Georgia Hospitals' Economic Impact

Georgia Communities Depend on Hospitals

Georgia Hospital Association Report Indicates $49 Billion Economic Impact

April 3, 2018

Each day, thousands of individuals pass by one of Georgia’s nearly 200 hospitals. Many of us may not think about hospitals until we, or people we know, require emergency care, surgery, outpatient treatment, or one of many other hospital services. For most of us, hospitals exist “just-in-case.” 

“We may not clearly see how hospitals benefit us when we are not using them for healing purposes. But think about where we live, work and play. Thriving communities are a result of strong economies,” said Montez Carter, chair of the Georgia Hospital Association (GHA) and chief executive officer of St. Mary’s Health Care System in Athens. 

What does this have to do with hospitals? Hospitals greatly contribute to the economic health of their communities by generating billions of dollars for the economy every year. Examine the impact of Georgia hospitals on local and state economic activity and you will find that they benefit just about all of us, whether directly or indirectly. Aside from impressive statistics, like the delivery of more than 120,000 babies and having nearly 5.3 million emergency room visits in 2016, Georgia hospitals also contributed $49 billion to local and state economies in the same year, according to the most recent economic impact report by GHA. 

“A hospital is more than just a place to treat patients. It helps communities thrive. Hospitals are important to communities’ economic, social and overall well-being,” said Carter. 

Hospitals are immensely advantageous to the local and state economy. In 2016, hospitals spent more than $21.7 billion to operate. These expenditures generated an estimated $49 billion in state and local economic activity, which translates to $2.40 for every $1 of hospital expenditures. A majority of hospital revenue is spent on wages and salaries. In fact, hospitals are a major source of jobs for their communities. In 2016, hospitals directly provided more than 150,500 full-time jobs. When an employment multiplier is applied to this number, it indicates that hospitals supported more than 366,000 full-time jobs in the state. The employment multiplier considers the “ripple effect” of direct hospital expenditures on the economy, such as medical supplies; durable medical equipment and pharmaceuticals; and retail establishments that depend on the hospital and its employees for business. 

The GHA economic impact report also measures hospitals’ direct economic contributions to Georgia’s working families. Using a household earnings multiplier, the report determined that hospitals generate more than $19.1 billion in household earnings in the state. The household earnings multiplier measures the increased economic contributions from individuals employed directly or indirectly by hospitals through daily living expenditures. 

Despite their economic contributions, Georgia hospitals continue to face financial challenges. Georgia residents who are uninsured or underinsured and unable to pay hospital bills continue to add to the uncompensated care problem hospitals, both rural and non-rural, face. In 2016, Georgia hospitals absorbed more than $1.8 billion in costs for care that was provided but not paid for. In the same year, Georgia’s uninsured rate was 12 percent, the third highest in the nation. Only Texas and Alaska had higher uninsured rates, at 15 percent and 14 percent respectively. Additionally, Medicaid pays Georgia hospitals only about 87 percent of actual costs, meaning hospitals lose 13 cents on every dollar spent treating a Medicaid recipient. 

Unfortunately, many hospitals have been forced to close due to dire fiscal strain. Since 2012, nine Georgia hospitals have closed and others, especially those in rural areas, are fighting to keep their doors open. The most recent Georgia Department of Community Health Hospital Financial Survey shows that, in 2016: 

  • 40 percent of all hospitals in Georgia had negative total margins; and
  • 63 percent of rural hospitals in the state lost money in the same year.

“When hospitals continually lose funds, it creates an intense financial strain that only worsens year after year,” said Carter. “As we have seen over the past few years, eventually, hospitals have no choice but to close when they cannot recoup lost funds. Then, access to care becomes a larger issue.” 

Uncompensated care is not the only ongoing challenge hospitals encounter. Physician shortages and access to care are very real problems in rural communities. This is where a healthy economy greatly helps. When a community’s economy is healthy, it becomes more appealing to physicians, as well as attractive to new businesses and infrastructures. 

“Hospitals are addressing the workforce shortage by increasing the amount of medical school residents through additional graduate medical education (GME) programs,” said Carter. 

Currently, 16 hospitals have GME programs, one of which is at a rural hospital. “Homegrown” physician programs are working to attract doctors to the rural communities in which they were raised and educated. Medical schools all over the country have established incentives and efforts to attract medical students back to their hometowns to practice. According to Augusta University, the implementation of dedicated rural admissions tracks have helped increase graduates in rural medicine. The programs recruit students from rural and underserved areas in order to return those students back to those areas. 

By addressing the workforce shortage, hospitals can make sure they keep their doors open and continue to be financial assets to their communities. The closure of a hospital not only means an increased lack of access to care, but also may mean fewer dollars going into the community, which can jeopardize the livelihood of residents and businesses. 

“All over the state, hospitals are doing everything they can to stay viable to ensure their stability as well as remain economically beneficial,” said Carter. “Their contributions to local and state economies ensure the fiscal and social health of their communities.”