Go to any decent sized town or city in the U.S. and you are likely to find that the largest employer is the local hospital or health system. Not only do these systems provide critical services to the community, but they also give many members of the community a way to make a living. In fact, the health care industry at large has provided an increasing number of jobs over the last two decades.
This source of employment is beneficial for many, most notably those individuals finding jobs. It also helps those in the health care industry seeking to grow the size of their market. Additionally, local politicians can point to growth in the local economy and low rates of unemployment, thus improving their standing. It’s clear that a thriving medical system or hospital is good news for many stakeholders in these communities. But is it good for the economy?
As the health care industry grows, an increasing proportion of household and corporate income funnels into that sector. Someone has to pay the salaries of all of the workers, administrators and others who keep the health care industry humming.
In an earlier paper released on provider consolidation and market power, CPR found that every new job in the health care sector resulted in 0.85 fewer jobs on average in the rest of the economy, based on data from the RAND Corporation. For every job created, the costs of running the U.S. health care system increases. These costs are translated into growing health insurance premiums, which eventually lead to layoffs in other sectors that are unable to manage such a burden. As Baicker and Chandra point out in the New England Journal of Medicine, continued growth in the health care sector may represent, at best, a “wildly inefficient jobs program.”
Health care is not a particularly efficient or productive industry. Provider market power and consolidation also drive up unit prices and allow dominant providers to resist efforts by those who pay for care to improve efficiencies and outcomes. Bottom line: the health care industry will likely continue to be a growing source of jobs, but at the expense of other industries, and potentially the rest of the economy.
On September 6th, CPR is hosting a Virtual Summit on Provider Consolidation Trends and Implications, What Employers Need to Know. Join us as we explore, with a panel of the most knowledgable experts, what the growth in large health systems means for employers and other stakeholders and how we can work to combat the negative effects.