Health care and the economy - Economic Impact of Private Practice in Georgia

“We are not retreating. We are advancing in a different direction.”

General Douglas McArthur

Prelude: This is an interview with David Cook, CEO of the Medical Association of Georgia, a position he has held since 2001. The Association has about 7000 members. David is interested in advancing the notion that private physicians in their offices are a significantly positive economic force in the community at large. This fact has not been appreciated because most similar economic studies have focused on hospitals.

It should be no secret by now, but I believe an expanded health care system is good for the economy in that it yields increased employment and increased tax revenues for local, state, and national economies.

Q; The Medical Association of Georgia recently released a report on the positive impact of private practice on the general economy. Tell us about that report.

A: The genesis of our report came out of a question we asked ourselves: how do we talk to policymakers about the significant problems physicians were facing. We have the shortage of physicians nationwide, which is particularly acute in Georgia. Other is low reimbursement rates. Others the negative malpractice climate and hassle factors, both of which cast a negative light on the practice environment. We wanted to make the argument to state and national legislators that physicians bring something positive to the health and economic tables.

Access to health care is the primary component, but the economic component, the positive economic activity generated, is important as well. Based on our intuitive understanding of the latter, we did an economic study several years of Hall County. Based on those results, we decided to do a state-wide study.

Q: And who did you do this study with?

A: The study was conducted with the Carl Vinson Institute of Government. They have an economic modeling program at the University of Georgia that county and state officials use to do economic studies for various aspects of governance. We wanted to use the same entity that policymakers already used to make economic decisions, such as what bringing an auto plant to Georgia might mean. They use that information to make policy decisions.

Q: I understand the study focused on private physicians’ offices rather than on hospital employed physicians or on hospitals themselves.

A; That’s right. Hospitals have been doing this for some times to determine economic impact. But to my knowledge, this is the first economic impact study of private practice. We wanted to fill in that piece of the puzzle. When you add in the hospital economic impact, it’s much greater.

Q; So you concentrated on ambulatory care in private offices.

A: Yes, care that is provided outside the hospital. The Bureau of Labor Statistics separates the two kinds of practice activities inside and outside of hospitals. The Department of Labor uses these statistics to track economic impact.

Q: This study seems important since 80 to 90% of ambulatory care is provided by private physicians outside the purview of hospitals. What did you find from the study? Did the economic impact surprise you?

A: We found there was a substantial impact of private practice. It was higher than we expected. What was enlightening was to compare it with other sectors of the economy. We found there was a $20 billion impact on the State of Georgia, and every single physician directly or indirectly generated 12 to 13 additional jobs. We found the private physician impact was roughly equivalent to the insurance and financial industries combined and to one-half the construction sector, which is huge in Georgia, which is a fast growing state. We’re one of the fastest growing states in the country. We added two representatives after the last census, and 6 of the 10 fastest growing counties in the nation are in Georgia. Atlanta has fast growing service and IT sectors.

Q; One of the reasons driving the study, as I understand it, is that you wanted to highlight the growing physician shortage in Georgia in order to catch the attention of policymakers in graduate medical education.

A: That’s right, but we had no objective data to influence policymakers. You’re most effective when you have data to make your point. There’s an argument to be made if you attract high-paying professionals to the state, it will have a strong economic benefit. It’s well-known Governors travel around to influence industries to settle in their state. But not much thought is given to educating or attracting more physicians. We argue if you change the practice environment to make it more favorable, you’ll not only be doing citizens a favor by giving greater access to care but also by generating jobs. One out of every 20 jobs in the state of Georgia is generated by private practice physicians, and those physicians generate $2.2 billion of state taxes.

Q: Your comments bring to mind two stories from other state.
• One is from North Carolina. North Carolina, like Georgia, is a fast-growing destination for retirees. I was told by a physician entrepreneur there, who was setting up multispecialty clinics in underserved areas, that retirees ask two questions: 1) What is the price of property and 2) Where do I get medical care? Health care is a magnet for drawing and retaining retirees migrating to Georgia.
• The other story is from Texas In 2003, the Texas Medical Association persuaded the legislators there to cap medical liability awards at $250,000. This caused thousands of doctors across the country to Texas to practice, and not only that, malpractice premiums dropped precipitously.

Has the Medical Association done anything in the medical liability arena?

A: Yes, in 2005 The Georgia legislature passed on a similar law, putting a $350,000 cap on non-economic damages. Our law is almost identical, and it has had a significantly positive impact in attracting doctors to Georgia. Premiums have been reduced, and we’re attracting more ER doctors and Ob-GYNs. While this legislation has been important, it is not sufficient to resolve the physician shortage problem. We need to do more to raise Medicaid rates and reducing hassle factors.

Q: Are you making any progress on the latter two points?

A; Yes, last year we had a 2% increase in Medicaid payments. We would like to bring Medicaid rates up to Medicare rates. If we did that, would we attract enough doctors to pay for the increased rates? We look at our study and our activities as an investment to encourage more economic activity and to raise state tax revenues.

Q: It hits me that what you’re doing is important. Doctors are often cast in a negative light because of high health care costs, and reformers tend to focus on the negative rather than the positive. You’re simply pointing out that private physicians are a positive economic force.

A: Just a point of nomenclature, if you will. We often talk of costs, not expenditures.. While expenditures on health care have gone up, I’m not so sure costs have. Expenditures have gone up because of new technologies, but costs on things we’ve had in the past aren’t. In fact, costs for many things have gone done. But the rise in the population and new things, expenditures have gone up. I prefer to talk in terms of expenditures.