Executive Summary: The Economic Impact of Pennsylvania's Hospitals, Fiscal Year 2019
Hospitals are economic anchors in their communities. They directly impact their local economies in many ways—maintaining and constructing new buildings, providing jobs, purchasing medical equipment, etc. Hospitals also indirectly affect the economy through business interactions (such as employment and cleaning services) and induce economic activity in other industries (like real estate). They also attract federal research dollars to the state, enabling Pennsylvania’s hospitals and health systems to develop innovations that improve care for all Americans. Throughout the years, Pennsylvania’s hospitals have increasingly become core economic drivers; however, the COVID-19 pandemic has put this status in jeopardy.
During 2000, the health care sector (including hospitals) comprised 13.5 percent of the state’s workforce. By 2019, the health care sector represented 18.6 percent of the state’s workforce, a 36 percent increase, moving it ahead of manufacturing as the leading employment sector for the state. 1
On their own, Pennsylvania’s hospitals directly and indirectly supported more than 660,000 jobs during fiscal year (FY) 2019, accounting for approximately one of every nine jobs in the state. These hospitals and health systems directly employ more than 291,000 Pennsylvanians in a wide variety of jobs, providing nearly $19.2 billion in wages, salaries, and benefits. In addition, Pennsylvania hospitals support more than 371,000 additional jobs—that pay another $18 billion in salaries—through the direct purchase of goods and services and the subsequent circulation of hospital dollars in local economies. 2
Overall, the data for FY 2019 shows that the Pennsylvania hospital and health system community contributed $143 billion to state and local economies, a 5 percent increase compared to the previous year. 3
HAP’s analysis documents that Pennsylvania hospitals and health systems contribute to the state economy through direct and ripple (indirect plus induced) contributions:
- $64.4 billion in direct impact—these are the dollars hospitals pay out for employee salaries, wages, and benefits, and for the many goods and services needed to provide health care services and support hospital and health system operations
- $78.6 billion in ripple impact—this includes the additional economic activity that results from the circulation of hospital dollars in local communities and across the state
The Threat of COVID-19
Economic factors exacerbated by the COVID-19 pandemic threaten the economic foundation that the commonwealth’s hospitals and health systems provide.
Even prior to the onset of COVID-19, Pennsylvania hospitals and health systems faced financial stress. According to a report by the Pennsylvania Health Care Cost Containment Council (PHC4), uncompensated care (bad debt plus charity care) for Pennsylvania general acute hospitals increased from $750 million during FY 2018, to $820 million during FY 2019, an increase of 9.3 percent, the first year–to-year increase in uncompensated care during the past five years. Furthermore, FY 2019 saw 34 percent of Pennsylvania hospitals post negative operating margins, with 29 percent of the state’s hospitals posting operating margins between 0 percent and 4 percent. 4
A pandemic the magnitude of COVID-19 has sent shockwaves through Pennsylvania. Thousands have lost their lives or will endure lasting health consequences as a result of COVID-19. The state’s unemployment rate jumped from 4.7 percent during February 2020, to 16.1 percent during April 2020 and has remained high (7.3 percent during October 2020). 5 In addition, a report by Health Management Associates (HMA) estimates that close to 1 million Pennsylvanians could lose employer-sponsored health insurance coverage as a result of the pandemic. 6
The COVID-19 pandemic also will leave lasting scars on Pennsylvania’s hospitals and health systems. According to a subsequent HMA report, hospitals statewide incurred losses in excess of $5 billion due to temporary closures and curtailing non-emergent treatment. 7 Unemployment claims for the health care sector in Pennsylvania increased five-fold between February and November 2020. 8
Hospitals Need Continued Support
Though the leadership and employees of the state’s hospitals and health systems have performed heroically in the face of the pandemic, continued federal and state support will be imperative to ensure they are able to perform as the economic and health care flagships for their communities.
Hospitals need sustainable payments for the care they provide, and to innovate and utilize the emerging mechanisms for delivering care in the post-COVID-19 world. These payments include:
- Reimbursement for telehealth
- Sustained state budget support for OB/NICU, burn and trauma centers, and critical access hospitals
- Sufficient reimbursement from Medicare, Medicaid, and private insurance
Hospitals also will need lawmaker support to continue reducing administrative red tape, so they can focus on caring for patients. These measures include streamlining processes for things like credentialing and prior authorization, as well as maintenance of the waivers put in place during the pandemic to ease the regulatory burden on hospitals.
1 HAP analysis of BLS Quarterly Census of Employment and Wages (QCEW) NAICS-based data files by area (annual averages for Pennsylvania counties) for 2000 and 2019. See U.S. Bureau of Labor Statistics, Quarterly Census of Employment and Wages.Last Accessed: 12/15/2020.
2 Based upon 2019 Q4 Hospital Employment and Wages data, provided to HAP Research Department by the Pennsylvania Department of Labor and Industry, Center for Workforce Information and Analysis.
3 HAP’s 2020 analysis of HHS HCRIS FY 2019 data, coupled with data provided directly to HAP by Pennsylvania health systems
4 Financial Analysis 2019, PA General Acute Care Hospitals – News Release. Pennsylvania Health Care Cost Containment Council. April 15, 2020. Retrieved from: http://www.phc4.org/reports/fin/19/nr041520.htm. Last accessed: 12/15/2020.
5 Pennsylvania Department of Labor and Industry, Center for Workforce Information and Analysis. Local Area Unemployment Statistics (LAUS). Last accessed: 12/18/2020.
6 COVID-19 Impact on Medicaid, Marketplace, and the Uninsured, by State. Health Management Associates. April 3, 2020. Retrieved from: https://www.healthmanagement.com/wp-content/uploads/HMA-Estimates-of-COVID-Impact-on-Coverage-public-version-for-April-3-830-CT.pdf. Last accessed: 12/15/2020.
7 Analysis of the Impacts of COVID-19 on Pennsylvania Hospitals. Health Management Associates. September 4, 2020. Retrieved from: https://www.haponline.org/Resource-Center?resourceid=475. Last accessed: 12/18/2020.
8 HAP analysis of data from the Pennsylvania Department of Labor and Industry Center for Workforce Information and Analysis, Weekly Unemployment Compensation Claims Dashboard comparing the total number of statewide initial, continued, and exhausted unemployment claims for the Health Care and Social Assistance sector from February 15, 2020 and November 7, 2020. Retrieved from: https://www.workstats.dli.pa.gov/dashboards/Pages/Weekly-UC.aspx.Last accessed: 12/15/2020.
Topics: Regulatory Advocacy, State Advocacy
Revision Date: 12/21/2020
Return to Previous Page