The Value of the Local Healthcare System on the Lyon County Economy Executive Summary The healthcare industry is often one of the largest employers in a rural community and serves as a significant driver of economic development. The healthcare sector plays four major roles in rural economic development. First, because the local healthcare system serves local residents, healthcare expenditures stay local, and as a results, the dollars stay within the local economy. Second, healthcare systems attract external dollars into a community from outside a local area, largely through payments from private insurance companies, Medicare and Medicaid. Third, the existence of a quality local healthcare system is important to retaining existing local businesses, as well as attracting new industries into a community. Finally, a local healthcare system will support and promote a healthy and productive workforce within a community. In many instances the economic importance of the healthcare sector is described as its economic impact on the local economy through the number of jobs, revenue and income created from the industry. Table 1 provides a summary of employment, revenue and income from the local healthcare sector in Lyon County. The healthcare and social assistance sector represents 13.4% of jobs in the county and 12.9% of total labor income. Table 1 The Value of the Local Healthcare System Category County Total* Output (Sales) $17,729,849 Labor Income $8,893,780 Employment (Jobs) 289 * Does not include Social Assistance Source: IMPLAN 2014
I. Introduction Over the last two decades, healthcare services have become a critical engine of growth in rural Kentucky. The healthcare sector is the second largest industry in rural Kentucky, trailing only local government. Very few rural communities have realized the full potential of local healthcare as an economic and community development tool. Rural communities have an extraordinary opportunity to improve their local economy by treating healthcare as an economic development strategy. Each healthcare service locally benefits the rural community in two ways. First, it improves people s health and, second, it contributes to the health of the local economy. This report documents the value of Lyon County s healthcare system. The value is captured solely through basic economic activity within the local healthcare system. There are other measures of value that include quality of healthcare/patient outcomes and the importance of quality of healthcare services for business attraction, that are not captured in this report. The report begins by describing the role of healthcare in local economic development and then examines the current status of the local economy and relative importance of the healthcare industry. II. The role of rural healthcare in economic development If healthcare providers can attract patients or payments from outside their community, the healthcare industry can act as an export industry. The ability to provide services helps keep local healthcare dollars at home by satisfying local healthcare demand. Healthcare is unique in that in meeting local demand for services, in many instances dollars also flow from outside the region into the community. For example, Medicare and Medicaid payments are federal and state dollars that compensate healthcare providers for services delivered to certain populations that meet age and income requirements. If these healthcare services either do not exist or cannot be supported then those outside dollars will not enter the local economy. If an individual leaves the community for services, because of perceived quality or availability, his or her dollars also leave the community. This bypass of local healthcare remains an important issue for many rural healthcare providers and rural communities. The identification of a community s supply-demand gap will assist a community in keeping healthcare dollars at home. A supply-demand gap occurs when a local economy does not supply (provide) the goods or services demanded (needed or wanted) by an individual or a community. Consequently, residents are often forced to out-shop and make purchases outside their own community. Non-financial contributions are based on the healthcare sector s role in retaining local physicians, promoting a more productive workforce, attracting new businesses and retaining existing ones. Although these may be measured through financial outcomes, generally the link is more indirect. Nevertheless, a strong healthcare system can promote economic development in a variety of nonfinancial ways. In today s economy, a productive workforce is critical to businesses, and is vital in the recruitment of new firms and the retention of existing ones. The heath status of local workers can be an important ingredient in productivity. Long-term economic benefits can be realized when the local workforce has access to and uses preventive care, leading to unproved worker productivity.
III. The Lyon County local economy An examination of the sources of personal income in the community can lead to a better understanding of the potential sources of revenue for local healthcare providers. In 2014, the average per capita income for Lyon County was $28,584. This was 8,475 less than the Kentucky average and $17,830 below the national average. Table 2 indicates that 46.6% of the total personal income for Lyon County was generated through earnings (place of residence), while 35.3% of the total personal income was from transfer payments, such as Social Security, Medicare and Medicaid. The reminder of total personal income is represented by dividends, interest and rents. Table 2 Income and Earnings Overview ($1,000) Source of Income, Earnings, Transfer Payments County Total ($) County Percent (%) State Percent (%) National Percent (%) Total Personal Income $240,986 -- -- -- Earnings by Place of Residence $112,416 46.6% 60.3% 62.5% Transfer Payments $85,089 35.3% 24.2% 17.2% Total Earnings by Place of Work: $100,715 -- -- -- Wages & Salaries $65,843 65.4% 70.9% 66.5% Proprietor s Income $8,903 8.8% 10.4% 11.9% Other Labor Income $25,969 25.8% 18.7% 21.6% Transfer Payments: $85,089 -- -- -- Retirement & Disability $37,235 43.8% 34.2% 32.9% Medical Payments $36,262 42.6% 44.9% 46.1% Other Transfer Payments $11,592 13.6% 20.9% 21.0% Source: Bureau of Economic Analyses (BEA), 2014 Table 3 details Lyon County s transfer payments by type, for 2009 and 2014. From total transfer payments 42.6% came from medical payments in 2014. Table 3 Transfer Payments ($1,000) Transfer Payment 2009 2014 Percent Change Medical Payments $26,864 $36,262 35.0% Retirement Benefits $31,017 $37,235 20.0% Income (welfare) benefits $3,841 $4,262 11.0% Unemployment Insurance $3,372 $626-81.4% Total Transfer Payments* $71,456 $85,089 19.1% * Difference in total is other types of transfer payments Source: Bureau of Economic Analysis (BEA), 2014
Graph 1 highlights the public insurance coverage for Medicare, Medicaid and VA, as well as percent uninsured, for 2013 and 2014. As the graph illustrates, the percent of people uninsured decreased from one year to the other. Overall the percent of people covered through Medicare, Medicaid and VA changed by -0.9% from 2013 to 2014. Graph 1 Percent Population with Public Insurance or Uninsured Source: U.S. Census, 2014 The Lyon County economy is comprised of a diverse group of industries, including manufacturing, construction, retail trade, educational services and healthcare and social assistance. Graph 2 and Table 4 provide an overview of employment and earnings for those industries that are present in Lyon County. The healthcare and social assistance sector is one of the top industries in both, earnings and employment. Graph 2 Employment by Industry *Including social assistance Source: JobsEQ, 2014
By comparing Table 4 with Table 3, it is noticeable that the growth in private industry is less than the growth in federal and state transfer payments to individuals. Private industry changed by 6% while total transfer payment to the county changed by 19% from 2009 to 2014. The change in transfer payment is primarily driven by Social Security, Medicare and Medicaid payments. Table 4 Earnings by Industry ($1,000) Industry Total Wages 2009 Total Wages 2014 Percent Change (2009-2014) Total earnings $59,529 $67,498 13.4% Forestry, fishing & related activities $1,008 $1,200 19.0% Mining, quarrying & oil & gas extraction $231 $5-97.8% Utilities $990 $1,072 8.3% Construction $4,716 $4,789 1.5% Manufacturing $960 $1,263 31.6% Wholesale trade $1,108 $1,377 24.3% Retail trade $4,095 $4,140 1.1% Transportation & warehousing $2,586 $2,182-15.6% Information $409 $329-19.6% Finance & insurance $689 $697 1.2% Real estate & rental & leasing $722 $569-21.2% Professional, scientific & technical services $3,329 $4,615 38.6% Management of companies & enterprises $212 n/a n/a Administrative services $2,136 $1,592-25.5% Educational services $4,862 $4,851-0.2% Health care & social assistance $6,698 $8,707 30.0% Arts, entertainment & recreation $1,660 $1,910 15.1% Accommodation & food services $4,617 $4,769 3.3% Other services (except public admin.) $1,505 $1,548 2.9% Government & government enterprises $14,891 $20,338 36.6% Source: JobsEQ, 2014
IV. The value of the local healthcare system Table 5 suggests that the healthcare sector alone is directly responsible for generating approximately $18 million in output, nearly $9 million in income, and employs 289 people (2014). The direct impact of the healthcare sector comes from ambulatory and healthcare services (including, offices of physicians, dentists and other healthcare practitioners, outpatient care centers, medical and diagnostic labs, home care services and other ambulatory services), hospitals and nursing and residential care facilities. Table 5 The Value of the Healthcare Subsectors Healthcare Subsector Output (Sales) Labor Income Employment Ambulatory Healthcare Services $8,063,422 $4,138,812 112 Hospitals* n/a n/a n/a Nursing & Residential Care Facilities $9,666,427 $4,754,968 177 Total Direct Value $17,729,849 $8,893,780 289 * Includes healthcare institutions that provide medical, diagnostic, and treatment services that include physician, nursing, and other health services to inpatients and the specialized accomodation services required by inpatients. (BLS, http://www.bls.gov/iag/tgs/iag622.htm ) Source: IMPLAN, 2014 Prepared By: Community and Economic Development Initiative of Kentucky (CEDIK), Revised 2017 Questions or concerns regarding this analysis should be directed to Dr. Alison Davis, Executive Director at CEDIK via e-mail, at Alison.Davis@uky.edu.