1. Calculating the Economic Impact On Physicians Where They Are Recruited
Dr. Al Lauzon
School of Environmental Design and Rural Development
University of Guelph

2. Perspective
Percept in the absence of concept is just a bloomin buzzin confusion. William James

3. Stories
Change your story and you might very well change your life. Ben Okri

4. What’s my story?

5. Determinants of Health
Healthcare system accounts for 25% of health outcomes (but roughly but 33% to 46% of the provincial and territorial budgets)
Biology/genetics accounts for 15% of health outcomes
Physical environment accounts for 10% of health outcomes
Socio-economic variables account for 50% of health outcomes
Final Report of the Senate Subcommittee on Population Health, 2009

6. The Canadian health care sector is a major source of spending for governments. Yet, it is also an important driver of economic growth—a perspective overlooked. As such, it should be considered both as an integral part of the Canadian economy and as a sector that can help drive economic growth and generate additional wealth for Canadians.
Conference Board of Canada, 2013

7. Health Care Infrastructure Contribution to Economic Development
Promotes a healthy labour force
Attractive to business and industry
Direct economic impacts
Indirect economic impacts
Induced economic impacts

8. Health Care Context
Health care costs will continue to climb and have doubled since 1985 and risen by 44% since 2000
In 2011 Canada spent more than $200 billion or 11.7% of the GDP on health care
Provincial and territorial funded 2/3 of these costs and costs range from 1/3 for Quebec to over 46% of the budget in Ontario
Drivers of costs: changing demographics (in and over will be 21% of population), technology and sector wages and salaries

9. Health Care Contribution to Canadian Economy
Health care delivery responsible for 10.1% of GDP
Supports 2.1 million jobs in a large number of industries
Generates $30.6 billion in taxes or $0.21 for every health care dollar spent
Health care sector is recession proof and in 2007 continued to grow in terms of GDP while the rest of economy declined

10. Physician Contribution to Economic Development: Canada
Physicians are the driver of the Canadian Health Care system
30,575 GPs & 13,800 specialists in 2013
Offices of physicians contribute $21.9 billion in GDP and directly create 180,000 jobs (second only to hospitals in the health care sector)
Indirect contributions to GDP is an additional $3.5 billion in GDP and 31,473 jobs (highest in GDP and 3rd highest in indirect job creation relative to other economic sectors)
The health care sector in total contributes $163.4 billion to GDP or 10.1% of GDP, creates 2,144,863 jobs and generates $30.6 billion in taxes (or $0.21 for every dollar spent on health care)

11. A Mayor’s Perspective
(hospitals)…play an important part in sustaining the economic vitality of their towns by injecting dollars into the local economy and by providing one of the basic community services that is needed to attract and retain other employers.
Pirani and Rosenblatt, 1991

12. A Mayor’s Perspective
71.1% of 130 mayors surveyed regarded physician shortage as an important reason for hospital closure in their community.
The most perceived negative effects of hospital closure was the economic effects (63.4%).
Pirani and Rosenblatt, 1991

13. A Mayor’s Conclusion
There is a clear interrelationship between general economic development and health services, with each supporting and amplifying the other, both during growth and during atrophy.
Pirani and Rosenblatt, 1991

14. Adequate numbers of physicians are the main driver of a vital health care sector!

15. Economic Contribution of Recruiting One Physician
GP Physician Income: $271,000
Physician Staff 3.5 jobs
Regional Jobs 4.5 X 1.79 = 8.06
Regional Income $271,000 X 1.34 = $363,140
Rent 1,000 sq. ft. x$13.50 = $13,500
Taxes $271,000 x $0.21 = $56,910

16. Return on Investment
Assume costs of $200,000 per year for physician recruitment
Revenue Contribution to local economy
= $271,000 + $363,140 + $13,500 = $647,640
Return on Investment $647,640/$200,000 = $3.25
Thus for one physician recruitment there is a return on investment of $3.24/$1.00 or a total $648,000 to the local/regional economy

17. Multi-Year Example

18. Physician Income Year Number of Physicians Annual Physician Income
Physician Income
Year
Number of Physicians
Annual Physician Income
Accumulated Physician Income
Year 1 3
$813,000
Year 2 6
$1,626,000
$2,439,000
Year 3 4
$1,084,000
$3,523,000
Total 13
$6,775,000

19. Job Creation Year Number of Physicians Employees Physician Office
Job Creation
Year
Number of Physicians
Employees Physician Office
Generated Jobs (1.34 multiplier)
Total Jobs
Year 1 3
10.5 4
14.5
Year 2 6 21 7 28
Year 3 14 5 19
Total 13
45.5 16
61.5

20. Income Generation (multiplier 1.79)
Income Generation (multiplier 1.79)
Year
Number of Physicians
Physician Income
Generated Income
Accumulated Generated Income
Year 1 3
$813,000
$1,455,279
Year 2 6
$1,626,000
$2,910,540
$4,365,819
Year 3 4
$1,084,000
$1,940,360
$6,306,179
Total 13
$3,523,000
$5,818,370
$12,127,277

21. Office Rent (1,000 Square Feet @ $13.50 per Square Foot)
Office Rent (1,000 Square $13.50 per Square Foot)
Year
Number of Physicians
Square Feet Required
Cost
Accumulated Rent
Year 1 3
3,000
$40,500
Year 2 6
6,000
$81,000
$121,500
Year 3 4
4,000
$54,000
$175,000
Total 13
13,000
$175,500
$337,500

22. Tax Revenues ($0.21 for every health care dollar)
Tax Revenues ($0.21 for every health care dollar)
Year
Number of Physicians
Accumulated Physician Income
New Annual Tax Revenues
Accumulated Tax Revenues
Year 1 3
$813,000
$170,730
Year 2 6
$2,439,000
$512,190
$682,920
Year 3 4
$1,084,000
$227,640
$910,560
Total 13
$4,336,000
$1,764,210

23. Summary Over Three Years
Accumulated Physician Income $6,775,000
Jobs Created
Income Revenue Generated $12,127,277
Rent Paid $337,500
Tax Revenue Generated $2,276,400

24. Return on Investment for Physician Recruitment Over a Three Year Period (assume annual budget of $250,000)
Total Physician Recruitment Costs 3 X $250,000 = $750,000
Total Revenue Generated = Accumulated Physician Income + Income Generated + Office Rent
$6,775,000 + $12,127,277 + $337,500 = $19,239,777
Return on Investment = Total Revenue Generated/Total Physician Recruitment Costs
$19,239,777/$750,000 = $25.65
Every dollar spent on physician recruitment generates an additional $25.65 in the regional economy or a total of $19,237,500 in total over 3 years

25. Conclusion
Regions should view physician recruitment as a strategic economic investment and not as a cost. The economic and general well-being of regions and their residents are directly related to the well-being of the health care sector and the well-being of the health care sector is dependent upon physicians. The health care sector not only provides access to health care, but is part of the infrastructure that promotes the overall economic well-being of the community, region and its citizens.

26. Thank you…
QUESTIONS?