How Rural Health Services Build Local Economies: Indiana Examples February 21, 2003 Indiana Rural Health Association Public Policy Forum Indianapolis, Indiana Paul E. McNamara, PhD, MPP University of Illinois at Urbana—Champaign Department of Agricultural and Consumer Economics and University of Illinois Extension and

Outline of Presentation Rural Health Challenges: Background Randolph and Marshall Counties, Indiana Health Care Impact Results Economic Developers and Health Care Competition and Value Perspectives Conclusions and Discussion

Challenges Facing Rural Health Care Providers

Competition for health care dollars Many rural counties are losing health care dollars as residents go out-of- county for their health care services 48% of rural residents believe urban health services are better Health care business is lost to other counties if local services close down

Changes in health care affect provision of local rural health care services Movement to managed care Purchase of rural health services by large urban networks Public funding squeeze – Medicare and Medicaid reimbursement pressures –Rural providers often serve a disproportionate share of the elderly, low-income, and un/underinsured

Why is economic impact information important? Rural residents have little idea of how important the health sector is to the local economy and how it contributes to employment, income, and retail sales Analysis shows the interconnectedness of economic activity

How Is A Health Sector Economic Impact Analysis Conducted? Thorough Examination of the County’s Economic Make-Up Understanding the Roles of the Health Sector Understanding the Interdependence of Economies Using IMPLAN to Illuminate the True Depth of Health Care’s Influence

IMPLAN A computer program that uses economic data to produce the economic multipliers Uses Data from 528 Industrial Sectors Conducts Input – Output Analysis Builds Transaction Tables Produces income and employment multipliers –Multipliers are mathematical ratios that describe the different rounds of spending that occur within the economy

Marshall and Randolph County Background Socio-economic comparison –income, employment, poverty Health care sector comparison –physicians, Medicare payments

Health Care Flow of Funds

Employment by Sector

Health Care’s Employment Impact

Health Care as a percentage of total Employment Health care accounts for 4.2% of all jobs within Marshall County –Including secondary impacts, health care accounts for 6.0% of employment Health care accounts for 4.4% of all jobs within Randolph County –Including secondary impacts, health care accounts for 5.7% of employment

Health Care’s Income Impact

Economic impact increases as The amount of services exported increases The amount of “leakages” decreases –“leakages” lower our multipliers The local purchase of inputs (labor, supplies, and other factors of production) increases –work force training issues?

Indirect Impact of Health Care Attract/retain residents, retirees, and businesses –quality of life Generate investment funds Contribute to local leadership

Why Should Economic Developers Pay Attention to the Health Care Industry? Less volatility than other sectors Health care as a “growth” industry –Aging population –Steady growth in health care spending

Economic Development’s Role in the Health Care Industry Collaboration With Existing Industries –Example: Health Insurance – are they sending people out of area? Advocacy for health care issues –Example: Proposed Medicaid Cuts Grant Assistance –Data collection

Health Care’s Role In Economic Development Efforts Board positions Committee Assignments Continued investments in local health care delivery Workforce training programs and partnerships with educational institutions

Health Care, Strategic Planning, and Partnering Health care can play a role in community economic strategic planning efforts Health care and economic development can partner to benefit the community

Market Structure Herfindahl Index – sum of squared market shares, ranges from 0 to 10,000 Zip code basis, quintiles IHCCCC 2001 Discharge data – all Illinois discharges White areas most competitive, dark areas least competitive Does not account for cross-state border migration

What is the Value of a Rural Hospital? Why bother? –Evidence-Based Public Health and Health Care Policy Travel Cost Economic Framework Applied in rural health research –Clarke (valuing provision of mobile mammography services in rural Australia) –Christianson and Bender (valuing the provision of rural hospital services in Montana)

Motivation “…federal scrutiny of critical access hospitals has raised concerns about ‘inappropriate designation,’ and over- proliferation of critical access hospitals. MedPAC, in particular, has raised questions about the Flex program, but the GAO has also expressed concerns.” Sent to rural health researchers April 2001

Conclusions Significant economic impact of health care in Randolph and Marshall Counties, Indiana Opportunities for health care’s impact in smaller and rural communities to be expanded For more information: – –copies of slides from this presentation –flyer on Illinois Rural Health Workshop