The Economic Impact of Pennsylvania's Hospitals

Fiscal Year 2019

Community Spending

Hospitals are economic anchors in their communities. They directly impact their local economies in many ways—maintaining and constructing new buildings, providing jobs, purchasing medical equipment, etc. Hospitals also indirectly affect the economy through business interactions (such as employment and cleaning services) and induce economic activity in other industries (like real estate). They also attract federal research dollars to the state, enabling Pennsylvania’s hospitals and health systems to develop innovations that improve care for all Americans. Throughout the years, Pennsylvania’s hospitals have increasingly become core economic drivers; however, the COVID-19 pandemic has put this status in jeopardy.

Leading Employers

During 2000, the health care sector (including hospitals) comprised 13.5 percent of the state’s workforce. By 2019, the health care sector represented 18.6 percent of the state’s workforce, a 36 percent increase, moving it ahead of manufacturing as the leading employment sector for the state. ¹

On their own, Pennsylvania’s hospitals directly and indirectly supported more than 660,000 jobs during fiscal year (FY) 2019, accounting for approximately one of every nine jobs in the state. These hospitals and health systems directly employ more than 291,000 Pennsylvanians in a wide variety of jobs, providing nearly $19.2 billion in wages, salaries, and benefits. In addition, Pennsylvania hospitals support more than 371,000 additional jobs—that pay another $18 billion in salaries—through the direct purchase of goods and services and the subsequent circulation of hospital dollars in local economies. ²

Overall, the data for FY 2019 shows that the Pennsylvania hospital and health system community contributed $143 billion to state and local economies, a 5 percent increase compared to the previous year. ³

HAP’s analysis documents that Pennsylvania hospitals and health systems contribute to the state economy through direct and ripple (indirect plus induced) contributions:

• $64.4 billion in direct impact—these are the dollars hospitals pay out for employee salaries, wages, and benefits, and for the many goods and services needed to provide health care services and support hospital and health system operations
• $78.6 billion in ripple impact—this includes the additional economic activity that results from the circulation of hospital dollars in local communities and across the state

The Threat of COVID-19

Economic factors exacerbated by the COVID-19 pandemic threaten the economic foundation that the commonwealth’s hospitals and health systems provide.

Even prior to the onset of COVID-19, Pennsylvania hospitals and health systems faced financial stress. According to a report by the Pennsylvania Health Care Cost Containment Council (PHC4), uncompensated care (bad debt plus charity care) for Pennsylvania general acute hospitals increased from $750 million during FY 2018, to $820 million during FY 2019, an increase of 9.3 percent, the first year–to-year increase in uncompensated care during the past five years. Furthermore, FY 2019 saw 34 percent of Pennsylvania hospitals post negative operating margins, with 29 percent of the state’s hospitals posting operating margins between 0 percent and 4 percent. ⁴

A pandemic the magnitude of COVID-19 has sent shockwaves through Pennsylvania. Thousands have lost their lives or will endure lasting health consequences as a result of COVID-19. The state’s unemployment rate jumped from 4.7 percent during February 2020, to 16.1 percent during April 2020 and has remained high (7.3 percent during October 2020). ⁵ In addition, a report by Health Management Associates (HMA) estimates that close to 1 million Pennsylvanians could lose employer-sponsored health insurance coverage as a result of the pandemic. ⁶

The COVID-19 pandemic also will leave lasting scars on Pennsylvania’s hospitals and health systems. According to a subsequent HMA report, hospitals statewide incurred losses in excess of $5 billion due to temporary closures and curtailing non-emergent treatment. ⁷ Unemployment claims for the health care sector in Pennsylvania increased five-fold between February and November 2020. ⁸