, 62133-Offices of Mental Health Professionals were limited to only
those entities that have Ph.D’s on staff. Secondly, 6216-Home Health Care Ser-
vices were limited to hospice service. Lastly, 623-Nursing and Residential Care
Facilities were limited only to nursing homes.

Data Collection
Within the outlined parameters, a total 136 non-duplicated healthcare entities
were identified. The data collection phase of the healthcare study relied on survey
methods utilizing mail, email, fax transmissions and telephone communications.
The survey consisted of the following questions:

1) Number of full-time employees?

2) Number of part-time employees?
3) Combined total payroll annual?
4) Are you planning to construct or remodel a facility with in the next 5 years?
If yes, what is the estimated value (not including medical equipment)?
5) Number of professionals whose income is not included as part of payroll?

In order to participate in the study, the number of part-time and full-time employ-
ees was required. The amount of annual payroll was optional. However, for em-
ployee privacy, annual payroll was automatically excluded from telephone surveys
if the respondent had less than two full-time employees. Future construction or
remodeling plans were collected to demonstrate growth of the industry and pro-
vide an economic impact of the capital investments. It is important to note that
some respondents did have definite expansion plans, but could not yet estimate a
dollar amount of their project. The number of professionals whose income is not
part of payroll was necessary to account for owners who may not list themselves
on payroll.

Participation Rates
The participation rate, based on the number of entities, was very high. Of the 136
entities, 48 provided the number of part-time and full-time employees, 55 par-
ticipants provided answers to all five questions. The result was 103 participants
with an overall participation rate of 75.7 percent. Of the 136 entities, 40.4 percent
provided a complete survey, 35.3 percent provided employment information only
and 24.3 percent did not participate in the study.
Graph 2
Participation Rate

Non-Participant
24 %
40 %
Full Participation

35 % Partial Participation

Even more remarkable than the participation rate is the estimated percent of em-
ployees captured.

Data Estimation
Because participation in the study by local healthcare providers was less than 100
percent, some estimation of input data was required. The IMPLAN model does
have income estimates, based on national averages, which it produces based on
employment. However, local data is preferred whenever possible for greatest ac-
curacy. This section details the payroll figures used for each sub-industry included
in the study.

Healthcare Sectors
Home Healthcare Services- Since every respondent to the survey only provided
employment numbers – no payroll figures were given – income estimates from the
model were used.

Offices of Physicians, Dentists, and Other Professionals- General participation for

the respondents in this category was quite high, in terms of payroll. Payroll figures
were included for about 88 percent of employment counts. However, we know
that a significant number of non-responses were for the physicians themselves,
indicating that the earnings per job of the data collected are somewhat low. The
payroll figures indicated by the model were about 14 percent higher ($65,873 per
job vs. $57,931). Because the actual data collected was clearly skewed to the low
side, the higher payroll figure from the model was used for this sector.

Hospitals- Complete information about payroll was received from all respondents.
Therefore, only local data was used for this sector.
Nursing Homes- For this sector, payroll figures were only obtained from one em-
ployer, though other facilities reported their employment figures. To preserve data
confidentiality, payroll figures presented are from the model. It should be noted,
though, that this does not significantly alter the overall impacts. This sub-sector is
a small portion of the overall healthcare sector and the average payroll figure from
the model did not substantially differ from the reported payroll figure.

Non-responders
For the purposes of this study, non-responders were assumed to look like respond-
ers, on average. That is, the employment/payroll figures for each non-responder
were assumed to be the average of the responders for each sub-sector. Based on
these assumptions, the following table details the employment and payroll of each
sub-sector.

Employment

Full Time Part Time Payroll

Home Health Care Services 66 364 $10,627,672
Offices of Physicians, Dentists, 3,446 185 $239,184,784
and Other Professionals
Hospitals 3,691 8 $130,844,170
Nursing Homes 363 86 $12,891,143
Totals 7,566 643 $393,547,769

METHODOLOGY

Input-Output Multipliers in Mississippi

Direct cash receipts and employment figures illustrate only a part of the impor-
tance of an industry to the Mississippi economy. To show the full effect that a firm
or industry has on the economy, including its impact on other sectors, input-output
analysis can be employed. Input-output analysis is founded on the principle that
industries are interdependent. One industry purchases inputs from other industries
and households (i.e. labor) then sells outputs to other industries, households, and
government. Therefore, economic activity in one sector impacts other sectors.
The economic impacts that an industrial sector (manufacturing, retail trade, the
service sector, even colleges and universities) has on an economy can be catego-
rized as direct, indirect or induced. Direct effects in the health care sector are those
due to the actual treatment activities and medical services. Direct effects are out-
put-generated, jobs created and income earned by those actively involved in provid-
ing health-related services, such as doctors, nurses and clerical & support staff.
Indirect effects occur when the healthcare sector buys inputs from other sectors.
For example, when a hospital purchases an input such as x-ray equipment or office
supplies, income and employment are created in other sectors involved in produc-
ing and delivering these inputs. The additional income and employment in these
other sectors can be attributed to the economic activity in the healthcare sector.
Thus, the healthcare sector creates income and jobs not only for doctors, nurses,
and other health sector employees, but also in other sectors that are linked to the
healthcare industry.

Additional employment and income earned by healthcare workers and their input
suppliers allow these households to increase their consumption. That is, as jobs
and income increase, people buy more goods and services. Industries expand to
provide these additional goods and services, spawning even more jobs and greater
income in the economy. The new jobs and income created to meet this increasing
consumer demand are considered to be an induced effect.

To simplify the reporting of the impacts, indirect and induced impacts are com-
bined and reported as secondary impacts. The extent of the secondary impacts of
healthcare in the Greater Hattiesburg Area depends on input purchase and income
expenditure patterns. When inputs are purchased locally, and wages and profits
are spent locally, regional jobs and income are created as these dollars circulate
throughout the local economy. However, when purchases are made outside the
region, these dollars are lost, or “leaked,” from the region and produce no second-
ary impacts within the region.

The IMPLAN Model

The input-output model used for this study is IMPLAN Pro. IMPLAN is based on
national level data for 2002 detailing the economic links between industries. It also
includes regional (state and county level) estimates of total gross output, final de-
mand, final payments, and employment. The IMPLAN model is a secondary data
model, composed of national level data that must be adjusted to the economic
make-up of the region in question.

IMPLAN, like many other static input-output models, incorporates several assump-
tions, which make it more accommodating for the user but may limit the confi-
dence in conclusions drawn from its output. To allow for greater manageability,
individual firms are aggregated into industries based on the similarity of their
production processes and outputs. Each industry is assumed to produce a single
homogeneous product using a constant, linear production function. This type of
production function cannot reflect the efficiencies associated with an industry’s
size or scale, or its ability to substitute one input for another. In addition, static in-
put-output models assume that trade relationships and relative prices are constant
and that resources are unlimited.

In addition, IMPLAN includes the assumption that inputs of production are pur-
chased within the region until no more are available. However, industries often
purchase locally obtainable inputs outside the local economy for reasons such as
differences in quality and price. Therefore, output, income, and employment mul-
tipliers may be inflated if industries purchase locally available inputs from suppliers
outside the study region. Also within IMPLAN, additional labor requirements of the
study region are satisfied by in-migration. Finally, each member of a household is
assumed to consume at the average rate of consumption.

Even with all these imperfections, the input/output method in general and IM-
PLAN in particular still generate reasonably accurate, defendable, and worthwhile
estimates of economic impacts. Parameters used in the project are best-available
estimates computed by the Economic Development Resource Center within the
University of Southern Mississippi. The study determines the current economic
impact, examining activities and expenditures over the last year. This is consis-
tent with the conservative approach to measuring economic impact taken in this
study.