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A $7.4B impact
Health care boosts local economy

Janet Dunphy
Inside Business - Hampton Roads
Monday April 3, 2006

The statistics are startling.

Obviously, the health care industry in Hampton Roads is flourishing. Three major heart programs have been launched in a year, two hospitals are building new campuses in Virginia Beach and one has successfully expanded in Williamsburg while another is trying.

Another hospital is seeking four certificates of need from the state for operating rooms and diagnostic machines in 2006. Many other requests to the state by local hospitals are probably in the pipeline as well.

So how does it compute for the local economy?

It all adds up when you put the numbers on paper. John Whaley, an economist with the Hampton Roads Planning District Commission, estimates that there are 112,000 jobs directly and indirectly related to health care here. The trickle down effect - the employees spending their paychecks as well as the employers paying their costs for things such as laundry and food service - equals about $7.4 billion of the gross regional product.

“There’s no shortage of money in health care,” said Louis Rossiter, the director of the Schroeder Healthcare Policy Center at the College of William and Mary and a former secretary of health and human resources in Virginia.

Health care spending is almost three times the rate of inflation, Rossiter said. That is widely attributed to better insurance coverage, even though about 14 percent of the population doesn’t have any.

Better insurance gives the consumer more incentive to make an appointment. Rossiter gives an analogy: It’s like going to a restaurant with co-workers and putting it all on one tab to be divided equally. Everyone orders what he wants because they know they will only pay a share of the total bill.

Rossiter said it is commonly referred to as “excess cost,” a disconnection between what consumers pay and what health care actually costs. Since they don’t pay the full cost, consumers demand more.

But that isn’t necessarily a bad thing. What is often overlooked, said Rossiter, is that for every dollar spent on health care, money goes into the economy.

For example, if the state spends $10 million on Medicaid, the federal government matches it. It improves access to health care for consumers and spending by hospitals and doctors, Rossiter said.

“We have tremendous improvements in health status in heart disease and cancer, but where do we go? Does it come from spending less? No, it comes from spending more,” he said.

“Someone spending money on health care is someone’s income on health care,” Rossiter said. “The dollars don’t disappear in the air. They wind up in someone’s pocket as income.”

More figures from Whaley show where the health care growth is. The three top employment categories in the industry are ambulatory care, hospitals and nursing facilities. In 2001, ambulatory care accounted for 29 percent, hospitals accounted for 21.5 percent and nursing facilities accounted for 12 percent. In 2004, those same categories were 31 percent, 22 percent and 13 percent, respectively.

Principal drivers of the growth, Whaley said, are the aging population, the growth in population, particularly with regard to retirees, improvements in medical technology and an improvement in the standard of living, which is true across the country.

Christopher Colburn, an associate professor of economics at Old Dominion University, helped research a workforce report for Opportunity Inc. that was released in January. He notes that many of the jobs in health care are the result of the growth in ambulatory care, or outpatient surgery centers, which insurance companies favor because they keep patients from costly overnight hospital stays. Also, the health care industry is in a sense self-perpetuating because doctors refer patients to other doctors.

“There are so many issues because it’s such a large part of the economy,” Colburn said. He sees the competition in the industry not so much between hospitals as doctors. “The real competition I think is among physicians. If you don’t like one, you go somewhere else. Hospitals are like an agent in the system.”

The largest health care employers in the region are Sentara Healthcare, Riverside Health System, Bon Secours Hampton Roads and Chesapeake General Hospital.

Sentara is by far the largest local health care system with seven hospitals. Earlier this year it opened a six-story heart hospital at Sentara Norfolk General and a Virginia Beach campus with an ambulatory surgery center is under construction.

Riverside Regional Medical Center is undergoing a five-year redesign. It has a new emergency/trauma center with a central tower building above and additional services for surgery, critical care, new moms and private rooms. Riverside is also seeking state permission to expand to the Williamsburg area.

Sentara and Riverside officials were not able to respond by deadline.

Bon Secours Hampton Roads has three local hospitals as well as an outpatient center and other nursing care facilities. It is spending $18 million on a new Virginia Beach campus. System-wide, Bon Secours employs about 4,500 and last year’s fiscal payroll was $145 million. It has 1,400 physicians.

The specialties bring in the consumers. Bon Secours has seen 30 patients three months into its partnership with Columbia University College of Physicians for open-heart surgery and advanced cardiac care. The bariatric weight-loss surgery program that began in 2003 has had more than 600 patients. Dr. J. Abbott Byrd, a Bon Secours orthopedic surgeon, has been noted for his invention, the Vanguard Spine Cage. The Minimally Invasive Surgery Center at Mary Immaculate has a new procedure, the Jiffy Hip for replacement surgery.

Elisabeth McNamara, the Bon Secours Hampton Roads vice president for business development, said health care is on a growth curve and much of it has to do with baby boomers. They are educated, often through the Internet, and they expect good communication with their providers.

“They don’t want to be passed from one doctor to another,” McNamara said. “They are informed and they have a better sense of what is available to them.”

The growth at Chesapeake General Hospital is phenomenal. According to Lori Wright, the hospital’s vice president for marketing and planning, over the last 10 years inpatient admissions have grown 23 percent, emergency department visits have jumped 32 percent and outpatient admissions - those for day surgery and all kinds of diagnostic testing - have soared 84 percent. In addition, last year the hospital celebrated its 50,000th birth in 17 years.

Wright said the hospital draws patients from several growing areas - Chesapeake, Virginia Beach and North Carolina’s Dare and Currituck counties, but there are additional reasons Chesapeake General is often bustling with business. “You can’t pin it on any one thing. It is our reputation as well. We are very high touch and high feel,” she said.

The payroll with benefits for Chesapeake General Health, which includes the hospital and its subsidiaries, was $87 million in 2005 for about 2,300 employees. The system has 652 physicians, a large number for its size. It is finishing construction of two new operating rooms and recently opened a cardiac catheter lab. This year the system will seek certificates for two more operating rooms and three more diagnostic machines, a third MRI and two more CT scanners.

“We have to,” Wright said, “because our volumes are so high.”

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Bon Secours Hampton Roads Health System is a leading health care organization known for providing care for the whole person with grace and clinical distinction. Bon Secours brings together a network of hospitals, primary care practices, ambulatory care sites and continuing care facilities to provide quality health care services to the residents of Hampton Roads. Bon Secours, which employs more than 4,500, includes: Bon Secours DePaul Medical Center, Bon Secours Maryview Medical Center, Mary Immaculate Hospital, Bon Secours Health Center at Harbour View, Bon Secours Maryview Nursing Care Center and St. Francis Nursing Center.

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