UCHC Expansion Pathways: Economic Impacts

Peter GuntherSr. Research Fellow CCEA REMI Spring Conference

Amherst MAApril 23, 2009

Objectives• Enhance the Supply of Doctors and Dentists to Offset

Abnormal Retirement Rates Midst Aging Population• Improve the Quality of Training

– Increase Offerings– Attract HQPs

• Augment Operating Revenues– More Paying Beds– Capacity to Lead Clinical Trials– Augment R&D Funding– Medical Tourism– Attract More Students

• Assess Economic and Health Impacts of Alternative Pathways for UCHC Expansion

Additional Background• Medical Training Hospitals Differ from Strictly Patient

Care Ones for Pedagogical Reasons & R&D Including More Precise Instrumentation

• The Main UCHC Campus Is the John Dempsey Hospital (JDH)

• JDH is Inadequate:– Has Only 224 Beds– HVAC System is Overloaded– Built as Circle with Irregularly Shaped ORs– Makes it Difficult to Attract and Retain Staff– Inadequate Capacity to Lead Clinical Trials

Alternative Additive Pathways

• Expansion of JDH and Enrolments

• Collaboration and Phase 2 and 3 Clinical Trials

• Attraction of Gurus and Medical Tourism

• Expanded Clinical Trials

Methodology

• Define Incremental Economic Stimuli for each Pathway 2010 to 2040– Construction– Operations

• Estimate Key Economic Impacts Using REMI• Estimate Amenity Benefits Outside of REMI

If You Invest, It Must Earn Revenue or Model Will Treat It As a Bad Investment

Key Economic Indicators

• Employment• Incomes• Taxes and Disposable Income• Demographics and Labor Force• Fiscal Impacts• Amenity Benefits

Expansion of JDH and Enrolments:Stimuli

• $475 Million Construction 2010-2015 Defined by Activity• Increase in Staffed Beds from 224 to 250• Clinical employment Increases at Current JDH Averages per Bed and carry-out R&D at

present average levels• Faculty increase over ten years• Support Staff Increase Commensurate with Statewide Averages to Physician and

Surgeons• Enrolments in Medicine and Dentistry Increase at 20/yr 2016-2019• Prior to graduations, medical students are not paid by the University• Medical Faculty Increase at Current Faculty/Student Ratio• Commensurate Increase in Support Staff• Dentists Commence Practicing after Graduation• Medical Internships and Residencies Last 2.9 Yrs. (Current Average)• State continues to benefit for surplus of Federal subsidies over payments• 52% of Graduates Remain in Connecticut to Practice with Average Staff Complements• Annual Attrition is 1.5%

Expansion of JDH and Enrolments:Employment

Expansion of JDH and Enrolments:Income

Expansion of JDH and Enrolments:Personal Disposable Income

Expansion of JDH and Enrolments:Population and Labor Force

Expansion of JDH and Enrolments:NPV Fiscal Impacts (Millions 2008$)

Jurisdiction Revenues Expenditures Net

Connecticut 708.8 264.2 444.6

Expansion of JDH and Enrolments:Amenity Benefits (VOSL)

Author Million $ a Year per Patient

GDP Deflator Rate of Increase

Millions 2008 $ per Patient per Year

Day(1996) 5.16 1.37 7.07

Millar (1998) 4 1.32 5.29

Bureau of Labour Upper (1998)

4 1.32 5.29

Bureau of Labour Lower (1998)

2 1.32 2.64

Takeuchi (1998) .616 1.32 0.81

Attributing 12 Lives Saved a Year to Improved Faculties at JDH or Additional Expertise at the School of Medicine Yields Amenity Benefits Equal to its Operating

Stimulus

Plus Collaboration and Clinical:Additional Stimuli

Activity/ Expenditures Values

Additional Capital costs AnnuallyAdditional Physicians and Surgeons # 82

Complementary Staff # 167.51

Total Staff Dedicated to Clinical Trials # 249.51

Bonus for Expertise (20%) 20.00

Wages and Salaries (Millions 2008 $) 20.68

Security (Millions 2008$) 5.00

Associated Operating Expenditures (Millions 2008$) 54.95

Annual Costs (Millions 2008$) 80.63

Anticipated Annual Revenues at full capacity (Million 2008 $) (Brings Average Research Grant per Faculty up U of Virginia)

125

Ramp-up (Years after completion of JDS) 10

Plus Collaboration and Clinical:Employment

Plus Collaboration and Clinical Trials:Income

Plus Collaboration and Clinical Trials:Personal Disposable Income

Plus Collaboration and Clinical Trials:Population and Labor Force

Plus Collaboration and Clinical Trials:NPV of Fiscal Benefits

Jurisdiction Revenues Expenditures Net

Connecticut 1,095.8 477.4 618.4

Collaboration and Clinical Trials:Amenity Benefits

• The Expected Value from Phase 3 Clinical Trials of 3,000 Persons for a Drug that Is Designed to Extend Life By Two Years Ranges from $643 million to $778 million Per Trial

• The advantages of reducing AMEs & accelerating patient recovery accrue to:– Patients in terms of quality of life – less chronic pain waiting for care,

less time in chronic pain post surgery, and a more rapid return to their jobs and incomes;

– Patients’ families in that burdens on family caregivers become less onerous;

– Social workers called upon to share the homecare load;– Where patients are insured, the insurance companies; and,– In cases of the underserved, Medicare.

– No account taken of increased efficiencies for Social workers from Improved IT System

Plus Partnership and Medical Tourism:Additional Medically Related Stimuli

Activity/Expansion Increment

Communications Unification Designs (Millions 2008 $) 30W&S to Attract Sr. Faculty (Per attracted per year) 500,000Ramp-up start 2015Ramp-up end 2024Incremental W&S Allocated Annually to Attract & Retain Sr. Staff (millions 2008$) 1Incremental Support staff for Each 2R&D grants (per additional Sr. Faculty Member Million 2008$ Over and Above Those They May Replace) 0.25Medical Tourism (# Additional Staffed Beds each Sucsessive Yr.) 10Associated Construciton Cost (Millions per Staffed Bed 0.1Hospital Bed Occupancy Rate (%) 80Const. Hartford Hospital Tower Etc. 2010-2014 (Millions 2008 $) 407

Plus Partnership and Medical Tourism:Medical Tourism Stimuli

Activity/Expansion IncrementAccompanying Family per patient 0.5Accommodations/night 100Food Services/day 60

Plus Partnership and Medical Tourism:Employment

Plus Partnership and Medical Tourism:Income

Plus Partnership and Medical Tourism:Personal Disposable Income & Taxes

Plus Partnership and Medical Tourism:Population and Labor Force

Plus Partnership and Medical Tourism:NPV of Fiscal Impacts

Jurisdiction Revenues Expenditures Net

Connecticut 1,719.8 893.9 825.9

Partnership and Medical Tourism:Amenity Benefits

• Improved Interactive and Shared IT Systems Will Avoid Adverse Drug interactions

• Improved Quality of Staff and Faculty/Student Ratios will Enhance Reputation and Attract Medical Tourists.

• Holds Promise of Specialized Teams - Shown to Save Hospital Time and Accelerate Recovery– Less Time Lost from Work– Reduce Homecare– Save Social Worker Costs

Expanded Clinical Trials:Amenity Benefits

• Adds $45 million for funds generated by the R&D staff so average grants per faculty member are at University of Iowa Levels

• Increases the number of Physicians and Surgeons by 37 each with the New Average Revenue Generation

Employment Impacts by Pathway

Labor Force Impacts by Pathway

Population Impacts by Pathway

Personal Disposable Income Impacts by Pathway (Millions Nominal $)

CRGDP Impacts by Pathway (Millions 2000 $)

Additional Fiscal Impacts by Pathway