Introduction

 The availability of high quality health care services is an essential component for community development and growth [1], and is particularly important in rural areas.  Several studies conducted over the past 20 years have demonstrated the importance of the health care sector in both industrial development and in the retention of existing rural businesses and industries[2-5].  Although access to quality health care services is important to all community residents, these services are particularly important for retirees and the elderly [6].

 In addition to its contributions to community economic growth and development and quality of life, the health care sector is often a major direct contributor to a community’s economy through its employment and local purchasing activities.  Studies of rural communities have shown that rural hospitals are often the second largest employer in the community, and the combined economic impact of the healthcare sector, including hospitals, physicians, dentists, and pharmacists, often support between 10 and 15 percent of rural communities employment [3].

 This paper describes results of an analysis of Marshfield Clinic’s economic contribution to Marathon and Wood counties (Central Wisconsin) during 1997.  These impacts, which are estimated using an input-output model, characterize the Clinic’s contribution to Central Wisconsin’s employment levels and employee compensation in the context of the Clinic’s impact on Central Wisconsin’s healthcare sector and its general economy. 

Input-Output Analyses

Input-output (I/O) analysis is the principal quantitative technique used to estimate the impact of transactions among industries and sectors in an economy.  The principal advantage of the I/O analytic framework is its facility in estimating indirect and induced effects within an economy that are secondary to a change in final demand.  The I/O analytic framework has broad appeal because it is based on a general equilibrium framework, although the fixed coefficient production function requirements limits its use for some analyses.  Because the I/O framework incorporates interdependencies among industries in an economy, it can produce estimates of economy-wide impacts associated with exogenous change in demand for an industry ‘s output.  These impacts, which are characterized as multipliers, can be estimated for a wide range of macroeconomic indicators, including measures of total output, employment, employee compensation, and personal income. 

Until recently, I/O analyses were restricted to large geographic areas (e.g., U.S., Census regions etc.) because of their computational complexity.  However, with the advent of more powerful personal computers and the development of more refined economic software it has become feasible to estimate I/O models at sub-state/region areas.  These advances, including expanded software capability to incorporate survey-based data and the capability to customize individual industry production functions, has led to a significant increase in the demand for I/O analyses.  Two recent examples of the use of I/O analyses in Wisconsin are an analysis of the impact of community health centers throughout Wisconsin [7] and an assessment of the significance of the health care sector in Grant county [8].   

IMPLAN Pro 1.1 software was used to estimate the economic impact of Marshfield Clinic on the Central Wisconsin economy.  IMPLAN Professional™ is one of the most comprehensive I/O microcomputer-based software programs currently available [9].  IMPLAN Pro provides a number of different analytic options in developing I/O model estimates.  This study used IMPLAN Pro’s Type II multipliers, which are income-based multipliers, to estimate direct, indirect, and induced effects of changes in demand for Marshfield Clinic services.  Direct impacts are changes in Marshfield Clinic activity resulting from changes in exogenous demand for its services.  Indirect impacts are influences on other businesses and industries that result from changes in the purchasing activities of Marshfield Clinic.  Induced effects are the aggregate effects on the purchasing patterns and consumption levels of area households resulting from the impact of Marshfield Clinic’s direct and indirect effects on household income. 

Marshfield Clinic Regional System 

Marshfield Clinic is organized as a not-for-profit 501(c)(3) multi-specialty physician group practice.  Founded in 1916, the Clinic has grown into a regional system of care, incorporating 39 regional centers (Map 1) and employing 533 physicians and over 3,700 support staff.  It currently operates regional centers in 15 central, northern, and western Wisconsin counties.  Marshfield Clinic has a significant presence in Central Wisconsin with major tertiary care facilities in Wausau and Marshfield and regional centers located in seven other communities in this area.

Marshfield Clinic has grown rapidly during the past 20 years (Table 1).  Between 1978 and 1998, Marshfield Clinic physician staffing levels increased from 138 to 533, and its regional center system increased from 5 regional centers to 39 centers.  Over this same period, the total number of patient encounters grew from 365,000 to over 1.2 million.  This growth is attributable to many factors, including the establishment of entirely new regional centers, the expansion of existing regional centers including the Marshfield center, and the acquisition and subsequent expansion of existing physician practices. 

 Marshfield Clinic provides health care services under a wide range of financial arrangements, including fee for service and direct contracting, and participates in preferred provider organizations, Medicaid risk contracts, and HMOs.  The Clinic’s wholly owned HMO subsidiary, Security Health Plan, has more than 100,000 enrollees, and markets its plans in 27 Wisconsin counties, including Marathon and Wood. 

Central Wisconsin 

The Central Wisconsin area had an estimated resident population of 197,051 in 1996.  Its estimated employment base was slightly over 129,000 persons, and its estimated total economic output was $10.8 billion in 1995 (IMPLAN 1997).  Estimated total income was $4.3 billion in 1995, and average income per household was $62,403. 

Central Wisconsin’s health care sector, which is a net exporter of health care services, is a major contributor to the area’s economic activity.  The health sector, which includes doctors and dentists, nursing and protective care services, hospitals, and other medical and health services enterprises, directly employed 12,279 individuals, accounting for 9.5 percent of total area employment.  The sector contributed over $830 million to the economy, which represented about 8 percent of Central Wisconsin’s economic output.  By contrast, it accounted for 16 percent of total Central Wisconsin employee compensation (Table 2).  The sector’s relatively larger share of compensation relative to both total output and employment reflects the labor-intensive nature of the health care sector and its relatively higher average wages compared to other Central Wisconsin industries.

Marshfield Clinic’s Economic Impact 

Estimating the economic impact of Marshfield Clinic on Central Wisconsin requires isolating Clinic-specific purchasing and employment levels from those of the remaining health care sector, and modeling those impacts in an input-output analytic framework.  To estimate these impacts, Marshfield Clinic employment, compensation, and output data were developed from internal accounting and employment databases for 1997 for regional centers located in Central Wisconsin.¹  These data were adjusted for Clinic employee residence, and the resulting adjusted employment and compensation estimates were incorporated into the base IMPLAN PRO I/O model.   

The analytic approach is designed to yield conservative estimates of the impact of Marshfield Clinic activities in Central Wisconsin.  Estimates are conservative because they do not include any measures of the impact of patient-related spending in Central Wisconsin incident to a Clinic visit by non-area residents.  Thus, any "tourism effect" is not accounted for in this analysis.  In addition, the economic impacts will be conservative if there are "synergy effects" associated with Marshfield Clinic operations.  "Synergy effects” are usually not captured in I/O models unless there is an established pattern of transactions between synergistic industries.  Thus, for example, any "synergy effects" resulting from an expansion of physician services which might accommodate an expansion of hospital-related services would not be fully captured in a base I/O model because it would not necessarily involve any purchase arrangements between the economy’s physician sector and hospital sector.  These effects can be modeled in an I/O framework but were not estimated in this analysis.  

Marshfield Clinic’s estimated employment impacts on Central Wisconsin are summarized in Table 3.  The total employment impact of Marshfield Clinic operations in Central Wisconsin was 5,012 employed persons, which represented nearly four percent of all employed persons.  This total includes 2,514 individuals employed directly by Marshfield Clinic and an additional 2,498 jobs created through indirect and induced effects.  The distribution of the Clinic’s employment impacts is depicted in Chart 1.  It is readily apparent from this graphic that the principal economic sectors benefiting from Marshfield Clinic’s impact are other health services, retail and service sectors.  These sectors account for over 90 percent of the total estimated employment impact of Marshfield Clinic in Central Wisconsin. 

The induced effects of Marshfield Clinic-related household spending in the local economy accounts for 37 percent of the aggregate employment impact, while the indirect impact on employment accounts for about 9 percent of the total employment impact (Chart 2).  These shares are characteristic of service industries that have high value added to output ratios, reflecting their high labor intensity.  With more of total output accounted for by labor costs, the share of output available for business-related purchases is smaller.  This relationship, combined with the fact that Central Wisconsin does not have major medical and pharmaceutical manufacturing, results in lower relative indirect effects.

Marshfield Clinic’s impact on total employee compensation in Central Wisconsin was estimated at $207.5 million in 1995 (Table 4).  The health, services, and retail sectors in the economy are the principal affected sectors, accounting for over 94 percent of the employee compensation impact.  This pattern mirrors the Clinic’s employment impacts.  Marshfield Clinic’s total employee compensation impact accounts for an estimated 6.4 percent of Central Wisconsin employee compensation and 6.2 percent of Central Wisconsin personal income (employee compensation and proprietor income).  These percentages are higher than the estimated share of employment attributed to Marshfield Clinic operations, which reflects the higher average wages and earnings of Clinic employees and their related impact on local economic activity.  In the health care sector, Marshfield Clinic accounts for about 40 percent of both compensation and employment.