Economic contributions of the Memphis medical

by.  Cyril F. Chang, Wes Routon
Memphis' medical community makes a substantial contribution to the local economy. In 2006, the Shelby County's overall economic contribution was estimated to be $6.8 billion, while the contribution of the entire metro area was almost $9 billion. These dollar contributions represent between 15 and 16 percent of the local economy's gross domestic product (GDP). The local health sector also has a significant impact on the employment pool in the area by providing one in every seven or eight jobs in Shelby County and the Memphis Metro Area. These are highly desirable jobs because they are filled mostly by local laborers, have a minimal adverse economic impact, and are in large part unaffected by economic downturns. These same jobs also insure that the metro areas increasing need for quality healthcare is met.

I. INTRODUCTION

There are at least three significant ways in which the healthcare sector contributes to economic growth. First, healthcare contributes to the economy by improving the health and longevity of the individuals within the economy and, therefore, improving their productivity (Mirvis, Chang, and Cosby 2008; Mirvis and Chang 2003). Yale economist William Nordhaus (2002) studied the value of this contribution in the U.S. and concluded that "... improvements in health status have been a major contributor to economic welfare over the twentieth century:' A similar study was conducted by the World Health Organization (WHO) which resulted in the publication of Macroeconomics and Health: Investing in Health for Economic Development. The WHO made an argument for investing in the healthcare infrastructure within developing countries as a prerequisite for stimulating economic development (WHO 2001). Unmistakably, a quality health sector contributes to both the productivity and well being of an economy's labor force.

Second, a lively healthcare sector also helps in raising the level of wages and salaries in an economy. A large number of healthcare jobs pay salaries that are above the national average, and clinical and research activities create ancillary businesses that are required to sustain their functions (Bureau of Labor Statistics 2009). Some examples include ancillary lab and radiological services that support cancer diagnostic clinics, large medical centers that support medical schools, and medical supply companies that support large hospitals. Therefore, a hefty healthcare sector plays a significant part in raising an economy's standard of living (through more income) and in creating a more attractive environment that brings in high scale restaurants, shops, and community facilities. (The authors recognize but do not detail these desirable effects in this article.)

The third reason the healthcare sector improves an economy is the large foundation it provides for employing local residents and attracting capable persons into an economy. This article will focus on this impact of the Memphis healthcare sector. Thus, the purpose of the current analysis is to update an earlier economic contribution study (Chang, Tuckman, and Nocetti 2003) with the latest available data that measure the economic contributions of the medical community in the Memphis Metropolitan Statistical Area (MSA), which consists of Shelby County, Tennessee; West Memphis, Arkansas; and DeSoto County, Mississippi. The analysis will do so by (1) describing the healthcare sector of the Memphis area economy; (2) documenting and summarizing the major economic activities of the healthcare sector; and (3) estimating the healthcare sector's direct and indirect economic contributions to the Memphis area economy.

It should be noted that the term "economic contributions" is used within this article to show that this is a "significance analysis" and not an "impact analysis" (Stynes and Propst 1992; Chang and Jackson 2003). The purpose of an "impact study" is to identify the benefits and/or adverse effects that result from a particular action or activity, such as the construction of a new hospital. Hence, the emphasis is on the incremental change in economic effects shown by a clear "with vs. without" comparison. By contrast, a "significance analysis" identifies the overall benefits of an economic activity or an economic sector. Accordingly, in the following report, the economic contributions of the medical community in its entirety are counted with no attempt to make a "with vs. without" comparison.

This article will be separated into the following sections. Section II provides a trend analysis of national healthcare expenditures and a discussion of healthcare's contributions to employment growth. Section III describes the socioeconomic characteristics of the Memphis Metropolitan Area. Section IV provides a summary of the structure of the Memphis healthcare sector. Section V documents and analyzes both the direct and indirect economic contributions of the healthcare sector. Section VI discusses additional contributions that cannot be measured in dollars. And, lastly, the conclusions of the analysis are presented in Section VII.