Doctors tally the economic value practices bring to communities

Medical societies are emphasizing how physicians' practices help local and state economies as they seek recruiting help and financial incentives.

By Karen Caffarini — Posted Nov. 10, 2008

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Around the country, physicians are letting their communities know that their practices don't only keep bodies healthy, they also keep economies healthy.

Medical societies locally and nationally are presenting economic impact studies showing that physician practices pump billions of dollars into local and state economies through payrolls and purchases of local goods and services. Among the latest are the Metropolitan Medical Society of Greater Kansas City and the Medical Assn. of Georgia, which both released studies in October.

The studies are being done with a purpose: to get local business and government leaders to assist with financial and tax incentives for practices, including assistance in recruiting. Both the Kansas City and Georgia reports project future physician shortages and the resulting billions of dollars in economic losses the areas will sustain if the shortages aren't alleviated.

"I knew health care makes up about 15% to 17% of the gross domestic product. But it was always presented with a negative connotation -- rich doctors getting richer," said Mark Meisel, vice president and chief operating officer of an 81-physician anesthesiology practice in Kansas City, Mo. "Health care is a growth area; it generates jobs. This is about creating and keeping jobs, purchasing capital items and everything about small business that fuels the economy."

The Kansas City study found that local practices created 21,000 full-time jobs and 3,200 part-time jobs, in addition to the 4,000 physicians who work full time and 500 who work part time. The average salary of a health care professional there, including benefits, is $102,537.

Those practices contribute $2.7 billion in payroll, make $191 million in capital investments, have $1 billion in operating expenses and pay $202 million in taxes annually. Also, the physician community each year provides more than $124 million worth of volunteer services and donates more than $19 million to area organizations.

"We want to communicate to the Kansas City community that we are a vibrant part of the economic fiber of Kansas City," said Steve Reintjes, MD, a neurosurgeon and president of the medical society. "It is in the interest of business to have a vibrant medical community. Each person employed by a practice goes out to eat, drives a car, etc."

Measuring other locations

Physician organizations, as well as others, have gotten more active in the last few years about measuring the economic activity of health care as a whole, and physician practices in particular.

A Wichita, Kan., study, commissioned by the Medical Society of Sedgwick County and released in March, included hospitals, veterans' clinics, a medical school and other health care facilities. The study was modeled after similar ones done by the chambers of commerce in Jacksonville, Fla., and San Antonio. The Kansas study found health care contributes about $2.4 billion to the county's economy, with a $35,685 average annual wage for medical staff.

"Before the study, we just had notions of how health care affects the economy -- no facts," said Jon Rosell, PhD, director of the Sedgwick County medical society. He said the information is being used as a recruiting tool to draw physicians and to educate key community members and decision-makers about the significance of health care as an economic driver.

The Robert Graham Center, a research group sponsored by the American Academy of Family Physicians, did a similar economic impact study in 2006, focusing solely on the impact of family practice physicians in each of the 50 states. It found that individual family physicians had an annual economic impact of $700,000 to $1.5 million per year, depending on location.

The study was meant to be used as a bargaining chip for family physicians trying to obtain financial incentives for their practices, said Robert L. Philips Jr., MD, director of the center.

Dr. Philips said physicians are missing the boat on small business loans, tax deferments, enterprise zones and other financial aids that local governments typically offer to other businesses, many of which don't contribute as much financially as does a physician practice.

"I don't think physicians routinely seek financing options. We have to help them think of negotiating as if they're the Dollar General locating in town, or any other business for that matter," he said.

The Medical Assn. of Georgia, which released its economic impact study of private physician practices on Oct. 28, found that the practices this year will account for more than 180,000 jobs, $10 billion in wages and nearly $20 billion in economic activity. Each private-practice physician in the state today supports 13 additional jobs, $640,000 in wages for those jobs and almost $1.5 million in total economic activity.

The economic impact of private-practice physicians' offices in Georgia is about half that of the state's construction industry and nearly as large as that of the finance and insurance industries.

The report also predicts the physician-derived impact will continue to grow. By 2020, private-practice physicians should generate nearly 270,000 jobs, $17.8 billion in wages and more than $32 billion in total economic output, according to the study, conducted by the Carl Vinson Institute of Government at the University of Georgia in Athens. There are about 18,500 physicians in Georgia.

The study also warned that Georgia would lose out economically if a projected 2,500-physician shortage was not alleviated. The state would lose out on 23,000 additional jobs, $1.5 billion in employee pay, and $2.5 billion in economic activity.

Shortages also helped drive the Kansas City study. The medical society said 40% of the area's physicians are expected to retire within the next 10 years, and it wanted to make the community aware of that fact and engage it in helping to solve the problem.

"Local government was really anxious to get a company with $50,000-a-year jobs," said Jill Watson, executive director of the Kansas City medical society. "I thought they should be excited about bringing in physicians, too."

Michael Schaff, chair of the corporate and health care departments of Wilentz, Goldman and Spitzer, a law firm in Woodbridge, N.J., said any business can seek financial incentives from local governing bodies when building or expanding. There is nothing unethical or illegal about a physician practice seeking financial incentives, Schaff added, unless the incentive comes from a government agency that also controls a nonprofit hospital in the area. He said those arrangements could come under scrutiny if it appears the practice increased its patient referrals to the hospital after receiving the tax break.

At this point, it's unclear whether the studies will move local business and government leaders toward the action physicians are seeking. A member of the Kansas City Downtown Economic Development Council, who did not want to be identified, said he doubts doctors will get much sympathy from council members or taxpayers, given the amount of money physicians are perceived to earn. However, experts say, even solo practices that have sought financial incentives from local leaders have found them responsive.

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The impact in Kansas City

The Metropolitan Medical Society of Greater Kansas City conducted a study on the economic impact of physician practices.

Typical practice

4 physicians
15 full-time staff
2 part-time staff


4,000 FT, 500 PT physicians
21,000 FT, 3,200 PT employees
$102,537 average annual professional compensation
$2.7 billion payroll for practices
$191 million annual capital investment
$1 billion operating expenses
$202 million paid in taxes

Source: "2008 Metro Medical Economic Footprint study," Metropolitan Medical Society of Greater Kansas City, October. Data based on 2007 fiscal year and gathered from 4,428 physicians representing 356 local practices and hospitals (link)

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The power of family practice

The American Academy of Family Physicians conducted a nationwide study on the economic impact of family practices. Here is a sampling from each region of the country.

Economic impact per physician Collective impact per year
New York $1.0 million $2.9 billion
Florida $941,000 $3.5 billion
Ohio $923,000 $2.4 billion
Michigan $907,000 $1.8 billion
Mississippi $1.3 million $819 million
Colorado $892,000 $1.1 billion
Idaho $812,000 $350 million
Texas $1.1 million $5.4 billion

Source: "Economic Impact of Family Physicians in Your State," Robert Graham Center for Policy Studies, presented at the North American Primary Care Research Group Annual Meeting, October 2006. Data on office-based family physicians per state from the Area Resource File database for 2003, physician/staff value data from 2002 Medical Group Management Assn. survey based on 2001 data (link)

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A countywide picture

The Medical Society of Sedgwick County, Kansas, conducted a study of the economic impact of the local health care industry, including physician practices, hospitals, veterans clinics and a medical school.
69,000 jobs created
$2.3 billion payroll stimulus to local economy
$35,569 average staff salary

Source: "A Healthier Economy: The Economic Impact of Wichita's Health Care and Related Industries," Center for Economic Development and Business Research, W. Frank Barton School of Business, Wichita State University, March. Study based on U.S. Census Bureau 2005 data.

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