NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665

January 28, 1999

Hospitals Important Contributor to State's Economy

Community hospitals provide a vital health care service to North Dakotans, but they also generate a substantial amount of economic activity and continue to be important contributors to the state's economy, according to a survey by North Dakota State University agricultural economists.

North Dakota community hospitals and associated clinics and nursing homes accounted for an estimated $807 million of in-state expenditures and net returns, employed more than 14,000 full-time-equivalent positions and were responsible for about $43.5 million in state-collected tax revenues in 1997, report Dean Bangsund, research scientist, and F. Larry Leistritz, professor, both in the NDSU Department of Agricultural Economics.

North Dakota had 50 hospitals in 1997, of which 44 were community hospitals. Military, Veterans Administration, state and Native American facilities were not included in the report.

North Dakota hospitals primarily serve North Dakota residents and receive most of their revenues from in-state sources. Measures of economic impact are traditionally based on out-of-state revenues and economic activity generated by this "new wealth." However, say Bangsund and Leistritz, hospitals can be credited with capturing and retaining economic activity that would have gone out of the state if these facilities had not been available, and would have been considered an economic loss to the state.

New wealth associated with hospitals would come from federal transfer payments for medical services such as Medicare and Medicaid and revenues for medical services provided to out-of-state residents.

Direct economic impacts from hospitals would be in-state expenditures for such things as supplies, services and payroll and net returns retained within the state. North Dakota community hospitals had expenditures of $938 million in 1997, of which about 76 percent or $709 million was spent in North Dakota. Also, about $98 million in net revenues was retained in the state, for total direct economic impacts of $807 million.

Community hospital operations, including associated nursing home and clinic facilities, employed an estimated 14,013 full-time positions in 1997. Secondary employment created from hospital economic activity was estimated at 36,174 full-time jobs. The total statewide employment attributable to community hospitals—50,187 full-time positions—represented 14.8 percent of the state's total employment.

Estimated state tax revenue generated by community hospitals in 1997 included $27 million in sales and use taxes, $12.5 million in personal income taxes, and $3.8 million in corporate income taxes, for a total of about $43.5 million. Community hospitals also directly paid $4.9 million in taxes in North Dakota.

The number of hospitals and hospital beds in North Dakota dropped between 1991 and 1997, but, adjusted for inflation, hospitals increased their economic importance in the state. Personal income resulting from hospitals in North Dakota represented about 8.25 percent of the state total personal income in 1997, compared to 7.93 percent in 1991.

Bangsund and Leistritz say that hospitals in the state generate a considerable amount of economic activity, and that community hospitals remain important economic forces in rural economies.

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Sources: Dean Bangsund (701) 231-7471 and Larry Leistritz (701) 231-7455

Editor: Gary Moran (701) 231-7865