Hospitals are critical to communities not only for the life-saving services they provide, but also for the money they infuse into the economy. They are supercharged economic engines. From the surgeon to the dry cleaner down the street that presses a hospital administrator’s suits, to the young family or retiree looking for a new community to call home, the economic influence of hospital systems in NH is powerful and far-reaching. Between October 2011 and September 2012 the state’s 26 acute care hospitals generated gross revenues of $9.2 billion and provided $227 million in charity care.
Those are impressive numbers, but hospital administrators say the biggest impact is on economic development, says Jill Batty, chief financial officer for Cheshire Medical Center/Dartmouth-Hitchcock in Keene. “Economically, having a medical center like Cheshire Medical Center/Dartmouth-Hitchcock Keene in this community creates a business climate that attracts larger businesses than would be available were we not here,” says Batty. “Businesses want to locate where their employees can have a good quality of life. And that’s a lot of things—that’s education, that’s the physical environment, but it’s also access to services.”
Many acute care and critical access (small, rural) hospitals around the state provide services far beyond hospital beds and emergency rooms. Instead, their menu of services includes physician practices, ambulatory surgery centers, health centers, clinics, assisted living or skilled nursing care facilities as well as home health care and hospice services.
“We have different types of acute care that we offer,” says Batty. “Whether it’s inpatient or obstetrical care or rehabilitation care and even psychiatric services. And then we have a wide array of specialties, which is unusual for a community of this size. So by pulling all those things together and having it all available in Cheshire County, it’s just one more aspect of making a business-friendly community, which then feeds into a vital economy overall.”
Among the biggest economic ripples created by hospitals are the capital investments they make in new buildings and renovations. Between 2007 and 2013, $397.6 million in projects were granted Certificate of Need Application approvals by the Health Services Planning and Review Board of the Department of Health and Human Services. These certificates of need are required to construct or modify health care facilities, acquire new medical equipment, or offer new inpatient care beds and services, subject to statutory thresholds.
Major Employers
Hospitals are often among the top employers in a community, if not the top employer, as is the case with Cheshire Medical Center, which employs 1,500. Total labor expenses for staff and physicians at all NH hospitals was $2.1 billion between October 2011 and September 2012, up from $197 million in the same period in the prior year.
“We’re the biggest private employer in the area,” says Mike Green, CEO of Concord Hospital, which has more than 3,000 employees. “We employ a lot of people that live in the area, they shop in the area, so it’s very good for the economy.”
Growth in revenue, though, outpaces employment growth at NH’s hospitals. Gross revenue grew 63 percent between third quarter of 2006 and 2012, according to NH Hospital Association data, while full-time equivalent (FTE) employment grew only 1.1 percent. Despite the small growth in jobs, hospitals continue to be powerful economic engines in their communities. Cheshire Medical and Concord Hospital pumped $79.3 million and $217 million into their communities respectively in fiscal year 2012, according to the annual reports of each hospital. The state’s largest hospital system—Dartmouth-Hitchcock, based in Lebanon—employs 8,500 and boasts a budget of $1.4 billion.
Taxes
Most of NH’s hospitals (23 of 26 are nonprofits) are exempt from property, business or federal taxes, but that doesn’t mean they don’t contribute to the tax base. Some nonprofit hospitals make Payment in Lieu of Taxes to their hometowns, which are intended to offset the loss of property tax revenue and their use of services. The two for-profit hospitals, Parkland Medical Center and Portsmouth Regional Hospital, paid $1.8 million in property taxes in 2012.
However, Green points out Concord Hospital is only exempt from paying property taxes on the acute care hospital, its family center and hospice house. “We pay property taxes directly on all of our office buildings,” he says, explaining they were considered commercial ventures when they were built originally to lease to private practices, and though those spaces are now used for more hospital-related services, the hospital chooses to pay the taxes—$817,000 last year. “So we’re one of the largest tax payers to the City of Concord.” He adds Concord Hospital also pays taxes on office buildings in Penacook and other surrounding communities.
Hospitals also help fill state coffers through the Medicaid Enhancement Tax (MET), a tax that has in recent years been the subject of a heated lawsuit between 10 NH hospitals and the NH Department of Health and Human Services. The MET, created in 1991, required the 26 acute care hospitals to pay a 5.5 percent tax based on patient revenue. The revenue the tax generated was split between the general fund and the uncompensated care fund. The state then applied to the federal government for matching funds and basically gave hospitals back what they paid. That program brought in more than $2 billion, subsidizing a portion of the state’s general fund. In 2011, the state filled an $800 million deficit by pulling the plug on the payback to non-critical access hospitals, which led to the lawsuit. In fiscal year 2013, hospitals paid $76.3 million in MET, according to the NH Department of Revenue Administration. The hospitals are no longer getting back what they paid, says Grant Bosse of NH Watchdog.
Community Outreach
Hospitals are also major benefactors in their communities, each providing about $10 million in charity care annually, according to the NH Center for Policy Studies 2012 report, “Executive Compensation at New Hampshire’s Nonprofit Hospitals.” And though a comprehensive total of charitable giving by hospitals wasn’t available, hospitals are known to donate not only money but in-kind services to community organizations. Dartmouth-Hitchcock, for example, contributed $25.3 million in 2012.
Yet for the millions of dollars they pump into NH’s economy, Green says hospitals need to be vigilant about their true mission. “We’re only going to be as good as the patients we take care of. Putting the patients at the center of everything we do, that’s what makes us viable as a business, if you will, and it’s being viable as a business that contributes to the economic benefit of the area.”
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