Health Care and Regional News and Hospital Construction and Hospitals and Other Counties and Economic Development and Health Care & Life Sciences

Hospitals are mixed bag for rural economies

May 12, 2008

WILLIAMSPORT--To see the economic impact hospitals have on Indiana, this town of 1,900--which boasts its county's only stoplight--provides a good view.

The 16-bed St. Vincent Williamsport Hospital is the fourth-largest employer in Warren County, where Williamsport is the seat, and pays wages that are 60 percent higher than the county average. The hospital employs all the county's doctors and even operates the local ambulance service.

The new brick exterior of the one-story hospital, nestled in a residential area, contrasts with the attractive but aging facades along Williamsport's placid downtown business strip.

The hospital is planning to expand to meet rising demand, which means it will add to its 170-person staff. That's good news for Williamsport as the nation settles into another economic downturn.

But it's a mixed blessing for businesses in the area. They expect to see higher hospital prices, which would hike the costs of their employee health benefits. That makes it harder for employers to keep and add jobs.

"I can't imagine the costs going down if they're expanding. They've got to cover that somehow," said Mike Wrighthouse, employee benefits manager at Harrison Steel Castings Co. The 950-worker firm sits four miles outside of Williamsport in Attica.

Around Indiana, hospitals continue to grow and add workers, increasing their role as an economic driver to the state's economy. But health care reformers say hospital growth has a double edge, as higher health care costs dampen growth prospects for other Indiana employers and their workers.

"People get jobs. But in the long term, who pays for this?" said Les Zwirn, a former executive at Methodist Hospital in Indianapolis who now is helping to organize a reform group called Hoosiers for Better Healthcare. "Well, we know who pays for this. Families pay for it through increased premiums and loss of coverage. And employers pay for it in terms of depressing wages and trying to slim down and scale down coverage."

Even hospital leaders agree with those claims--to a point.

"We're a source of costs for the businesses," acknowledged Doug Leonard, president of the Indiana Hospital Association. "But on the other side of the coin, we provide a lot of benefits for the community."

Vince Caponi, CEO of St. Vincent Health, which owns the hospital in Williamsport, said the entire health care system needs fundamental reform.

"Health care in general is too expensive and, in its current format, not sustainable," Caponi said, sitting in a conference room of his offices that looks out on the sprawling campus of St. Vincent's flagship Indianapolis hospital. "We have to be in the business of making things more affordable."

Employment powerhouses

St. Vincent provides a handy guide to hospitals in Indiana, particularly those outside Indianapolis.

The Catholic system, owned by St. Louis-based Ascension Health, operates 17 hospitals in Indiana. They range from the tiny Williamsport facility to midsize St. Joseph Hospital in Kokomo to the massive cluster of hospitals St. Vincent owns on the northern edge of Indianapolis and in Carmel.

St. Vincent Health is the eighth-largest employer in Indiana, with the equivalent of 11,605 full-time workers, according to IBJ research. Its two main rivals, Clarian Health and Community Health Network, rank as the fourth- and 11th-largest employers.

Indiana's auto, steel and other manufacturers have slashed jobs over the last two decades, leaving no manufacturers among the top 10. Meanwhile, hospital employment has surged.

St. Vincent's biggest concentration is in the Indianapolis metro area. But even outside the Indianapolis area, St. Vincent employs the equivalent of nearly 3,200 full-time workers, doling out annual wages of nearly $160 million.

"They create a tax base," Caponi said. "People have to buy homes and buy gas and buy groceries and educate their children. And that creates an impact."

St. Vincent owns hospitals in Anderson, Brazil, Elwood, Frankfort, North Vernon, Winchester and Williamsport. Combined, they provide more than $34 million in free care or care for which patients and government programs do not fully pay.

Hospital leaders in Indiana and nationwide have never been more eager to catalog the benefit hospitals bring to their communities. That's because lawmakers in Washington have considered stripping hospitals of their income-tax exemptions on the grounds that they aren't giving enough charity care.

Indiana legislators also have mulled whether hospitals should retain their property tax exemptions, since the industry takes up so much land and since some hospitals make a lot of money. In its most recent fiscal year, St. Vincent Indianapolis Hospital posted profit, from patients and investments, of $161 million.

In Indiana, hospitals employ nearly 125,000 workers, paying out $5 billion in wages, according to the Indiana Hospital Association. Hospitals dole out another $1.3 billion in employee benefits.

In addition, Indiana's hospitals provide $809 million in free care and forgive another $940 million in unpaid bills.

Jane Craigin, the CEO at St. Vincent Williamsport, said the hospital's biggest impact is providing access to care during a time it's not feasible for doctors to set up a practice on their own in a rural area.

"I don't think people realize that if the hospital wasn't here, the doctors wouldn't be here," she said. The hospital employs nine physicians and three nurse practitioners.

Bob Tartar likes that access. As the human resource director at TMF Center Inc., a maker of computer-controlled machining tools in Williamsport, the proximity of the hospital saves the company and its 270 employees time. That comes in particularly handy when there's an emergency or a worker gets hurt on the job.

"We're not having to worry about shipping someone to Lafayette or Danville or Crawfordsville, which is going to be a 30-minute drive," he said. "This is just five minutes away."

Driving up costs

Zwirn agrees that small rural areas like Williamsport probably gain when their hospitals expand. He's most concerned about midsize cities where multiple hospitals are growing even though the population isn't.

Like in Kokomo. There, St. Joseph Hospital has added 100 employees in the last year, bringing its staff to 860. It even has hired former autoworkers that took early-retirement packages from struggling Chrysler Corp.

"We have a changing economy in Kokomo, so we're really proud that we're able to employ some of those folks that may be early-retired," said Darcy Burthay, president of St. Joseph Hospital. Along with Howard Regional Health System, St. Joseph serves the Kokomo area, whose population is stagnant at 100,000.

Burthay noted that the hospital has seen rapid growth in rehabilitation services, such as physical and occupational therapy. Last summer, it even leased space in a former Ben Franklin store to accommodate its growth. The hospital also opened a new cancer center last year.

Burthay proudly reviews how St. Joseph was losing money before she became president three years ago, but that it posted an operating margin of 9.1 percent this year. Operating margin is the key gauge of performance for not-for-profit organizations like hospitals, just as profit margin is the key gauge at for-profit businesses.

In its most recent fiscal year, St. Joseph posted an overall gain of $15 million.

But healthy hospital profits don't make employers happy. They worry that competing hospitals offer duplicative services and drive up prices as they compete to attract doctors and nurses. Burthay said she meets regularly with Kokomo employers to listen to their concerns about costs.

Employers have similar concerns across the state and the nation.

"We have administrative costs that are excessive. We have programs that aren't necessary. I think there is a lot of waste in the system," said Dr. Ned Lamkin, who leads an Indianapolis-based employers group pushing for health care reform. The group is funded by several large employers, including automaker General Motors Corp.

There is even some evidence that higher health care spending is costing Indiana jobs. A 2004 study by Mathematica Policy Research, a think tank in Washington, D.C., showed that if Hoosiers reduced spending on health care 25 percent over a 10-year period, the state would lose 16,000 health care jobs but gain 68,000 non-health-care jobs.

Economic boost

But such debates hardly register in some of the towns where St. Vincent operates its hospitals.

"In North Vernon, Indiana, I think the question isn't having too much health care," said Joe Roche, administrator of the St. Vincent hospital there. Since St. Vincent bought the facility in 1999, the hospital has expanded its staff from 90 employees to 240.

The hospital has added lots of imaging services and operating rooms, and finally has the capability to deliver babies. Before, locals say, there were a lot of babies born in cars on the side of State Road 7, halfway to the hospital in Columbus.

Local employers complain about health care costs, of course, said Roche, who has served on the local chamber of commerce and the economic development organization. But he contends the hospital is a valuable asset for attracting new employers.

North Vernon is a relatively poor community, with a downtown dominated by crisscrossing railroad tracks and a moldering gray factory.

John Hall, who was North Vernon mayor for 16 years until December, credited the hospital for helping Jennings County secure expansions at a Lowe's distribution center. The North Vernon Industry Corp. has expanded as well.

Combined, those two companies employ about 1,000 workers.

"It's been very helpful with economic development," Hall said.

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