Hospitals Provide Healthy Infusion of Economic Activity and Employment to Southern California Economy, says LAEDC Study

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Contributing 12.1 percent ($85.5 billion) to the region’s $708 billion economy, Hospitals keep Southern California’s economy and employment healthy and thriving, according to new LAEDC study.

LOS ANGELES With the Southern California economy facing new challenges each year, hospitals and related services contribute a substantial portion to the region’s $708 billion economy, according to a new Los Angeles County Economic Development Corporation (LAEDC) study released today. The study – “Hidden in Plain Sight: The Economic Contribution of Southern California Hospitals & Related Services” – is available for viewing at http://www.laedc.org/reports/ and http://www.MayoCommunications.com
(click on “What’s New”) .

“We really take hospitals for granted. We expect them to be there when we need them, but rarely do we stop and realize what a huge economic boon they are to the local economy. The $85.5 billion economic contribution is impressive,” said Greg Freeman, LAEDC vice president of Public Policy and author of the study.

The study notes that while hospitals are primarily about health, healing, and wellness, they are also hubs of employment, payers of wages, purchasers of goods and services, and generators of tax revenue. In fact, the estimated total economic output of hospitals and related services in the six-county Southern California region (including Los Angeles, Orange, Riverside, San Bernardino, Santa Barbara, and Ventura) accounts for 12.1 percent of the region’s $708 billion economy, or $85.5 billion. More than half of that comes from Los Angeles County at $47.2 billion. Additionally, hospitals and related services accounted for 640,000 full-time equivalent jobs and $29.1 billion in wages in 2004. The tax revenue generated by the region’s hospitals and related services is equally impressive at more than $2 billion.

“While we all recognize the critical role hospitals play in public health, it is remarkable to see what a huge impact they have on the health of our regional economy,” said Bill Allen, president and CEO of the LAEDC. “It is also worth noting that unprecedented demands are being placed on our region’s hospitals and we must be vigilant in monitoring their own economic health to be sure they will continue to be here for us when we need them.”

According to the study area hospitals will spend at least $8.2 billion on construction projects during the years 2005-2009. “This level of spending is expected to have a total economic output in excess of $20 billion dollars and create 166,600 FTE one-year jobs with wages of $6.6 billion.

The health care industry is changing and will continue to face challenges in the future, according to the study. Expenditures for health care services are rising at a faster pace than the economy as a whole. Also, while rapid advances in the diagnosis and treatment of disease are contributing to better outcomes and longer life expectancy, these can also be very expensive.

Other challenges outlined in the study include:

  •     The number of patients using hospital facilities in Southern California is growing –

17 percent increase in hospital discharges from 1995 to 2004, and 10 percent increase in outpatient visits.

  •     The Southern California population is rising; ensuring that demand for hospital services will grow even more in the future.
  •     Big buyers (including Medicare, Medi-Cal, and managed care) play a large role in Southern California health care.
  •     Hospital costs are rising.
  •     Hospitals’ bottom lines linger at the very margin of profitability – with total operating revenues of $20.6 billion in 2004 and operating expenses of $21.4 billion, regional hospital have an implied loss of $800 million when taken as a whole.
  •     Southern California hospitals are investing in new facilities – due to aging facilities as well as natural disasters (1994 Northridge and 1971 Sylmar earthquakes), rebuilding the region’s hospitals will be a financial burden, especially for hospitals in weaker financial shape.

“The bottom line, hospitals are impacted by rising prices as much as their patients,” said Executive Vice President Jim Lott of health Care Policy and Communications, Hospital Association of Southern California (HASC). “In fact, 107 out of 212 Southland hospitals reported operating losses during 2004. Hospitals in the six-county region reported total operating revenues of $20.6 billion in 2004, but operating expenses came to $21.4 billion, which means the regional group lost $800 million that year.”

The 72-page report released today is divided by county, with the economic impact of hospitals and related services in each of the six counties displayed in full detail.

[Editors: For advanced interviews call: George McQuade @ 818.340.5300 or 818.618.9229.

The full report is available on the internet at: http://www.MayoCommunications.com (click on “What’s New”) or http://www.laedc.org/reports/.

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