Practical Assessment of the Economic Impact of Healthcare Investment: A Case Study Approach

Article excerpt

For years, academics and practitioners have argued the social need and benefits of healthcare spending. Economists and medical researchers question the value of such spending, claiming small marginal benefits to the population's health relative to costs. Previous studies tend to address healthcare costs relative to benefits without considering the overall economic benefit to the community. While the investment-versus-health-gain debate continues, few articles deal with the actual beneficial short-and long-term impact on the economy of the additional economic activity generated by the healthcare investment itself.

Healthcare investment may be especially critical to small, rural communities. This paper offers a guide to examining the economic impact of healthcare spending by providing a case study on Union Regional Medical Center (URMC) in Union County, North Carolina. It analyzes and reports the effects of healthcare and, specifically, hospital spending. The paper demonstrates how IMPLAN Pro(TM), a software model developed by the Minnesota IMPLAN Group, utilizes data to perform input/output analysis to evaluate the impact of investment and measure the resulting economic activity generated within the community. Based upon the significant positive contribution of the healthcare industry to the economy of Union County, North Carolina, this study suggests that practitioners should evaluate the economic impact as a primary consideration, at least for rural healthcare investment.

Literature Review

The existing literature regarding healthcare spending focuses on two main areas: 1) various debates over whether and how public spending on healthcare should occur (Fuchs, 1998; and Arrow, 1963); and, 2) investigations of the economic consequences of healthcare spending (Auster et al., 1969; Emanuel, 1996; Cutler et al., 1998; and Cremieux et al., 1999). Papers in the former group address whether the benefits to society are commensurate with the amount of public spending on health service, or whether there is a significant difference in the population's health depending on the manner in which funds are distributed to various constituents within the healthcare industry. Brief reviews of both areas of the literature are presented, but it is the economic impact of healthcare investment on which this article concentrates.

Spending and Outcomes

Fuchs (1998) discussed the challenges that nations face in the efficient and effective allocation of limited health resources. De Milto (2000) and Kolata (2000) argued that societal benefits of healthcare spending would be greatly enhanced by shifts in focus from technology to service and from care to prevention. Arrow (1963) and Haan et al. (1987) addressed a variety of socioeconomic factors that influence the overall effectiveness of healthcare. Conflicting evidence exists as to how healthcare dollars should be spent. Bunker et al. (1994), Blomqvist and Carter (1997), and McClellan and Newhouse (1997) all claim that more needs to be done to investigate the cost-effectiveness and application of preventative versus curative services. Yet, most taxpayers are reluctant to pay higher taxes for a public (curative) healthcare system and are opposed to the practice of rationing services (Price, 1999). While these issues are important and current topics in the healthcare debate, they are outside the purview of this paper.

Economic Impact Studies

Few researchers have examined the economic impact of healthcare spending and/or the spending by specific facilities in a local area. None adopt the premise that promoting healthcare investment is a sound strategy for local economic growth. McDermott and Parson (1994) develop a methodology for researchers to calculate direct, indirect, and induced spending effects for a healthcare facility in a community or region. The model, formulas, and methodology are valid, but gathering all the necessary data is challenging, which limits its application. …