Even in a recession year, hospitals continued to be a stable and slightly growing source of jobs and wages in Indiana—for better and for worse. The sector paid $7.3 billion to 127,000 Hoosiers in 2008, according to the latest data from the American Hospital Association.

The data is the most recent analyzed by the AHA. In spite of the recession that began in December 2007, Indiana hospitals added 5,000 jobs in 2008 and increased their payrolls by $700 million.

Hospitals continue to be one of the surest ways for local communities to bring in outside dollars, since upwards of 50 percent of a hospital’s revenue can come from the federal Medicare program and the federal-state Medicaid programs.

Wages aren’t their only contribution, either. Indiana hospitals had total expenditures nearing $15 billion in 2008, or about 6 percent of the state’s entire economy.

Statewide, unemployment has been stuck near 10 percent for nearly a year, although the state recently has begun adding jobs.

“This study reaffirms the importance of hospitals as an integral part of the state’s economic engine,” said Douglas J. Leonard, president of the Indiana Hospital Association. “Hospitals have remained stable employers even in bad economic times.”

And yet there’s a double edge to hospital employment. The other half of hospital revenue comes from employers and private citizens, who have been increasingly squeezed by rising health care costs.

Indianapolis-based health insurer WellPoint Inc. said health care providers nationally raised prices about 8 percent in 2008, and another 8.5 percent last year. Locally, the Clarian Health hospital system pushed through rate increases of 9.75 percent in 2008 and another 9 percent last year.

That kind of spending does help create jobs in the health care sector, but tends to force non-health-care employers to reduce their payrolls to absorb the higher health care costs.

A 2004 study commissioned by the state of Indiana found that, if Hoosiers could slow the growth of health care spending by 25 percent over 10 years, the state would lose 16,000 health care jobs but gain more than four times that amount, or 68,000 non-health-care jobs.

Hospital CEOs acknowledge this, but say the way Medicare and private insurers pay them gives them incentives to do more and more procedures, not to find ways to make people healthy for less money. Some pilot programs in the new health reform law, passed in March, are designed to experiment with new payment models that reward high-quality, low-cost care rather than high volumes.