IU report finds health care nonprofits play major role in Indiana economy

  • Sept. 23, 2013

By Dann Denny

Despite a recent announcement by IU Health that it will cut about 800 jobs at seven hospitals on Dec. 1, Indiana’s nonprofit health care industry has supplied the state with a steady supply of good-paying jobs for more than a decade, helping to take the sting out of the state’s recurring recessions.

This was the finding of a new Indiana University report, which showed that even during the depths of recessions, the nonprofit health care industry continued to thrive.

From 1995 to 2011, employment in Indiana health care nonprofits -- places like IU Health Bloomington Hospital and the Volunteers in Medicine clinic -- grew more than a third, and nonprofit payroll in health care grew 65 percent, adjusted for inflation.

“Health care nonprofits not only provide critical services, but also employ a significant number of workers with wages higher than most other Indiana industries,” said Kirsten Gronbjerg, a professor at the Indiana University School of Public and Environmental Affairs and the report’s lead author.

“People use those wages to buy homes and cars and groceries -- which has played a significant role in softening the impact of recessions.”

During that same time period, Gronbjerg said, health care was a dominant force in the nonprofit sector, employing more than half of Indiana’s nonprofit employees -- more than 137,700 in 2011; and the nonprofit payroll in hospitals, nursing homes, residential care facilities, and ambulatory health care services increased almost every year.

The report found that from 1995 to 2011, nonprofit health care employees, working disproportionately in hospitals, saw their wages increase on average from $34,800 in 1995 to $42,100 in 2011, a 21 percent increase adjusted for inflation. The relatively few government employees, also mainly working in hospitals, saw an even larger increase in wages, from $34,600 in 1995 to $44,600 in 2011, a 29 percent increase.

During the same time frame, the wages of employees working in for-profit health care increased less than 1 percent, from $40,800 to $41,200, reflecting in part the low wages in nursing homes and residential care services.

Gronbjerg said during the recessions of 2001-02 and 2007-09, the total nonprofit health care payroll in Indiana increased from $4.4 billion to $4.7 billion and from $5.1 billion to $5.5 billion, respectively.

“Those recessions certainly hurt a lot of Hoosiers,” she said. “But nonprofits in health care helped to offset contraction in other Indiana industries, lessening the severity of the recessions.”

Gronbjerg said the resiliency of the nonprofit health care industry stems in part from the utter necessity of health care.

“During a recession, you can eat less or reduce your utility bills or buy a used car rather than a new one, but it’s hard to forgo health care services,” she said. “People get sick, give birth or have accidents, and it’s difficult to curtail spending money on medical services for those things.”

She said the consistent strength of the nonprofit health care industry is “particularly remarkable” in light of the pressure it faces from for-profit competitors and ever-shifting federal and state health care policies.

“They’re also under fiscal constraints,” she said. “Unlike for-profits, they are unable to raise capital from investors, forcing them to rely on service fees, contracts and donations to operate.”

Gronbjerg said in the health care industry overall, for-profits have the largest share of employment and almost 10 times more facilities than the nonprofit sector.

“But 65 percent of all hospital employees work for nonprofit hospitals, which tend to be quite large, averaging 1,050 employees,” she said. “The for-profit hospitals, like Monroe Hospital, tend to be much smaller, averaging 250 employees.”

Gronbjerg said the challenges facing nonprofits in the health care industry are likely to become more acute as the population grows and ages, and as government pressure to rein in costs places additional demands on the medical system.

The report’s coauthors are IU doctoral students Kellie McGiverin-Bohan and Lauren Dula; and master’s students Weston Merrick, Alexandra Toledo, Deb Seltzer and Katherine Zilvinskis.

Editor's note: This story from The Bloomington Herald-Times is being published here as a courtesy for readers of IU in the News.