Tuesday, May 5, 2015

Where the Health-Care Industry Dominates

Last week, The New York Times ran an article about how the health-care industry has become the lifeblood of many rural towns. Other industries are offering fewer and fewer jobs paying middle-class incomes. Manufacturers have either moved offshore, become highly mechanized, or been driven out of business; small retail stores have lost the competition to big-box stores employing mostly low-wage workers; even agriculture has become mostly mechanized. In these towns, health care is one of the few industries that continue to offer decent wages and steady employment, so the towns survive by serving as the health-care hub of their region.

As an example, the article looks at Beatrice, Nebraska, which has not only a hospital but also two centers for the developmentally disabled and several new nursing homes and assisted-living centers. The article points out that one of the reasons rural hospitals are able to survive, besides simple demand, is a federal program that guarantees better-than-average Medicare reimbursement rates at facilities designated “critical access hospitals,” provided they meet certain standards.

I thought it might be interesting to identify some other communities that are health-care hubs. I used data from the Occupational Employment Survey that estimates employment in metropolitan areas for May 2014. Note that because the data set is based on metro areas, it overlooks small towns, such as Beatrice, located in rural areas. That means that I found cities that are health-care hubs rather than towns.

I looked for the ratio of employment in health-care occupations (specifically those in the group Healthcare Practitioners and Technical Occupations) to employment in all occupations. Here are the 10 metro areas where more than 10 percent of the wage-and-salary employment is in these occupations:

Metro Area
Health Care Practitioners and
Techs as Percentage of 
Wage-and-Salary Workforce
Rochester, MN
Rome, GA
Huntington-Ashland, WV-KY-OH
Gainesville, FL
Johnson City, TN
Ann Arbor, MI
Morgantown, WV
Kankakee-Bradley, IL
Cape Girardeau-Jackson, MO-IL
Greenville, NC

It should come as no surprise that Rochester, Minnesota, tops the list. It is the home of the Mayo Clinic, which employs 4,200 staff physicians and scientists; 2,400 residents, fellows, and others; and 52,900 allied health staff. Although we must exclude the scientists from the health-care workers and must subtract the workers in satellite clinics outside the Rochester area, we also must add a large number of non-Mayo health-care workers in this area. The result is an impressive ratio of health-care workers for a metro area with a total employment of 104,000 workers.

You may be less familiar with Rome, Georgia, but it is home to several medical centers: Floyd Medical Center, Redmond Regional Medical Center, and the Harbin Clinic, plus the Northwest Georgia Clinical Campus of The Medical College of Georgia.

Similarly, in the Huntington-Ashland metro area, some of the largest employers are Cabell Huntington Hospital and St. Mary’s Medical Center (in Huntington, West Virginia) and King’s Daughters Medical Center (in Ashland, Kentucky).

Most of the other metro areas on this list host universities with hospitals and medical schools. Greenville, North Carolina, is a good example—one I know well because my sister lives there. East Carolina University has a medical school and, since only a few years ago, the state’s second school of dentistry. Like Rome, Georgia, Greenville once served mainly as a center of trade for the region’s agriculture, but now health care has supplanted cotton and tobacco as the basis of the economy.

Next, I was curious about whether the health-care-dominated metro areas have experienced recent economic trends differently from the United States as a whole. So I looked at the median earnings for Healthcare Practitioners and Technical Occupations from 2007 through 2014. In the chart below, you can see the trends for the earnings of these workers nationwide (the blue line) versus the earnings for these workers who were employed in seven of the ten metro areas with high ratios (the red line). (Data was not available for all 10.) Here’s what I found:

First, note that the earnings in the health-care-dominated metros started out below those nationwide. This is not surprising, because all seven of these metros are low-cost-of-living regions, largely rural, and the nationwide average seems to be boosted by the earnings of the large number of health-care workers in big cities.

More interesting to me is the fact that the recent recession caused a conspicuous dip in the earnings of health-care workers in the metros where the industry is dominant, whereas health-care workers nationwide experienced no such downturn. Furthermore, although the workers in the health-care-dominated metros saw their wages rebound rather quickly, their earnings trend seems to fall slightly short of the curve one would have expected at the beginning of this time period. In other words, they seem to be still suffering a little from the after-effects of the recession.

I’m not at all sure why this is the case, but I will hazard a guess. There’s an old joke that the poor will never starve because they can always find work doing each other’s laundry. By that logic, health-care workers can always find work diagnosing and treating each other’s diseases. But this does not seem to be what actually happens during hard times. It appears that when a region does not have a diverse base of industries and is dominated by health care, a downturn in the economy reduces the number of patients available to health-care workers, causing their earnings to suffer. So although health care may save a community from becoming a ghost town after other industries have departed, the community seems likely to be less stable than it was when it hosted a more diverse set of industries.

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