Economic Impact of Mercy Health on Southwest Ohio

Economic Impact of Mercy Health on Southwest Ohio
Overview of the Economic Impact
of Mercy Health on Southwest Ohio
Mercy Health, the Cincinnati-based network of Catholic
Health Partners, operates six hospitals and a range of other
long-term care, physicians, and other healthcare services
in Southwest Ohio.1 This report summarizes annual
economic impacts generated as a result of both Mercy
Health’s investments and its operations during 2011.
Investments, which consist of new construction and major
capital expenditures, and operations of Mercy Health’s
healthcare facilities create increased economic activity in
the region. This occurs directly, through Mercy Health’s
payment of employees and spending on goods and services,
and indirectly through the consequent spending of these
employees and vendors.
In 2011Mercy Health’s facilities together spent $1.30 billion, which produced:
A total annual economic impact of $2.7 billion, including
$960 million in household earnings.
These expenditures by Mercy Health’s network of facilities generated:
9,520 jobs across the Mercy Health network, making it one of the largest employers in the region, and
A total employment impact of 19,267 jobs.
Between 2005 and 2011, the number of persons employed by Mercy Health increased by 68 percent,
and its total impact on the region’s employment increased by 98 percent.
Other benefits that Mercy Health produced for the region in 2011 include:
$ 71.2 million in income, sales, and other taxes for local governments and the State of Ohio, and
$ 94.1 million in uncompensated care for the poor and other wellness benefits for the region.
Between 2005 and 2011, state and local taxes generated as a result of Mercy Health increased by 103 percent.
During the same period, Mercy Health increased the amount of uncompensated care and other wellness
benefits it contributed to the community by about 240 percent.
____________________________
1
Mercy Health’s regional operations are located in the five Southwest Ohio counties of Hamilton, Butler,
Warren, Clermont, and Brown. For this report, this five-county region represents Mercy Health’s service area.
Mercy Health Economic Impact on Southwest Ohio
6
$1.37
Hospital Facilities
17
Other Facilities
$986
Billion
Capital Expenditures
$346
Million
TOTAL IMPACT
Million
$2.7 Billion
Direct Jobs by Occupation
Nursing
2,400
Other Healthcare Practice
1,699
Healthcare Support
1,623
Non-Clinical Support
2,308
All Other Staff
1,490
Indirect Jobs by Sector
Administrative Services
Retail Trade
Real Estate & Rental
Employer Rank
Other
DIRECT IMPACT
Direct Employment
TOTAL IMPACT
Employment
9,520
19,267 Jobs
Direct Earnings
Earnings
$529
Million
$960 Million
14.2%
13.2%
12.1%
60.5%
Mercy Health Operations
Size of Mercy Health’s Operations
Through its integrated system of healthcare facilities and services, from physicians to clinics to laboratories,
Mercy Health offers a comprehensive response to its community’s healthcare needs. The table below
details the size and types of expenditures.
Size of Mercy Health Operations
Hospital Operations
$643,212,700
Other Operations
$482,076,100
Capital Expenditures
Expenditures
$80,262,900
Mercy Health Healthcare Facilities
Hospitals2
Other Healthcare Facilities
Mercy Health – Anderson Hospital
Anderson Cath Lab
Mercy Health – Clermont Hospital
Mercy Health – Core Lab Mercy Hospital – Fairfield
Mercy Health – Health Solutions Jewish Mercy Hospital
Mercy Health – Riverfront Pharmacy
Mercy Health – Mt. Airy Hospital
Mercy Health – Anderson HealthPlex
Mercy Health – Western Hills Hospital
Mercy Health – Fairfield HealthPlex
Physicians
Mercy Health – Western Hills HealthPlex
Mercy Health Physician Group
Other Operations
Long Term Care Mercy Health – St. John Social Services
Terrace Mercy Health – St. Raphael Social Services
St. Theresa Center
Mercy Health – Blue Ash Network Office
Schroder Mercy Health Foundation
West Park
Mercy Health Network Office3
____________________________
2
Mercy West Hospital, a new facility scheduled to open in 2013, is not included here, but capital expenditures for its construction
are included in this report.
3
This includes Catholic Health Partners (CHP) Home Office.
Employment and Earnings
Mercy Health employs 9,520 people in 23 organizations, including
six hospitals, making it one of the largest employers in the region.
Of this total, Mercy Health added 3,870 jobs between 2005 and 2011,
a 68 percent increase during the six-year period.
Based on employment figures for each of its facilities and the particular
workforce characteristics within their respective industries, more than
one-fourth of Mercy Health employees are nurses and 60 percent of its
employees are in some type of health care occupation. Of these, about
262 are physicians and surgeons.
Mercy Health Employment, by Occupation
Nurses
2,400
Other Healthcare Practitioners
1,699
Healthcare Support & Social Services
1,623
1,613
Office and Administrative Support
Other Office Management & Financial
836
Food Services, Cleaning & Maintenance
695
654
All Other Occupations
Economic Impact
Impact on Earnings and Employment
Mercy Health paid its employees $529 million in 2011. Its operating expenditures, including both these
payments to employees and other spending on goods and services, require other businesses to employ
workers, which generates an indirect earnings impact of over $334 million. The result is a total household
earnings impact of over $863 million.
In addition to 9,520 jobs for its own employees, Mercy Health’s operating expenditures created another
7,695 indirect jobs and a total employment impact of 19,267 jobs annually.
Earnings and Employment Impacts from Operating Expenditures
Direct Effect
Indirect Effect Total Impact
Earnings Impact
$528,965,100 $333,541,200 $862,506,300
Employment Impact
9,520
7,695
17,215
Administrative services and retail trade are the two industries that benefit most from Mercy Health’s
operating expenditures. Spending by employee households benefits employment in retail trade, while
Mercy Health and its vendors are the primary purchasers of healthcare administrative services.
Indirect Jobs Impact, by Industry Sector
Administrative services
14.2%
Retail trade
13.2%
Real estate & rental/leasing
12.1%
Finance and insurance
9.4%
Professional, scientific, technical services
9.4%
Food & beverage services
9.3%
Arts, entertainment, recreation
7.2%
Manufacturing5.6%
Other industry sectors4
19.6%
Operations Impact
Operating expenditures by Mercy Health include employee payroll and benefits, non-employee personnel
expenses, and spending on all supplies and services purchased from outside vendors.
Together all facilities spent a total of nearly $1.13 billion on operating expenditures in 2011.5
This expenditure is expected to generate an indirect impact of $1.23 billion in additional economic
activity in the region.
together, a total annual economic impact of $2.36 billion is generated by operating expenditures of
Put
all Mercy Health healthcare and related facilities, of which its hospitals account for nearly 60 percent,
and corporate offices are responsible for over 20 percent.
Economic Impact of Mercy Health Operations
Direct Effect
Indirect Effect Total Impact
Hospitals (6)
$643,212,700 $727,537,800 $1,370,750,500
Long Term Care (4)
$37,593,100 $39,390,100 $76,983,200
Physicians (1)
$109,673,600 $123,229,300 $232,902,900
Other Healthcare (7)
$42,347,800 $49,045,100 $91,392,900
Other Operations (4)
$292,461,600 $292,308,600 $584,770,200
TOTAL
$1,125,288,800 $1,231,510,900 $2,356,799,700
____________________________
4
The other 12 industry sectors are: agriculture, forestry, fishing and hunting; mining; construction; wholesale trade; transportation and
warehousing; utilities; information; management of companies and enterprises; educational services; health care & social services;
accommodation; other household and miscellaneous services.
5
This report does not include the impact of four Mercy Health joint ventures on which there is incomplete financial information.
On average, Mercy Health is about a 50% partner in these activities.
Capital Expenditures Impact
To fulfill its mission of providing safe, affordable, high quality healthcare, Mercy Health continually
re-invests in its healthcare facilities. It also makes substantial upgrades in new technology and equipment
each year. During 2011, these capital expenditures on construction, information technology (IT), and other
capital equipment totaled $179 million, a level of spending that is likely to increase substantially in 2012
and 2013, as construction of the new hospital progresses.
Mercy Health spent a total of $179 million on capital expenditures in 2011.
These expenditures generate an indirect impact of $167 million.
Combined,
the direct and indirect impacts amount to a total economic impact of $346 million
from capital expenditures.
These capital expenditures generate direct household income of $52.5 million with an indirect impact
of $45.1 million, resulting in a total household earnings impact of nearly $97.7 million.
A total of 888 jobs, mostly in construction, get created directly through these capital expenditures, creating
another 1,165 indirect jobs and a total employment impact of 2,052 jobs.
Economic Impacts from Capital Expenditures in 2011
Direct Effect
Indirect Effect Total Impact
Economic Impact
$179,027,516 $167,203,984 $346,231,500
Earnings Impact
$52,540,000 $45,125,700 $97,665,700
Employment Impact
888
1,165
2,052
Combined Economic Impacts
When combined, impacts from capital expenditures and spending on operations amount to $2.70 billion
annually. This includes $960 million in household earnings for the 19,267 people holding jobs in the
region as a result of Mercy Health’s presence. The following table lists combined annual economic impacts
of Mercy Health’s healthcare facilities from their capital and operating expenditures.
Total Annual Economic Impacts from Capital and Operating Expenditures
Direct Effect
Indirect Effect Total Impact
Economic Impact
$1,304,316,299 $1,398,714,901 $2,703,031,200
Earnings Impact
$581,505,100 $378,666,900 $960,172,000
Employment Impact
10,408 8,860 19,267
From 2005 to 2011, Mercy Health’s total economic impact increased by 184 percent, from $953 million
to $2.70 billion dollars. Between 2005 and 2011, Mercy Health’s impact on employment in Southwest
Ohio increased by 98 percent, from 9,739 to 19,267. In 2011, Mercy Health employed over 1.2 percent
of all people working in the region, and its economic impact accounted for more than 2.5 percent of all
jobs in the region.
Other Benefits
Fiscal Impacts: Local and State Taxes
Mercy Health is a major generator of income and sales taxes for local governments and the State of Ohio. In
2011, Mercy Health’s direct fiscal impact, including property and other taxes, exceeded $22.7 million.
Mercy Health’s Direct Fiscal Impact
Local Income Tax Withholding
$6,631,300
State Income Property Tax
Other Taxes
Tax Withholding
TOTAL
TAXES
$14,972,900
$22,733,100
$1,128,900
$1,863,600
Mercy Health’s spending on operations and capital investments, and the additional economic activity this
spending generates, combine to produce almost $20.2 million in local tax revenue and nearly $51.1 million
in State tax revenue. Thus, Mercy Health’s total annual fiscal impact exceeds $71.2 million.
Mercy Health’s Total 2011 Fiscal Impact
Local
Ohio
TOTAL
$4,142,200
$23,731,100
$27,873,300
Sales Tax
Income Tax
$13,019,900
$27,348,500
$40,368,400
Property Tax
$1,128,900
$1,128,900
Others Taxes
$1,863,600
$1,863,600
TOTAL FISCAL IMPACT
$20,154,600
$51,079,600
$71,234,200
Local impact increased 188 percent from $7.0 million in 2005, while state fiscal impact increased 82 percent
from $20.1 million. Since 2005, when its fiscal impact totaled $35.1 million, Mercy Health has increased its
total impact on state and local tax revenue by 103 percent.
Community Benefits
In 2011, Mercy Health spent a total of $94.1 million in the region, or about $1.8 million a week, on
uncompensated care for the poor and other wellness benefits for the community. This amount is equal
to 8.4 percent of Mercy Health’s total operating expenditures.
Another way to view this community benefit is to calculate the net savings it produces for local taxpayers.
Non-profit hospitals have to satisfy a community benefit standard to maintain their tax exempt status.
If it were a for-profit corporation, Mercy Health estimates that its property tax obligation would total
$50.4 million in 2011. At the same time, it provided $94.1 million in community benefits by providing
financial assistance and services for those in need. In other words, Mercy Health provided $187 in
community benefits for every $100 it estimates it would have paid in property taxes — producing a net
savings for the local community.
The impact of such spending directly benefits the unemployed,
low-income, and uninsured persons of the community. While
such community impacts vary, spending such as this enhances
the general health and well-being of the communities served by
Mercy Health — or those without the ability to pay.
While 88 percent of this community benefit spending is for
uncompensated care, Mercy Health spends more than $200,000
a week to support wellness programs and other efforts to help
improve the health of people in the communities Mercy Health
serves. By comparison, Mercy Health spends approximately
1.6 times as much on its community benefit activities as the
combined budgets of the Hamilton County and Cincinnati
Health Departments.6
Since 2005, when it spent $27.6 million on these various activities,
Mercy Health has increased its total community benefit spending by about 240 percent.
Diversity Spending
I n recent years, Mercy Health has made a
concerted effort to change its purchasing
practices to increase the proportion of its
purchases that are made from vendors who are
women or minority-owned business enterprises
(W/MBEs). Purchases from W/MBE vendors
more than tripled in 2011, increasing from an
average of $18,622,200 in 2009 and 2010 to
$56,585,500 in 2011. Mercy Health’s goals
for 2012 anticipate continued expansion of its
diversity spending, with spending expected
to grow by 17 percent.
____________________________
6
Based on data from the 2011 Comprehensive Annual Financial Report of the City of Cincinnati and the 2011 Annual Report of Hamilton
County Public Health.
Methodology
The economic impact of any spending includes two elements, as defined here: the direct impact and,
the indirect and induced impact.
he direct impact comprises purchases of
T
local resources (labor, goods, and services)
for construction, capital improvements,
and operations.
he indirect impact is the purchases of
T
local resources made by local businesses
in order to produce the goods and services
purchased by the healthcare facilities,
along with consequent purchases by
other businesses that supply the first group
of businesses. It also includes the local
household spending of the earnings
generated from the healthcare facilities’
capital and operating expenditures.
Mercy Health provided the Economics Center with
data related to its healthcare facilities’ annual capital and
operating expenditures.
Measuring the indirect impacts in the region is made
possible by multipliers derived from an input-output table
(“I-O table”). The Bureau of Economic Analysis of the
U.S. Department of Commerce has constructed these tables
for various regions in the U.S. through the second generation
of its Regional Input-Output Modeling System (RIMS II).
The RIMS II tables provide multipliers to measure the
indirect impacts of virtually any type of economic activity
in the region.
Mercy Health – Cincinnati Network
Mercy Health – Anderson Hospital
Mercy Health – Clermont Hospital
Mercy Health – Fairfield Hospital
Jewish Mercy Hospital
Mercy Health – Mt. Airy Hospital
Mercy Health – Western Hills Hospital
Mercy Health – West Hospital*
Terrace – Long Term Care
Schroder – Long Term Care
West Park – Long Term Care
St. Theresa Center – Long Term Care
Mercy Health Physician Group
Anderson Cath Lab
Mercy Health – Core Lab
Mercy Health – Health Solutions
Mercy Health – St. John Social Services
Mercy Health – Riverfront Pharmacy
Mercy Health – St. Raphael Social Services
Mercy Health – Anderson HealthPlex
Mercy Health – Fairfield HealthPlex
Mercy Health – Western Hills HealthPlex
Mercy Health Foundation
Mercy Health Network Office
____________________________
*New hospital construction in Green Township
to be completed in October 2013
4600 McAuley Place
Cincinnati, Ohio 45242
www.e-mercy.com
Follow Us on: