Economics of Health CareEconomics of Health Care
Val Schott, MPH, DirectorOSU Center for Rural Health
Scope of Rural HealthScope of Rural Health
© 2006 Oklahoma State University
NATIONAL TRENDS IN NATIONAL TRENDS IN HEALTHCAREHEALTHCARETable 1
United States Health Expenditures and Employment Data1970-2004; Projected for 2005, 2010 & 2015
UNITED STATES
DATA
Total Per Capita Health Health Ave. Annual Health & Ave. Yrly
Year Health Health Expenditures Sector Employment Social Asst. Employment
Expenditures Expenditures As % of GDP Employment
Increase Employment
Increase
($$ Billions) ($$) (%) (000) (%) (000) (%)
1970 $75.1 $357 7.2% 3,052
1980 254.9 1,106 9.1% 5,278 7.3%
1990 717.3 2,821 12.4% 7,814 4.8% N/A N/A
2000 1,358.5 4,729 13.8% 10,103 2.9% N/A N/A
2001 1,474.2 5,079 14.6% 10, 381 2.8% N/A N/A
2002 1,607.9 5,485 15.4% 10,673 2.8% N/A N/A
2003 1,740.6 5,879 15.9% N/A N/A 14,759 N/A
2004 1,877.6 6,280 16.0% N/A N/A 15,052 2.0%
Projections
2005 2,016.0 6,683 16.2%
2010 2,879.4 9.148 18.0%
2015 4,031.7 12,320 20.0%
© 2006 Oklahoma State University
NATIONAL TRENDS IN HEALTH NATIONAL TRENDS IN HEALTH CARECARE
Health care services as a share of the national gross domestic product (GDP) 1970 7.2 % 2004 16.0 %
Per capita health expenditures 1970 $357 2004 $6,280
Employment in the health sector Increased 250 percent from 1970 to 2002
© 2006 Oklahoma State University
NATIONAL TRENDS IN HEALTH CARE – NATIONAL TRENDS IN HEALTH CARE – PROJECTIONSPROJECTIONS
Health care expenditures as % of GDP 2010 18.0% 2015 20.0%
Per capita health care expenditures 2010 $9,148 2015 $12,320
Total health expenditures Increase to over $4 trillion in 2015
© 2006 Oklahoma State University
NATIONAL HEALTH CARE NATIONAL HEALTH CARE EXPENDITURESEXPENDITURES
© 2006 Oklahoma State University
© 2006 Oklahoma State University
MARSHALL MEMORIAL HOSPITALMARSHALL MEMORIAL HOSPITALMEDICAL SERVICE AREAMEDICAL SERVICE AREA
© 2006 Oklahoma State University
ECONOMIC IMPACT OF MARSHALL ECONOMIC IMPACT OF MARSHALL MEMORIAL HOSPITALMEMORIAL HOSPITAL
Website: www.okruralhealthworks.org
Cheryl St. Clair, Associate State Extension Specialist, OSU, Stillwater, OK405-744-6083; Email: [email protected]
Gerald A. Doeksen, Extension Economist, OSU, Stillwater, OK405-744-6083
Jack Frye, Rural Development Specialist, E. Oklahoma, OSU, Ada, OK580-332-4100
Gena L. Alexander, Interim County Extension Director,Marshall County Extension Office, OSU, Madill, OK
580-795-3563
Corie Kaiser, Regional Health Consultant, Oklahoma Rural Health Policy and Research Center,
Oklahoma Office of Rural Health, OSU, Oklahoma City, OK405-945-9197
Val Schott, DirectorOklahoma Office of Rural Health, OSU, Oklahoma City & Tulsa, OK
405-945-9197
© 2006 Oklahoma State University
OBJECTIVE OF REPORT OF REPORT
1. Review economic trends of the health sector for the U.S. and Marshall County;
2. Identify the Marshall Memorial Hospital medical service area;
3. Summarize the direct economic activities of Marshall Memorial Hospital;
4. Review concepts of community economics and multipliers; and
5. Estimate the secondary impacts of Marshall Memorial Hospital on the economy of Marshall County.
Report Includes The Following:
© 2006 Oklahoma State University
MARSHALL CO. TRENDS IN HEALTH MARSHALL CO. TRENDS IN HEALTH CARECARE
© 2006 Oklahoma State University
MARSHALL CO. TRENDS IN HEALTH MARSHALL CO. TRENDS IN HEALTH CARECARE
© 2006 Oklahoma State University
MARSHALL CO. TRENDS IN HEALTH MARSHALL CO. TRENDS IN HEALTH CARECARE
© 2006 Oklahoma State University
MARSHALL MEMORIAL HOSPITALMARSHALL MEMORIAL HOSPITALMEDICAL SERVICE AREAMEDICAL SERVICE AREA
© 2006 Oklahoma State University
MARSHALL MEMORIAL HOSPITALMARSHALL MEMORIAL HOSPITALDIRECT ECONOMIC ACTIVTIESDIRECT ECONOMIC ACTIVTIES
© 2006 Oklahoma State University
OVERVIEW OF COMMUNITYOVERVIEW OF COMMUNITYECONOMIC SYSTEMECONOMIC SYSTEM
Households
IndustryBasic
ServicesGoods &
$
Inputs
Products
Inputs
$ $
$
$
Services
$ $
Labor
© 2006 Oklahoma State University
MARSHALL CO. EMPLOYMENT, MARSHALL CO. EMPLOYMENT, INCOME,INCOME,
& RETAIL SALES IMPACT& RETAIL SALES IMPACT
© 2006 Oklahoma State University
© 2006 Oklahoma State University
Cheryl F. St. Clair - Assistant State Extension Specialist, OSU, Stillwater
(405) 744-6081Gerald A. Doeksen - Extension Economist, OSU,
Stillwater (405) 744-6081
Jack Frye - Area Rural Development Specialist, Ada
(580) 332-4100Jody R. House – Atoka County Extension
Director, Atoka(580) 889-7337
RURAL DEVELOPMENTCOOPERATIVE EXTENSION SERVICE
OKLAHOMA STATE UNIVERSITYJanuary 2003
COOPERATIVE EXTENSIONPOINT OF CONTACTS
© 2006 Oklahoma State University
To examine the need for primary care physicians in Atoka, Oklahoma
To estimate the costs and revenues associated with establishing a primary care physician practice in Atoka, Oklahoma.
OBJECTIVES:
© 2006 Oklahoma State University
Determine the need for primary care physicians
Determine medical service area and populations;
Estimate primary care physician office visits; and
Estimate the total demand for primary care physicians in the medical service area.
PURPOSE OF STUDY
© 2006 Oklahoma State University
Estimate the costs and revenues to establish a primary care physician practice
Estimate capital costs;
Estimate annual capital costs, annual operating costs and total costs;
Estimate revenues based on type of visit;
Estimate alternate collection rates; and
Determine estimated net income.
PURPOSE OF STUDY
© 2006 Oklahoma State University
Determine the need for primary care physicians
Determine medical service area and populations
PURPOSE OF STUDY
© 2006 Oklahoma State University
Figure 2Atoka County, Oklahoma
ADAIR
ALFALFA
ATOKA
BECKHAM
BLAINE
BRYAN
CANADIAN
CARTER
CH
ER
OK
EE
CHOCTAW
CIMARRON
CLEVELAND
COMANCHE
COTTON
CRAIG
CUSTER
DE
LA
WA
RE
DEWEY
ELLISGARFIELD
GRADY
GRANT
GREER
HA
RM
ON
HARPER
JACKSON
JEFFERSON
KAY
KIOWA LATIMER
LOVE
MAYES
MURRAY
MUSKOGEE
NOBLE
NOWATA
OKLAHOMA
OK
MU
LG
EE
OSAGE
OTTAWA
PAWNEE
PAYNE
PUSHMATAHA
ROGER MILLS
ROGERS
SEQUOYAH
STEPHENSTILLMAN
TULSA
WAGONER
WASHITA
WOODS
WOODWARD WA
SH
ING
TO
N
SHALLMAR-
MAJOR
KINGFISHER
BEAVERTEXAS
LOGAN
CREEK
LINCOLN
OKFUSKEE
McINTOSH
CADDO
MCCLAIN
GARVIN
SE
MIN
OLE
PO
TT
A-
WA
TO
MIE
HUGHES
PITTSBURG
HASKELL
LE FLORE
COAL
JOHNSTON
PONTOTOC
MCCURTAIN
Atoka
Tushka
Caney
Stringtown
© 2006 Oklahoma State University
Service Area Population
Atoka 2,988
Caney 199
Stringtown 396
Tushka 345
Wardville N/A
Remainder of county 9,951
Total Medical Service Area Population 13,879
Estimated 2000 PopulationTable 1
Atoka County, Oklahoma,Medical Service Area
© 2006 Oklahoma State University
Specifically, the study will:
Determine the need for primary care physicians
Estimate primary care physician office visits
PURPOSE OF STUDY
© 2006 Oklahoma State University
Table 2Total Annual Physician and Primary Care Physician Office Visits
Generated in the Atoka County Medical Service Area
MALE FEMALE Total 2000 Visit Total 2000 Visit Total PhysicianAge Population Rate Visits Population Rate Visits Visits
Under 15 1,400 2.4 3,423 1,266 2.3 2,876 6,299
15-24 1,018 1.2 1,200 731 2.3 1,694 2,894
25-44 2,414 1.6 3,969 1,621 3.1 5,071 9,039
45-64 1,783 3.0 5,369 1,596 4.1 6,563 11,931
65-74 545 5.4 2,936 544 6.1 3,312 6,248 75+ 346 6.7 2,317 615 6.4 3,964 6,282
Total 7,506 19,214 6,373 23,480 42,694
Annual Primary Care Physician Office Visits = 26,555
Based on 62.2% of Total Physician Office Visits = Primary Care Physician Office Visits
ANNUAL PHYSICIAN OFFICE VISITS
© 2006 Oklahoma State University
Determine the need for primary care physicians
Estimate the total demand for primary care physicians in the medical service area
PURPOSE OF STUDY
© 2006 Oklahoma State University
Table 3Primary Care Physician Office Visits Given Usage
By Local Residents in Atoka County, Oklahoma,Medical Service Area
Usage 70% 75% 80% 85% 90% 95% 100%
Number of Primary Care Visits at Different Usage Levels
18,589 19,916 21,244 22,572 23,900 25,227 26,555
Number of Primary Care Physicians
3.7 4.0 4.3 4.5 4.8 5.1 5.3
If 85% usage level,then 22,572 total primary care physician office visits
for an estimated 4.5 Total Primary Care Physicians
Based on 4,976 average primary care office visits/ physician practice/year in Oklahoma
PRIMARY CARE PHYSICIAN VISITS
© 2006 Oklahoma State University
Estimate the costs and revenues to establish a primary care physician practice
Estimate capital costs
PURPOSE OF STUDY
© 2006 Oklahoma State University
Illustrate 2 Budget Alternatives
Alternative 1. Assume 2,750 primary care physician office visits
Alternative 2.Assume 4,750 primary care physician office visits
ESTIMATE CAPITAL COSTS
© 2006 Oklahoma State University
Capital Costs are the total of all capital equipment items
Assume a 1,500 Sq. Ft. Building will be rented for both Alternatives with 3
Examination/Treatment Rooms
ESTIMATE CAPITAL COSTS
© 2006 Oklahoma State University
Both Alternatives 1 and 2Table 4
Typical Equipment Found in Primary Care Physician Office
EQUIPMENT SUMMARY
Total Reception Area $1,927 Total Business Office $24,604 Total Examination/Treatment Rooms (3) $26,202 Total Laboratory $4,894 Total Physician's Office $3,435 Total Conference Room/Staff Lounge $1,442
TOTAL EQUIPMENT SUMMARY $62,505
Total Equipment Costs are the SAME for BOTH Alternatives
ESTIMATE CAPITAL COSTS
© 2006 Oklahoma State University
Estimate the costs and revenues to establish a primary care physician practice
Estimate annual capital costs, annual operating costs and total costs
PURPOSE OF STUDY
© 2006 Oklahoma State University
Both Alternatives 1 and 2
Table 5Estimated Capital Costs for a Primary Care Physician Practice in Atoka
Cost Item Total Cost
ESTIMATED CAPITAL COSTSEquipment Estimated Total Equipment Costs $62,505
ESTIMATED TOTAL CAPITAL COSTS $62,505
ESTIMATED ANNUAL CAPITAL COSTSEquipment (Based on a 10 year loan @ 10% interest) $10,172
ESTIMATED TOTAL ANNUAL CAPITAL COSTS $10,172
Total Capital Costs and Total Annual Capital Costs are
the SAME for BOTH Alternatives
ESTIMATED CAPITAL COSTS
© 2006 Oklahoma State University
Both Alternatives 1 and 2
Table 6Estimated Annual Capital & Operating Costs
for a Primary Care Physician Practice in Atoka
Costs for Costs for 2,750 Visits 4,750 Visits
ESTIMATED ANNUAL CAPITAL COSTS $10,172 $10,172
ESTIMATED ANNUAL OPERATING COSTSTotal Annual Building Costs $20,702 $20,702Total Annual Office Costs $22,150 $22,468Total Annual Medical Costs $17,682 $24,854Total Personnel Costs with Benefits $60,256 $71,640
TOTAL OPERATING EXPENSES $120,790 $139,674 TOTAL CAPITAL& OPERATING EXPENSES $130,963 $149,846
ESTIMATED CAPITAL & OPERATING COSTS
© 2006 Oklahoma State University
Estimate the costs and revenues to establish a primary care physician practice
Estimate revenues based on type of visit
PURPOSE OF STUDY
© 2006 Oklahoma State University
Estimate revenues based on type of visit
Type of Office Visits are estimated based on research:
14.9% Initial Office Visits85.1% Routine Office Visits47.0% Visits with Additional Charges8.6% Hospital Visits8.2% Emergency Room Visits3.6% Nursing Home Visits1.7% Nursery Visits4.2% Home Visits
ESTIMATE REVENUES
© 2006 Oklahoma State University
Alternative 1
Number of Percent of Visits Total Visits
Type of Visits 2,750
Initial Office Visits 410 14.9%Routine Office Visits 2,340 85.1%Visits w/ Add’l Charges 1,293 47.0%Hospital Visits 237 8.6%ER Visits 226 8.2%Nursing Home Visits 99 3.6%Nursery Visits 47 1.7%Home Visits 116 4.2%
Table 7Estimates of Primary Care Physician Office Visits and Revenues
By Type of Visit for 2,750 Visits
ESTIMATES OF OFFICE VISITS
© 2006 Oklahoma State University
No. of 1999 Updated Visits Rate Schedule Revenues
Type of Visits 2,750 High Average Low High Average Low
Initial Office Visits 410 $60.75 $40.64 $27.00 $24,908 $16,660 $11,070Routine Office Visits 2,340 $47.52 $33.28 $25.47 $111,197 $77,869 $59,610Visits w/ Add’l Charges 1,293 $83.98 $30.69 $11.48 $108,591 $39,676 $14,837Hospital Visits 237 $55.50 $46.18 $34.76 $13,153 $10,945 $8,239ER Visits 226 $135.00 $76.68 $40.50 $30,510 $17,330 $9,153Nursing Home Visits 99 $65.49 $41.18 $24.75 $6,483 $4,076 $2,450Nursery Visits 47 $189.00 $118.22 $67.50 $8,883 $5,556 $3,173Home Visits 116 $101.25 $54.70 $35.86 $11,745 $6,345 $4,159
REVENUES –High Range $315,469REVENUES – Average Range $178,459REVENUES – Low Range $112,691
Alternative 1 Table 7Estimates of Primary Care Physician Office
Visits by Type of Visit
ESTIMATES OF OFFICE VISITS
© 2006 Oklahoma State University
ESTIMATES OF OFFICE VISITSESTIMATES OF OFFICE VISITSAlternative 2 Table 8
Estimates of Primary Care Physician Office Visits by Type of Visit
No. of 1999 Updated Visits Rate Schedule Revenues
Type of Visits 4,750 High Average Low High Average Low
Initial Office Visits 708 $60.75 $40.64 $27.00 $43,011 $28,770 $19,116Routine Office Visits 4,042 $47.52 $33.28 $25.47 $192,076 $134,508 $102,968Visits w/ Add’l Charges 2,233 $83.98 $30.69 $11.48 $187,535 $68,521 $25,624Hospital Visits 409 $55.50 $46.18 $34.76 $22,699 $18,889 $14,218ER Visits 390 $135.00 $76.68 $40.50 $52,650 $29,905 $15,795Nursing Home Visits 171 $65.49 $41.18 $24.75 $11,199 $7,041 $4,231Nursery Visits 81 $189.00 $118.22 $67.50 $15,309 $9,576 $5,468Home Visits 200 $101.25 $54.70 $35.86 $20,250 $10,940 $7,171
REVENUES –High Range $544,728REVENUES – Average Range $308,149REVENUES – Low Range $194,591
© 2006 Oklahoma State University
Estimate the costs and revenues to establish a primary care physician practice
Estimate alternate collection rates
PURPOSE OF STUDY
© 2006 Oklahoma State University
Alternative 1 Table 9a
Estimated Collected Revenues (2,750 Visits)
Revenues for 2,750 VisitsCollection Rates High Average Low
Total Revenues $315,469 $178,459 $112,691
95% Collections $299,696 $169,536 $107,05690% Collections $283,923 $160,613 $101,42285% Collections $268,149 $151,690 $95,78782.5% Collections $260,262 $147,229 $92,97080% Collections $252,376 $142,767 $90,15375% Collections $236,602 $133,844 $84,51870% Collections $220,829 $124,922 $78,884
ESTIMATED COLLECTED REVENUES
© 2006 Oklahoma State University
Alternative 2Table 9b
Estimated Collected Revenues (4,750 Visits)
Revenues for 4,750 VisitsCollection Rates High Average Low
Total Revenues $544,728 $308,149 $194,591
95% Collections $517,492 $292,741 $184,86190% Collections $490,256 $277,334 $175,13285% Collections $463,019 $261,927 $165,40282.5% Collections $449,401 $254,223 $160,53780% Collections $435,783 $246,519 $155,67375% Collections $408,546 $231,112 $145,94370% Collections $381,310 $215,705 $136,213
ESTIMATED COLLECTED REVENUES
© 2006 Oklahoma State University
Estimate the costs and revenues to establish a primary care physician practice
Determine estimated net income
PURPOSE OF STUDY
© 2006 Oklahoma State University
COMPARISON OF ALTERNATIVES 1 & 2Table 10
Estimated Net income for a Primary Care Physician Practice
Scenario for 2,750 Visits Scenario for 4,750 Visits High Average Low High Average Low
Revenues Based on82.5% Collections $260,262 $147,229 $92,970 $449,401 $254,223 $160,537
Total Annual Capital &Operating Expenses $130,963 $130,963 $130,963 $149,846 $149,846 $149,846
NET INCOME $129,299 $16,266 ($37,993) $299,555 $104,377 $10,691
© 2006 Oklahoma State University
REFERENCESREFERENCESBureau of Labor Statistics
Bureau of Economic Analysis
Centers for Medicare & Medicaid Services
National Health Expenditures 1970-2004 and National Health Expenditure Projections 2005-2015
U.S. Census, County Business Patterns; 1988-1997
National Ambulatory Medical Care Survey, 2004, Nation Center for Health Statistics
2006 Regional Economic Information System, Bureau of Economic Analysis
2006 Local Employment and Income Data for Marshall County, Oklahoma
U.S. Census Bureau; 1980, 1990 & 2000 Census; 2004 Census Estimate Populations; 2010 and 2020 Census Population Projections
2006 Oklahoma Department of Commerce Population Projections for the State, Metropolitan Areas and Counties: 2000-2020
© 2006 Oklahoma State University
Scope of Rural HealthScope of Rural Health