brookings health system economic impact february 2014

Brookings Health System Economic ImpactFebruary 2014

Report compiled by: Eric Guthrie, South Dakota State University Graduate Research Assistant and Dr. Mike McCurry, State Demographer

2 South Dakota Census Data Center Report

IntroductionBrookings Health System serves Brookings and its surrounding communities (Arlington, Badger, Hetland, Lake Preston, Sinai, Nunda, Rutland, Estelline, Dempster, Bruce, Toronto, Astoria, White, Bushnell, Aurora, Elkton, Ward, and Volga). Brookings Health System includes a 49-bed hospital with three operating rooms; a 79-bed nursing home, The Neighborhoods at Brookview; congregate living apartments for seniors, Brookhaven Estates; Arlington Medical Center; White Medical Clinic and Yorkshire Eye Clinic (data taken from http://brookingshealth.org/our-centers/brookings-health-system/).

Brookings Health System is city-owned, and the purpose of this analysis is to provide a reasonable estimate of the economic impact it has on Brookings and the area within a thirty-mile radius.

Several demographic challenges need to be addressed in determining the impact of Brookings Health System.

• Brookings Health System provides a hospital, nursing home, senior apartments, eye clinic, Arlington Medical Center and White Medical Clinic. While all business units within Brookings Health System have some impact on other (non-city) health care services, facilities and employees, the hospital exudes the most significant influence. After reviewing similar studies in rural western Minnesota and rural North Dakota, and calculating the points of leakage equilibrium, we accepted that at least 25% of the other (non-city) health care services existing in Brookings can only exist because of the presence of Brookings Health System.

• Brookings is a “college-town.” Since the town’s population has a larger component in the 18 to 29 age range (residents who require less medical care than the older residents of the comparable neighboring communities), calculations need to be performed to “normalize” the population to reflect the health care services residents need (else we cannot contrast Brookings correctly with Sioux Falls and Watertown). We chose to normalize Brookings population by a downward adjustment in young adults (rather than attempting to adjust Sioux Falls and Watertown).

• The most reliable data blends Census data from April 1, 2010 with Labor data from March 2011, and Brookings Health System data from Dec, 2011.

• Census data on health care employment is confounded by including employment that is not connected with Brookings Health System – examples include care for the mentally retarded, child daycare, dentists, etc. Table 5 at end of this report identifies those categories that required adjustment.

ObjectiveThe objective of this study is to demonstrate how Brookings Health System positively affects the local economy by quantifying how it affects employment levels and labor income.

Commuting PatternsThe primary commuting locations that affect Brookings employment are Sioux Falls and Watertown. Census data allowed the South Dakota State Data Center staff to analyze work force and commuting patterns. That data shows (Table 1) that slightly more people commute from Sioux Falls

City of ResidenceEmployed in Brookings County

Brookings Workers Whose Salaries are Lost to Commuting

Brookings Residents Who Commute for Employment

Brookings 7,786 – –

Sioux Falls Metro 1,428 55 1,373

Watertown 282 2 280

Table 1: Commuters between Brookings, Sioux Falls and Watertown

3Brookings Health System Economic Impact

Figure 1: Brookings City adjusted population (numerical)

to Brookings than from Brookings to Sioux Falls. The data also shows that Watertown to Brookings commuters closely balance their counterparts who drive from Brookings to Watertown.

Census data shows 13,809 people employed in the city of Brookings in March, 2011. Table 1 shows

Figure 2: Brookings City adjusted population (percentages)

that 55 more people commute from Sioux Falls to Brookings than Brookings to Sioux Falls – suggesting a 0.4 percent direct salary leakage to Sioux Falls that is systemic in the commuting pattern.

Adjusting the population of Brookings to reflect the reduced medical needs of the university


student population provides an adjusted (medical) population of Brookings at 16,082 (Figures 1 and 2). This adjustment does not reduce the faculty population, which is more likely to use Brookings Health System than their students.

Brookings Health System Service AreaFor our purposes the concept of leakage is referring to the tendency for business, or in this case, patients, to leave the Brookings area to seek treatment in a different area. This is an important factor for our study because without the effects of Brookings Health System there would be a vacuum that would be split among the healthcare facilities in the competing communities.

To better understand the phenomenon, we have used Reilly’s Law of Retail Gravitation, which is used to determine the break point where the pull of one city’s retail gravitation is equal to that of the second city by dividing the distance between the two locations by unity plus the square root of the ratio of the population of the first place to the second. For simplicity sake this can be written as shown in Figure 3.

Figure 4: Breakpoint relationship

13.4 Miles 14.2 Miles

Break Point

Figure 3: Applying Reilly’s Law of Retail Gravitation

PiBP =

dĳ

1 + Pj

In this formula BP is equal to the break point between the two cities, dij is the distance between the two cities and P is the population of the cities. The value of this calculation is that it takes into consideration the distance between the cities as well as the populations of the cities. The assumption is that larger cities will have a greater number of services that people will travel farther to obtain, but the pull of the greater services has a limit regarding how far people are willing to travel to take advantage of those services. The limit of the pull of different cities is the break point of the retail gravitational pull.

To illustrate this point, say you are considering two cities that have a breakpoint that is 13.4 miles from the first city and 14.2 miles from the second, you could picture that relationship as shown in Figure 4.

The breakpoint lies on a straight line between the two cities where the arcs that represents the distance between the cities meet. It is at that point that the pull of the two population centers are equal. While this example is clearly not to scale, it does help us to see the circles that are created when we are plotting the distances from a particular location.

When looking at Brookings Health System, we have considered the following locations to be within a distance that there could be theoretical competition for business: Canby, MN; Clear Lake; DeSmet; Flandreau; Hendricks, MN; Madison; Marshall, MN; Pipestone, MN; Sioux Falls; Slayton, MN; and Watertown. When the calculations were performed as indicated above, the results are in Table 2.

Examples to Help Illustrate the Data in Table 2We can see from this table that Sioux Falls is the community that competes most strongly for business (patients) that would otherwise go to Brookings Health System, but there are some other relationships that are of note as well. It is easier to see the relationships on a map (Figure 5).


of the red circles represent the distance from the city that is competing for the patients that might otherwise go to or stay in Brookings.

The white line in Figure 5 that surrounds Brookings is the 30-mile radius that constitutes the theoretical service area for Brookings Health System. Each

Location of Health System

PopulationDistance to Brookings (Radial Miles)

BP Distance (Radial from Brookings)

BP Distance (Radial from Competing City)

Brookings 22,056 – – –

Canby, MN 1,795 36.8 28.6 8.2

Clear Lake 1,273 31.1 25.1 6.0

De Smet 1,089 39.7 32.5 7.2

Flandreau 2,302 19.9 15.0 4.9

Hendricks, MN 627 22.1 18.9 3.2

Madison 6,474 26.5 17.2 9.3

Marshall, MN 13,680 50 28.0 22.0

Pipestone, MN 4,317 31.1 21.6 9.5

Sioux Falls 153,888 53.4 14.7 38.7

Slayton, MN 2,153 54.7 41.7 13.0

Watertown 21,482 45.2 22.7 22.5

Table 2: Distance between competing cities

Figure 5: Brooking Health System Service Area


We can see from Table 2 that the influence from the hospital in Canby, MN exerts a gravitational pull that extends to a point that is 28.6 miles from Brookings Health System. That relationship is represented in Figure 5 by the red circle to the northeast of Brookings that extends just over the 30 mile service area of Brookings Health System. Similarly, when we look at the relationship of Brookings Health System to the competitors in Sioux Falls, we see that the people living 14.7 miles south of Brookings Health System have about an equal likelihood of going to either Brookings or Sioux Falls for treatment, but any distance greater than that will send them to Sioux Falls.

As we can see the southern border of Brookings Health System coverage area is hemmed in by the systems in Sioux Falls, Madison, and Pipestone, MN. The area that is taken by these communities, created by the Reilly calculations, almost reaches the southern border of Brookings County. To the east the only communities that are subject to a gravitational pull that is larger than the competing communities are: Aurora; Bushnell; Elkton; and Lake Benton, MN. To the north of Brookings we can see that the communities

that are drawn to Brookings Health System for services are Astoria, Toronto, Estelline, White, and Bruce. When we look in a westward direction the cities of Volga, Arlington, Sinai, Badger, and Hetland fall into Brookings Health System area of gravitation. Other communities that do not fit well into this model would be Oldham, Lake Preston, and Hendricks, MN.

These communities would have issues because of natural features (in the case of these communities it would be lakes) that would increase the relative distance and there decrease the gravitational pull of Brookings Health System. We can look at Lake Preston as an illustrative example. This community has Lake Whitewood that lies directly on the line that would bring people to Brookings Health System, so that would effectively reduce the gravitational pull of Brookings Health System to the point where people would be more likely to go to DeSmet even though calculations indicate that the Brookings gravitational pull would cover this community at is westernmost extreme. Hendricks, MN poses its own issues to this analysis. It has a hospital that would have its own gravitational pull, but because of Lake Hendricks,

Figure 6: Hospital coverage without Brookings Health System


that pull is going to be stronger on the Minnesota side of the border that the lake spans. Give that the people that live on the Minnesota side of the lake are more likely to use the community health center in Hendricks, but the actual gravitational pull on the South Dakota side of the border would be less than calculated because of the obstruction increasing that relative distance thereby making it likely that people living even a short distance on the South Dakota side of the border would utilize Brookings Health System.

An additional perspective on this analysis is to consider the gravitation of Brookings largest competitors, Sioux Falls and Watertown, with the hypothetical situation of Brookings not being present. When we do that (Figure 6) we see that the gravitation of Sioux Falls extends through the entirety of Brookings County and extends to the breakpoint that is 29.6 miles from Watertown. While this scenario is only a hypothetical one, we see that the major competition for the services that Brookings Health System provides lies to the south.

This analysis is most accurate when we are considering basic services or services that can be relatively easily provided or provided without the need of a large number of specialists; and emergency services. When treatment options for long-term and complicated medical issues are considered, we see a multiplication of the radii for large population

centers and a reduction of those radii for small population areas. When this reaches its limit for the most complicated cases, we see a regional completion map in which the players are reduced to Sioux Falls, Rochester, Minneapolis, and Fargo.

ResultsThe economic impact of Brookings Health System is not just the direct effect of employment and income it provides Brookings County – there is also a secondary impact. The secondary impact is the relationship Brookings Health System and its employees have with other businesses in the county.

We have estimated that Brookings Health System’s primary impacts are increased by 25% of the “other” health care employment in the county. Census data shows 1,329 people employed in health care and social assistance in Brookings County as of 3/12/2011. Of these, approximately 500 are employed in areas that are not significantly affected by the operation of Brookings Health System. Brookings Health System has 438 employees (223 full-time and 215 part-time) and there are another 207 health care employees directly attributed to the existence of Brookings Health System (Table 3). Between these directly impacted employees and the indirect impacts to the labor force, we estimate that Brookings Health System is

Area of Impact Direct Impact MultiplierSecondary Impacts (non-health care)

Total Impacts

Employment

BHS 438 1.15 66 504 employed

Other Health Care (clinics, etc.)

207 1.25 52 259 employed

Employment Impacts

645 118 763 employed

Wages & Salaries

BHS $15,036,942 1.15 $2,255,413 $17,292,483

Other Health Care $8,103,033 1.19 $1,539,576 $9,642,609

$23,139,975 $3,794,989 $26,935,092

Table 3: Impact


responsible for at least 763 jobs in the community, and nearly $27 million in wages and salaries.

ConclusionBrookings County showed a total of 414 million dollars in annual payroll for 2011 (County Business Patterns, Table 4). While we tend to think of South Dakota State University dominating the Brookings economy, that Brookings is a “college town”, the data shows that 195 million dollars of that annual payroll comes from 40 manufacturers. South Dakota State University, in its 2011 Statement of Revenues, Expenses and Other Changes listed salaries and benefits at $143,542,693.29. Thus, Brookings is both a manufacturing town and a college town.

The conclusion is similar in health care. Again, referring to Table 4, Health Care and Social Assistance shows an annual payroll of $42,287,000 in Brookings County. Brookings Health System data shows that Brookings Health System is directly

NAICS Description Employees Annual Payroll Establishments

Total for all sectors 12,939 414,213 854

22---- Utilities – 4,457 6

23---- Construction 572 24,685 103

31---- Manufacturing 4,494 194,834 40

42---- Wholesale trade 282 13,365 38

44---- Retail trade 1,711 36,460 114

48---- Transportation & warehousing 191 5,012 29

51---- Information 152 3,907 14

52---- Finance & insurance 381 14,392 57

53---- Real estate & rental 180 4,961 45

54---- Professional & scientific 355 16,540 71

55---- Management of companies – – 2

56---- Administrative & support 327 5,481 37

61---- Educational services 52 768 12

62---- Health care & social assistance 1,329 42,287 72

71---- Arts, entertainment, & recreation 133 2,321 23

72---- Accommodation & food services 1,888 18,603 83

81---- Other services (except public administration) 557 11,898 100

Table 4: 2011 County Business Patterns shows the following employment data for Brookings County

responsible for about 35% of those salaries. Our study estimates that $8,103,033 of the remaining health care payroll exists because of the presence of Brookings Health System – for a total of $23,139,975. Therefore, about 55% of wages and salaries in the Health Care and Social Assistance category in Brookings depends (either directly or indirectly) on the existence of Brookings Health System.

Adding in the secondary impacts (outside of health care) we estimate that the economic impact of Brookings Health System in terms of wages and salaries is approximately $27 million dollars – about 6 ½ percent of the county’s total payroll.

Our intent was to work with a thirty-mile radius of Brookings Health System as a service area. Our calculations strongly suggest that the service area is more oval – reaching 30 miles to the east, possibly a bit further to the west, but very much shortened to the south.


NAICS (North American Industry Classification System) codes offer a bit of a challenge in using Census Data (County Business Patterns) to analyze the effect of Brookings Health System. The following occupation classes (see Table 5) are minimally influenced by

NAICS code Code description Annual payroll Establishments

62121 Offices of dentists $811,000 8

62131 Offices of chiropractors $1,032,000 6

62321 Residential mental retardation facilities 10

63220 Residential mental health & substance abuse centers 3

62421 Community Food Services 2

624221 Temporary shelters 1

62441 Child day care services $697,000 9

Table 5: Types of Health Care only indirectly affected by Brookings Health System

Brookings Health System, and not included among the “jobs that would not be in Brookings without the existence of Brookings Health System.” They are included in the indirectly affected category.

brookings health system economic impact february 2014

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