The Economic Impact of Hospital Closures in Ontario ©2009 The Centre for Spatial Economics prepared for: Ontario Health Coalition prepared by: The Centre for Spatial Economics January 31, 2009

Background ©2009 The Centre for Spatial Economics Ontarios economy is in recession and its government is expected to run deficits for the next few years Ministry of Health is restructuring and reducing funding for the provinces hospitals The OHC expects hospitals in some communities to close with services transferred to larger, centralized, regional facilities Job losses of 5,000 expected through lay-offs and attrition

Assumptions & Direct Impact ©2009 The Centre for Spatial Economics Assume 5,000 fewer health care workers in 2009, with 1,000 through lay-offs and 4,000 through attrition Direct reduction of health care sector GDP of $252 million Direct reduction in government spending on hospitals of $325 million Restructuring costs of $49 million include severance pay (9 months for workers on lay-off) and early retirement packages (1 month for workers lost through attrition) Study does not include estimate of revenue from the sale and disposal of government assets nor does it include restructuring costs for facilities that need to be renovated or expanded This cut in spending is assumed to be permanent

Economic Impact Summary ©2009 The Centre for Spatial Economics The short-run impacts include a loss of 7,125 jobs, a reduction in GDP of $549 million, a drop in the standard of living, lower provincial government spending, revenues and deficit The long-run impacts arise from a negative economic cycle that permanently reduces Ontarios population by, on average, 18,900 with a loss of 11,230 jobs and $1.3 billion in GDP

Impact on Government Finances ©2009 The Centre for Spatial Economics Provincial government net lending improves in both the short- and the long- run. Ontario government savings reduced in the short-run by restructuring costs and in the short- and long-run by reduced revenues Federal government net lending deteriorates in both the short- and the long- run. Spending rises in the short-term reflecting higher EI payments but falls in the long-run because Ontarios population growth is reduced

Impact by Sector ©2009 The Centre for Spatial Economics The short-run employment impact is centered on the health care, construction, wholesale and retail trade, and professional services sectors The long-run employment impact is borne particularly by the health care, construction, education and government sectors

Community & Patient Impacts ©2009 The Centre for Spatial Economics Hospitals are a part of a regions economic foundation and are used to attract and retain business in the region Reduced health care services will lead to fewer medical procedures performed and longer patient wait times for treatment Wait times impose costs on the patient and the economy through reduced productivity CMA study established that the hidden costs of an underperforming health care system can be very high

Conclusions ©2009 The Centre for Spatial Economics Reducing hospital budgets can ease the pressure on provincial budget – but at the cost of permanent reductions in employment, GDP and the standard of living Impact extends beyond workers and business affected by the cuts and includes community and patient impacts Its the wrong time to cut public spending Government should stay the course with hospital funding in the current economic environment and engage in constructive, long-term planning for the provinces health care sector

©2009 The Centre for Spatial Economics for more information please contact: Robin Somerville Director, Corporate Research Services The Centre for Spatial Economics 15 Martin Street, Suite 203 Milton, ON Canada L9T 2R1 phone: web:

Appendix: C 4 SE Provincial Modeling System ©2009 The Centre for Spatial Economics The C 4 SEs provincial models are dynamic multi- sector econometric models The C 4 SEs Provincial Modeling System is a bottom- up system of provincial macroeconometric models which are linked by a national add-up model that helps determine: Trade Labour migration Prices Interest Rates Exchange Rates The models are solved iteratively using updated information from the national model to generate a convergent solution