Role of Hospitals in the Pennsylvania Economy

Abstract

The Penn State Workforce Education and Development (WED) Initiative conducted an analysis of the economic impact of hospitals in Pennsylvania in the second part of a three-part series of analyses of the economic impact of jobs in the health care sector. On February 19, 2010, the WED Initiative released findings from a study of the economic impact of ambulatory health care services in Pennsylvania, The final analysis in this series, to be released later this week, will focus on nursing and residential care facilities in the Commonwealth.Hospitals medical care and diagnostics on an inpatient basis, with a secondary emphasis on outpatient procedures. Hospitals are dealing with a severe economic recession and the uncertainties of health care reform. Hospital CEOs responding to the HealthLeaders Media Industry Survey 2010 reported that organized labor could affect their hospitals negatively in the next three years, as could nurse and physician shortages, increased regulatory scrutiny, reimbursement cuts, and uncompensated care. Nineteen percent of hospital CFOs projected permanent worker layoffs during the coming year. Over 80% believed that layoffs and staff reductions are most effective in dealing with the current economic crisis. The CFOs rated labor costs as the second-ranked driver of health care costs behind government laws and mandates.Hospitals employed 272,553 workers in 340 Pennsylvania facilities during 2008. Approximately one-half of these workers were employed in five of Pennsylvania's 67 counties (in order: Philadelphia; Allegheny; Montgomery; Lehigh; and Dauphin).Employment in Pennsylvania hospitals grew by 15,059 workers between 2004 and 2008. Average annual earnings per worker in the industry were $57,361 in 2008, although earnings differed significantly by occupation. For instance, on average, 5,166 hospital physicians earned $64.03 per hour worked, while 73,862 registered nurses earned $28.69 per hour and 2,859 medical assistants earned $12.94 per hour.In contrast, 15,956 workers, representing 5.9% of total employment in Pennsylvania hospitals, earned $9.86 per hour or less, which is the poverty wage for households composed of two adults and two children in Pennsylvania (cf., Poverty Thresholds for 2007 by Size of Family and Number of Children)Four occupations - religious workers, dining room and cafeteria attendants, child care workers, and waiters and waitresses - earned less than $8.00 per hour, which is considered the living wage for a one-adult household in Pennsylvania. The living wage is defined as the hourly wage rate that an individual must earn to support a family, if the individual is the sole provider and is a full-time worker (2080 hours per year). The living wage varies by the number of dependents an individual supports as well as by the region in which the individual resides.Hospitals are classified in North American Industrial Classification System code 622. According to the U.S. Bureau of the Census, establishments in this industry provide medical, diagnostic, and treatment services that include physician, nursing, and other health services to inpatients and the specialized accommodation services required by inpatients. Hospitals may also outpatient services as a secondary activity. Establishments in the Hospitals subsector inpatient health services, many of which can only be provided using the specialized facilities and equipment that form a significant and integral part of the production process. During 2007, 5.5 million U.S. workers were employed in 7,352 hospitals with a payroll of $261 billion.