economics of health care val schott, mph, director osu center for rural health

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%


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


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


NATIONAL HEALTH CARE NATIONAL HEALTH CARE EXPENDITURESEXPENDITURES


MARSHALL MEMORIAL HOSPITALMARSHALL MEMORIAL HOSPITALMEDICAL SERVICE AREAMEDICAL SERVICE AREA


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


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:


MARSHALL CO. TRENDS IN HEALTH MARSHALL CO. TRENDS IN HEALTH CARECARE


MARSHALL MEMORIAL HOSPITALMARSHALL MEMORIAL HOSPITALMEDICAL SERVICE AREAMEDICAL SERVICE AREA


MARSHALL MEMORIAL HOSPITALMARSHALL MEMORIAL HOSPITALDIRECT ECONOMIC ACTIVTIESDIRECT ECONOMIC ACTIVTIES


OVERVIEW OF COMMUNITYOVERVIEW OF COMMUNITYECONOMIC SYSTEMECONOMIC SYSTEM

Households

IndustryBasic

ServicesGoods &

$

Inputs

Products

Inputs

$ $

$

$

Services

$ $

Labor


MARSHALL CO. EMPLOYMENT, MARSHALL CO. EMPLOYMENT, INCOME,INCOME,

& RETAIL SALES IMPACT& RETAIL SALES IMPACT


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


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:


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


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



Determine medical service area and populations

PURPOSE OF STUDY


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


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


Specifically, the study will:


Estimate primary care physician office visits

PURPOSE OF STUDY


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



Estimate the total demand for primary care physicians in the medical service area

PURPOSE OF STUDY


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



Estimate capital costs

PURPOSE OF STUDY


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


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



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 annual capital costs, annual operating costs and total costs

PURPOSE OF STUDY


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


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



Estimate revenues based on type of visit

PURPOSE OF STUDY


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


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


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


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



Estimate alternate collection rates

PURPOSE OF STUDY


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


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



Determine estimated net income

PURPOSE OF STUDY


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


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


Scope of Rural HealthScope of Rural Health

economics of health care val schott, mph, director osu center for rural health

Documents

oklahoma rural health

health sector

health expenditures1970

oklahoma city tulsa

total health expenditures

regional health consultant

marshall countyidentify

economy of marshall