Skip to main content

AHA: Hospitals a $2T Economic Driver

 |  By John Commins  
   January 25, 2013

With Congress and states looking to trim healthcare spending, the American Hospital Association this week issued a none-too-subtle reminder that hospitals are economic engines for the communities they serve.

Citing various data sources, AHA said that the nation's hospitals employ 5.5 million people and create $2 trillion dollars in economic activity, even as "some in Congress continue to threaten access to hospital services."

"It's important that people understand that hospitals are not a drain on our economy. They are a driver," Caroline Steinberg, AHA's vice president for trends analysis, told HealthLeaders Media. "They not only provide medical care to support a healthy and productive workforce. They also act as an economic engine supporting trillions of dollars of economic activity nationwide."

"Very few people really understand that," Steinberg says. "I remember some years back being at a conference where they were talking about national health expenditures. Everything they said, if they had said it about another sector of the economy, it would have been a positive. 'It's growing as a share of (Gross Domestic Product). It has this many more people employed. It's a growth industry.'"

Steinberg noted that the healthcare sector added an average of 28,000 new jobs each month in 2012. "Throughout the recession healthcare was a steady producer of jobs and you can't really say that about any other industries," she says.

In addition, AHA says that hospitals are the second-largest sources of private sector jobs, support another 10 million jobs in the economy through "ripple effects," and spend more than $702 billion each year on goods and services from other businesses.

Stuart Altman, professor of national health policy at The Heller School at Brandeis University, calls the economic activity generated by hospitals and healthcare "a mixed blessing."

"There is no question it is a major economic force in many if not most communities. It is often the largest employer. It has transformed communities," Altman says.

"Even big cities like Pittsburgh and Boston. Pittsburgh in particular was reeling from the loss of steel and other industries and now it is a healthcare mecca. If we were to cut that spending it would reduce that component of the local economy."

"On the other hand it is draining funds from other industries and state governments and communities which can use that money to generate other kinds of jobs," Altman says. "It is a big mistake to use economic power as an excuse for not finding the right balance for what we should spend on healthcare. We should spend what we need to spend and no more."

Steinberg says hospitals have a tremendous "multiplier effect" in the communities they serve.

"For every $1 you put into healthcare you get $3.28 back," she says. "One thing that is different about healthcare and hospitals in particular is that most of the money stays in the local community."

"About 60% of the money spent on hospital care goes to the wages of the staff. If you were going to spend that $1 at Wal-Mart, a lot of that $1 goes to China. Healthcare is different because it stays in the local economy and it has a high multiplier effect."

Richard (Buz) Cooper, MD, director of the Center for the Future of the Healthcare Workforce at New York Institute of Technology, says there are worse things to spend money on than healthcare.  

"The reality is healthcare is a major industry," Cooper wrote in an email exchange with HealthLeaders Media. "Our problem is not that there's too much. It's that when there's more, social justice demands that it be distributed across income groups, and this happens in a much more equitable manner than transportation, food or housing and therefore entails greater transfers of wealth and taxes."

"But think about it. Take healthcare from Pittsburgh and you have just another Rust Belt town. Try doing it in New York or Philadelphia or Houston, and others," Cooper wrote.

"This is what America does. And it creates jobs, well-paying jobs—jobs with upward mobility, jobs that pay taxes that support schools and other important services. Healthcare accounts for about 10% of [all] jobs, but 20% of new jobs. This is the future. Don't kill it."

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.

Tagged Under:


Get the latest on healthcare leadership in your inbox.