Medical Development as a Catalyst for Economic Development Keith Dines, Executive Vice President, Strategic Development

2 Source: American Hospital Association TrendWatch, May 2004, Vol.6, No. 1 Health care is a major contributor to the U.S. economy… National Expenditures on Health Services and Supplies as a Percentage of Gross Domestic Product 2004 Other – 27% Prescription Drugs – 11% Nursing Home Care – 7% Physician Services – 23% Hospital Care – 33% $1.8 Trillion U.S. GDP 2004 Health Services and Supplies 14.9% Other Sectors 85.1%

3 …fueled by a growing, changing population. Wave of Aging Baby-Boomers Trend Increasing over long term Source: US Census Bureau; Sun Health Strategic Planning Department; Healthcare Advisory Board,2006 National Age Distribution Growth By Age Cohort Over the next 25 years, the population will grow at an accelerated rate in the age groups with the highest utilization of medical services

4 Medical Employment vs. Employment in Other Industries 2005 (1) Source: Department of Labor, Bureau of Labor Statistics, Current Employment Statistics Survey, custom data request (1) Data are as of September 2005 Thousands Healthcare is the largest private-sector employer ,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 Full-service restaurants General medical & surgical hospitals Employment services Limited- service eating places Grocery stores Offices of physicians Building equipment contractors Department stores

5 Healthcare Employment by Occupation Type 2004 Source: Department of Labor, Bureau of Labor Statistics, 2004 National Industry-Specific Occupational Employment and Wage Estimates Installation, Maintenance, and Repair Business and Financial Operations Community and Social Services Food Preparation and Serving Management Building and Grounds Cleaning and Maintenance Other Occupations Healthcare Support Office and Administrative Support Healthcare Practitioner and Technical Number of Employees (Thousands) …supporting a range of workers with varying skill levels…

6 Average Weekly Earnings of Workers, Health Care (1) vs. All Service-providing Industries All Service-providing Industries Health Care Source: Department of Labor, Bureau of Labor Statistics, Current Employment Statistics Survey (1) Includes physicians employed by hospitals. … with jobs that offer higher pay than other industries… $0 $100 $200 $300 $400 $500 $600 $700 $

7 Quarterly (3-Month) Percent Change Percent Change in Employment, Seasonally-Adjusted: Health Care vs. All Industries – 2005 Source: Department of Labor, Bureau of Labor Statistics; Recession period defined by National Bureau of Economic Research 1 – Non-farm Hospitals All Industries (Total nonfarm) Qtr Qtr 2Qtr 3Qtr 4Qtr 1Qtr 2Qtr 3Qtr 4Qtr 1Qtr 2Qtr 3Qtr 4Qtr 1Qtr 2Qtr 3Qtr … and provide job stability, even during uncertain times. Recession of 2001* -0.4% -0.2% 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% In the United States, one out of every nine jobs is supported by the health care industry, offering stable employment even in times of economic strain.

8 Percent of Health Care Costs (1) by Type of Expense 2Q05 Professional Fees - 5.7% Utilities – 1.7% All Other: Non-labor Intensive – 3.6% (2) All Other: Labor Intensive – 2.7% Professional Liability Insurance – 5.7% Other Products (e.g., Food, Medical Instruments) Other Services Prescription Drugs 19.3% 6.5% 19.5%Wages & Benefits 54.7% Source: Centers for Medicare and Medicaid Services, September 2005, using base year 2002 weights (1) Does not include capital (2) Includes postage and telephone expenses Health Care entities purchase a variety of services…

9 Health Care Services Impact on Sectors of the U.S. Economy (in $ billions) 2004 Source: The Lewin Group analysis of American Hospital Association 2004 Annual Survey data using BEA industry multipliers for the hospital sector Health Care and Social Assistance$570.6 Manufacturing240.0 Real Estate and Rental & Leasing151.5 Finance and Insurance102.0 Professional, Scientific, and Technical Services66.8 Retail Trade65.0 Wholesale Trade52.3 Information52.2 Administrative and Waste Management Services49.9 Transportation and Warehousing49.9 Accommodation and Food Services40.9 Other Services40.0 Management of Companies and Enterprises32.3 Utilities28.4 Agriculture, Forestry, Fishing, and Hunting23.5 Educational Services12.8 Arts, Entertainment, and Recreation11.4 Mining10.1 Construction8.0 Total$1,607.6 Economic ImpactIndustry … and fuel sectors of the economy outside healthcare…

10 Impact of Health Care on U.S. Economy (in $ billions) 2004 Source: The Lewin Group, using BEA RIMS-II multipliers applied to 2004 American Hospital Association Annual Survey data Direct Effect Ripple EffectTotal Contribution … while supporting businesses and jobs across the country... $591 $1,608 $343 $1,113 $249 $495 Impact on Wages & Salaries Impact on Economy

11 Source: The Lewin Group, using BEA RIMS-II multipliers applied to 2004 American Hospital Association Annual Survey data Impact of Health Care on U.S. Jobs (in millions) 2004 … generating more jobs throughout the entire economy Total Jobs Ripple Effect Direct Jobs

12 The Arizona health sector holds a quarter-million jobs… Arizona Industry Employment Projections 2006 Source: Arizona Dept of Economic Security; US Dept of Labor, Bureau of Labor Statistics note – Includes non-hospital based healthcare employees

13 …with robust job growth projected to continue. Health Sector 1 Leads State-wide in New Job Growth Through 2013 Source: Arizona Dept of Economic Security; US Dept of Labor, Bureau of Labor Statistics (1) – Includes non-hospital based employees 51% 10-year growth rate

14 …boosting overall economic and social well-being. Across the country healthcare providers make significant contributions to the economy, providing large numbers of high-paying, stable jobs to healthcare workers. At a local level, healthcare providers can fuel economic development both through the direct impact of their payroll dollars, as well as through the purchasing of other goods and services that support the provision of care. Further, the presence of healthcare providers boosts the region’s attractiveness to new residential and commercial interests through a variety of services that maintain the optimum health status of the community.