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Report: Hospital fuels local economy to the tune of $800 million

POSTED: February 10, 2008 5:05 a.m.
ROBIN MICHENER NATHAN /The Times

Lamarcus Jones, left, and Jack Brown of Food Service Equipment make a delivery Tuesday afternoon to Northeast Georgia Medical Center. The Gainesville company considers the hospital one of its most valuable customers. A report by a hospital association said the medical center fueled the local economy to the tune of $800 million in 2005.

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Northeast Georgia Medical Center generates more than $800 million in revenue for the local economy, according to a report released this week by the Georgia Hospital Association.

The study is based on financial records from 2005, the most recent figures available. The medical center had direct expenditures of $328 million, but when filtered through the U.S. Department of Commerce’s "economic multiplier," the total impact of the hospital’s presence nearly triples.

This is due to the "ripple" effect, according to the report. The hospital supports local businesses by purchasing all types of goods and services, from food and medical supplies to plumbing and electricity.

"This is 2005 data, and we’ve had two of our biggest growth years in the history of the hospital in 2006 and 2007," said Jim Gardner, president and chief executive officer of Northeast Georgia Medical Center and Health System. "I wouldn’t be surprised if the 2007 total is over $1 billion."

He said the hospital already is on pace to have more than $400 million in direct expenditures this year.

"It’s a function of more patient volume," Gardner said, noting that on many recent days, all 461 inpatient beds have been filled.

He said that’s due both to the region’s growing population "and also the fact that the hospital’s reputation is drawing more patients from a larger area."

The report estimates that the hospital’s existence creates almost 7,300 full-time local jobs, in addition to the approximately 4,000 people employed directly by the medical center.

The study looks only at the impact of the hospital itself. It does not gauge the financial influence of other parts of Northeast Georgia Health System, such as its primary care centers.

It also does not include two current, major construction projects, the North Patient Tower and the Women and Children’s Pavilion. Gardner said on any given day, more than 700 construction workers are on site at the main campus.

"Some of them are employed with subcontractors that aren’t locally based, but they spend money while they’re here," he said.

That’s the way the multiplier effect works. Hospital spokeswoman Cathy Bowers said about 40 percent of the medical center’s patients come from outside Hall County.

"When their families come to visit, they spend money here on shopping, restaurants and gas," she said.

Though local businesses may be hurting from the combined effect of the faltering economy and the drought, the hospital remains a reliable source of customers.

"While other industries tend to go in cycles, we know that health care continues to be a huge economic engine in every community throughout the state," said Kevin Bloye, spokesman for the Georgia Hospital Association. "There’s always going to be a need for health care, especially as Georgia’s population grows and ages."

Hospitals are also voracious consumers of medical supplies, because almost everything that comes into contact with a patient can only be used once. That means money has to be spent both to acquire the items and then to get rid of them after they’ve been used.

Compared to industries such as housing and automobiles, health care jobs are relatively unaffected by an economic downturn. But Gardner said hospitals aren’t completely recession-proof.

"If our revenue drops significantly, we would reduce expenses," he said. "But the last place you look at staffing reductions is at the bedside."

The paradox of health care is that the number of "customers" remains the same regardless of economic conditions. People will continue to get sick and will seek some form of medical care.

Gardner said of every dollar the hospital spends, 50 cents goes to salaries, 20 cents to supplies, and the rest to providing uncompensated care and making payments on infrastructure and equipment.

"We’re misers of the highest order. How we spend each and every dollar is of critical importance to us," he said. "We’re constantly asking, ‘Is there a better product for cheaper?’"

Companies that meet the hospital’s criteria can win much-coveted contracts. George Romberg, owner of Food Service Equipment in Gainesville, said the medical center is among his most valuable customers.

The company sells just about everything related to kitchens except food. Romberg said the firm is subcontracted to install kitchens in both the North Patient Tower and the Women and Children’s Pavilion. In addition, the company makes deliveries to the hospital on an almost daily basis, bringing everything from plates and silverware to stoves and ice machines.

"We give them a real good price, and we’re nearby (off the Gainesville downtown square)," Romberg said. "If they call us and need something, we can usually get it to them within an hour. I think that gives us an edge over our competitors."



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