The Economic Impact of Minnesota Hospitals and Health Systems

Abstract

Hospitals and health systems play an important role in the community, not only as life saving health organizations but also as major employers and purchasers of goods that provide considerable economic impact. The Minnesota Hospital Association (MHA) contacted the Bureau of Business and Economic Research at the University of Minnesota Duluth’s Labovitz School of Business and Economics to study the economic impact of hospitals and health systems regionally and statewide. Inputs used in calculating the economic impacts of hospitals and health systems included total revenue, employment, salaries, and benefits for the 128 hospitals and health systems as well as revenue for supporting health care services, such as offices of physicians and nursing and community care facilities. In 2020, Minnesota hospitals and health systems reported total revenues of more than $21.4 billion, employment levels of 122,758 and employee compensation of $10.2 billion. The MHA regions with the highest revenues included the Twin Cities Metro Region ($10.3 billion), which includes the seven counties in the Twin Cities metro area; the Southeast Region 6 ($4.5 billion), which includes the Rochester metro area; and the Central Region 3 ($2.7 billion), which is the largest region by geography and includes 22 counties that span the entire central part of the state, including St. Cloud. In all six regions, hospitals and health systems ranked among the top ten largest industries by employment. MHA estimates that 66% of the state’s primary care clinic providers are associated with a hospital or health system, based on information obtained from the Minnesota Department of Employment and Economic Development (DEED). MHA also used DEED data to estimate the number of primary care clinic providers associated with hospitals and health systems at the regional level with the following results: Region 1 is 71%, Region 2 is 55%, Region 3 is 58%, Region 4 is 46%, Region 5 is 91%, and Region 6 is 87%. An estimated 13% of the state’s nursing home revenues could be attributed to nursing homes associated with hospital and health systems, based on data obtained from the Minnesota Department of Health’s Health Care Cost Information System. In total, $32.3 billion in direct revenue was generated by health systems, including hospitals, clinics, nursing homes, home health, ambulance, and other associated health care entities. Economic impact analysis tracks an initial economic shock or activity (like the direct spending of hospitals and health systems and their employees) through multiple rounds of industry and consumer spending to show the multiplier or ripple effects through a local economy. The initial shock or activity is considered the direct effect, the resulting increase in industry spending is the indirect effect, and the resulting increase in consumer spending is the induced effect. The research team used the IMPLAN Group’s input-output modeling data and software (IMPLAN version 3.1) for modeling economic impacts. The data used was the most recent IMPLAN data available, which is for the year 2020. Results reflect 2022 dollars. According to the results of economic impact modeling, Minnesota hospitals and health systems—along with their affiliated clinics, nursing homes, and other associated entities—supported almost 389,000 jobs in 2020, added almost $31 billion in labor income (wages and benefits), contributed $39.3 billion in additional value added to the state’s economy, and added $67.6 billion in new spending. In total, for every one job created by hospitals and health systems in the state, another 1.09 jobs were created in related industries.