From the giant Texas Medical Center to a solo practitioner in a tiny Panhandle hamlet, physicians’ practices fuel the economic engines that grow Texas. The economic benefit of doctors’ offices goes beyond the hundreds of thousands of direct jobs they support, including the quite-quantifiable ripple effect of those jobs and tax dollars through the local economy. It also takes in health care’s obvious, but somewhat less tangible, contribution to Texas’ continued economic development.
Health care is a vital component of the Texas economy, generating tens of billions of dollars in revenue each year and providing hundreds of thousands of jobs. For example, the 49 hospitals and other institutions that make up the Texas Medical Center in Houston employ more than 93,000 people. Indirectly, the Texas Medical Center generates some $14 billion for the Houston economy.
For the entire Houston metropolitan area, however, physicians’ offices have an even greater impact. More than 11,000 office-based physicians generate $16 billion per year for the local economy, comprising more than $10.6 billion in wages and benefits. The U.S. Census Bureau has identified offices and clinics of medical doctors, osteopathic physicians, and other health practitioners as the third largest employment sector in Texas.
The Lewin Group, February 2011
The ripple effect of physicians' practices
An April 2011 study the Lewin Group conducted for the American Medical Association put dollar figures on exactly how much doctors’ offices contribute to the Texas economy. That report found that Texas office-based physicians generate significantly more economic output (i.e., medical and nonmedical sales revenues) than the legal industry; produce more jobs than colleges, universities, and nursing homes combined; and pay more in wages and benefits than all the Texas hospitals.
The Lewin Group concluded that, in Texas:
- Office-based physicians created a total of $63.6 billion in direct and indirect economic output in 2009. The output multiplier for office-based physicians in Texas is 1.95, meaning an additional 95 cents of indirect output is generated in the state over and above each dollar of direct output created in the practice of medicine. Indirect output captures the value of revenues generated by other businesses as a result of the office-based physician industry, e.g., the sale of equipment to an office or the sale of laboratory services related to a physician visit.
- Texas’ office-based physicians supported 249,010 jobs in 2009. On average, each office-based physician supported 5.8 jobs, including his or her own. The employment multiplier in Texas is 1.91, meaning that 91 additional jobs, above and beyond the clinical and administrative personnel that work in physician practices, were supported for each $1 million of revenue a physician practice generated.
- Physician offices contributed $39.4 billion in direct and indirect wages and employee benefits in 2009. On average, each physician supported $924,413 in total wages and benefits. This includes the payroll multiplier, which concludes that an additional 50 cents in wages and benefits was generated for every dollar of direct employee compensation within the industry.
- Physician offices supported nearly $2.1 billion in local and state tax revenues in the year 2009. The total tax contribution is computed by summing taxation on employee income, proprietor income, indirect business interactions, households, and corporations.
Key in communities large and small
Looking at the economic impact of physician practices by metropolitan statistical area (MSA), the Lewin Group reported that doctors’ offices in the Houston and Dallas-Fort Worth areas each accounted for more than 65,000 jobs and more than $10 billion in annual wages and benefits. In the economically stressed border region from Brownsville to Laredo and on to El Paso, physicians’ offices contribute $2.4 billion per year in economic output and support nearly 14,000 jobs.
Payroll includes wages, salaries and benefits, and proprietor income, when applicable.
The financial value of a physician’s practice has even been measured in some of Texas’ tiniest towns. Hemphill County (population 3,807) contracted to determine the value of recruiting a primary care physician to its Panhandle community.
The Hemphill County report concluded, “… [Primary care physicians’] economic contributions are as important to a community as their medical contributions.” Specifically, the study found:
One solo rural primary care physician generates approximately $1 million in revenue, $1.6 million in income (wages, salaries, benefits, and proprietor income), and creates 21 jobs in the Hemphill County economy.
Crucial for economic development
A healthy and viable medical system is vital for continued economic development in our state. Without a healthy and educated workforce or ready access to high-quality medical care, Texas cannot attract new industries and employers.
Economic development experts from coast to coast cite health care as a critical factor companies evaluate as they determine where to locate.
“Larger employers are looking at everything before moving,” said Martin Moll, partner and chair of the health care practice at AKT, a CPA and business consultant firm in Portland, Ore. “If a city has long emergency department waits or it is impossible to get access to a primary care physician, the employer will look at another city.”
As Ricardo Azziz, MD, president of Georgia Health Sciences University and CEO of Georgia Health Sciences Health System, said in an interview with the Federal Reserve Bank of Atlanta, “When an industry is deciding to ‘set up shop,’ if you would, in our communities, first thing they will look for is, ‘Is there adequate health care that is affordable, that is readily available, that actually meets the needs of that particular industry?’ ”
Although health care is big business, individual physician practices are small businesses — mostly very small and often struggling. About 34 percent of Texas physicians are solo practitioners; another 38 percent are in small groups of two to six physicians. These small practices each employ four to five additional workers per physician and have large overhead expenses. Two-thirds of Texas physicians report having trouble covering payroll and other practice expenses because of difficulties in collecting timely or adequate payment from insurers and government payers.
In 2009, physician offices contributed $39.4 billion in direct and indirect wages and employee benefits. On average, each physician supported $924,413 in total wages and benefits.
Healthy Vision 2020