Health Services
Overview
The health services sector is an important component of the Washington State economy, accounting for roughly 9 percent of total nonfarm employment and wages. Health services is comprised of thousands of independent medical and dental practices and partnerships, public and non-profit institutions, and private corporations. It includes hospitals, nursing and personal care facilities, medical and dental laboratories, and home health care services. A sizeable share of the hospitals are public or non-profit private institutions.
Health services is primarily a "local" industry, meaning that the majority of the health practitioners provide services to people living in the region. However, the presence of major research and teaching hospitals as well as specialized treatment centers for trauma, burn, cancer, and other types of patients brings in business from throughout the Pacific Northwest region, other parts of the United States, and even foreign nations, making this sector in part an exporter of services to other regions.
Scope and Definitions
Health care is more than just patient care. Other analyses of the health sector include the health-related industries of biotechnology (including pharmaceuticals) and medical technology (e.g., instruments manufacturers), health insurance, medical education, and wholesalers of medical instruments and supplies. For purposes of simplicity, this analysis covers only health services.
Table 1
Public- & Private-Owned Health Care and Health-Related
Industries in Washington State, 1998
Source: Washington Employment Security Department
1998 |
1998 |
|||
| Sector |
Number of Employees |
Percent of Total |
Average Annual |
Percent of Total* |
| Health care industries | 204,667 |
8.3% |
$31,449 |
7.7% |
| Hospitals | 84,505 |
3.4% |
$35,861 |
3.6% |
| Nursing homes | 33,271 |
1.3% |
$19,970 |
0.8% |
| Medical doctors' offices & clinics | 38,265 |
1.5% |
$39,321 |
1.8% |
| Dentists' offices & clinics | 18383 |
0.7% |
$25,054 |
0.5% |
| Other health practitioners' offices & clinics | 10,256 |
0.4% |
$23,877 |
0.3% |
| Home health care | 6,630 |
0.3% |
$20,226 |
0.2% |
| Medical & dental laboratories | 4,326 |
0.2% |
$31,428 |
0.2% |
| Miscellaneous health services | 9,031 |
0.4% |
$28,968 |
0.3% |
| Other health-related industries | 17,888 |
0.7% |
$52,132 |
1.1% |
| Manufacturers | 7,665 |
0.3% |
$62,329 |
0.6% |
| Pharmaceuticals | 1,943 |
0.1% |
$58,457 |
0.1% |
| Medical instruments & supplies | 5,722 |
0.2% |
$63,643 |
0.4% |
| Health insurance | 6,928 |
0.3% |
$40,431 |
0.3% |
| Wholesalers of instruments & supplies | 3,295 |
0.1% |
$53,015 |
0.2% |
| Total, all health industries | 222,555 |
9.0% |
$33,112 |
8.8% |
| Total, all nonfarm industries | 2,472,256 |
100.0% |
$33,922 |
100.0% |
Notes: Percent of total for wages & salaries refers to the sector’s share of total nonfarm wages and salaries; employment and wages & salaries include both private and public owners.
This industry report uses industry definitions and concepts that underlie the U.S. government’s Standard Industrial Classification (SIC) system. In the SIC system, health services is a major industry, one of sixteen such industries that form the services sector. According to the Standard Industrial Classification Manual, there are nineteen separate health services industries. Each of the roughly 485,000 health services establishments (both for-profit and not-for-profit) operating in the United States in 1998 was placed in one of these nineteen industry subsectors.
Health services (SIC 80) is organized into the following nine major groups:
offices and clinics of doctors of medicine (SIC 801), including primary care clinics, physicians’ clinics, surgeons’ offices, psychiatrists’ offices, and radiologists’ offices;
offices and clinics of dentists (SIC 802), including dentists’ clinics, orthodontists’ offices, dental surgeons’ offices, and periodontists’ offices;
offices and clinics of doctors of osteopathy (SIC 803), including licensed practitioners in general or specialized osteopathic medicine and surgery;
offices and clinics of other health practitioners (SIC 804), including chiropractors, optometrists, podiatrists, naturopaths, acupuncturists, midwives, clinical psychologists, physical and occupational therapists, speech pathologists, nutritionists and dieticians, dental hygienists, and paramedics;
nursing and personal care facilities (SIC 805), including convalescent homes, intermediate and extended care facilities, psychiatric patients’ convalescent homes, rest homes with health care, and mental retardation homes;
hospitals (SIC 806), including general medical and surgical hospitals, psychiatric hospitals, and specialty hospitals including children’s, drug addiction, cancer, and maternity;
medical and dental laboratories (SIC 807), including establishments engaged in providing medical diagnostic services and those making dentures, artificial teeth and orthodontic appliances;
home health care services (SIC 808) including those providing skilled nursing or medical care in the home, under the supervision of a physician; and
miscellaneous health and allied services (SIC 809), including kidney dialysis centers, family planning clinics, alcohol and drug treatment clinics, respiratory therapy clinics, blood banks, childbirth preparation classes, and hearing testing services.
Recent Health Services Trends in the
United States and Washington
More than 9.9 million U.S. workers have jobs in the health services industry, making it the largest private employment sector in the economy. National employment trends show a rapid increase in health services jobs since World War II, with its employment growth rate largely unaffected by changes in the growth of the overall economy. The industry’s share of total nonfarm jobs rose from 5.8 percent in 1980 to 7.9 percent in 1998, an increase of 4.5 million jobs.
Why has health services registered such strong growth rates? Behind this robust growth lies a different set of supply and demand conditions facing the health services industry compared with other industries. The indispensable nature of its services, the steady pressure of demographic change, and the means by which health care is purchased account for the industry’s strong and independent growth. The health care market is composed of a mix of mostly private service providers who generally are compensated by public or private third-party organizations; meaning that the customer rarely pays directly for services rendered.
In fact, the post-World War II growth of the health services industry has been inextricably tied to the development of the health insurance industry. Although the health insurance industry traces its beginnings to 1929--where a third party was created to pay for health services, health insurance expanded rapidly after the war with the growth of employer-provided fringe benefits. Later, in 1965, the Federal government enacted the Medicare and Medicaid programs, providing health insurance for the aged and the poor (i.e., those not working and thus, ineligible for employer-provided health insurance). Today, while health services is considered a part of the private sector, few other industries are influenced by government policy and funding to such an extent.
As demand for health care services increased, the supply of health care professionals and their support staffs increased to meet it. Other reasons behind the robust growth in health services include the growth in population, the lengthening of life expectancies, and the expansion of services offered (such as sports medicine, cosmetic surgery, and psychotherapy).
Changes in coverage and programs (e.g., managed-care systems including health maintenance organizations and preferred provider organizations) and health care reform over the years has retarded growth somewhat and shifted employment within the health care services industry. For example, as a way to cut costs, an emphasis on more home-based and community-based care has shifted patients—and hence health care employment—away from hospitals and nursing facilities toward other health services such as outpatient clinics, assisted-living facilities, adult foster care, and home health care services. Advances in medical technology have also tended to shorten hospital stays, with some procedures that used to be performed in hospitals now done on an outpatient basis. Finally, the shift from the traditional fee-for-service health insurance payment system to a managed-care system (in which members prepay for services) has shifted employment growth from physicians toward physicians’ assistants and nurse practitioners.
Establishments in Washington Health Services, 1981-1998
Source: Washington Employment Security Department
For more detail of above graphic
Table 2
National Health Services Employment Shares, 1980 and 1998
Source: U.S. Bureau of Labor Statistics
|
Percentage of Total U.S.
Health Services Employment |
||
| Sector | 1980 | 1998 |
| Doctors' offices | 15% | 18% |
| Dentists' offices | 7% | 6% |
| Other health practitioners | 2% | 5% |
| Nursing facilities | 19% | 18% |
| Hospitals | 52% | 40% |
| Medical & dental laboratories | 2% | 2% |
| Other health services | 4% | 11% |
Health services employment growth in Washington has generally followed national trends. Between 1981 and 1998, Washington’s private sector annual employment in health services has grown about 17 percent faster on average than all nonfarm wage and salary employment. In 1998, health services employed 180,250 workers in Washington. However, average annual employment in Washington’s private hospitals has grown slightly slower (2.6 percent) than all nonfarm wage and salary employment (2.7 percent), but still faster than the population growth (2.0 percent) over the same time period. Employment in "other private health services" has grown at an average annual rate of 4.8 percent between 1981 and 1998 (two-fifths higher than the growth rate of all nonfarm wage and salary employment), reflecting the shift from hospitals and nursing facilities to outpatient, home-based and community-based health care. This category includes doctors’ and dentists’ offices and clinics, other health practitioners, medical and dental laboratories, home health care services, and all forms of alternative health services.
Employment in Washington Health Services, 1981-1998
Source: Washington Employment Security Department
For more detail of above graphic
Table 3
Percent Change in Washington Health Services Employment and
Population, 1982-1998
Sources: Washington Employment Security Department and
Office of Financial Management
|
Year |
Total Covered Employment |
Total Private Health Services |
Private Nursing Facilities |
Private Hospitals |
Other Health Services |
Washington Population |
1982 |
-4.0% |
0.9% |
0.5% |
1.1% |
0.8% |
1.1% |
1983 |
1.0% |
3.4% |
1.9% |
2.1% |
5.4% |
0.7% |
1984 |
3.6% |
3.3% |
3.5% |
1.7% |
4.5% |
1.1% |
1985 |
3.2% |
4.2% |
4.9% |
-0.1% |
7.7% |
1.4% |
1986 |
3.6% |
4.4% |
3.2% |
1.2% |
7.6% |
1.1% |
1987 |
4.9% |
6.3% |
4.8% |
4.1% |
8.7% |
1.5% |
1988 |
5.1% |
3.9% |
1.5% |
6.6% |
3.0% |
2.0% |
1989 |
5.9% |
5.2% |
2.3% |
3.7% |
7.8% |
2.4% |
1990 |
5.0% |
5.5% |
3.9% |
4.4% |
7.0% |
2.9% |
1991 |
0.9% |
4.8% |
2.2% |
5.5% |
5.6% |
2.7% |
1992 |
2.0% |
5.3% |
6.0% |
3.8% |
6.0% |
2.3% |
1993 |
1.9% |
2.5% |
1.9% |
-0.9% |
5.1% |
2.4% |
1994 |
2.5% |
0.8% |
2.9% |
-3.4% |
2.7% |
2.0% |
1995 |
1.7% |
1.6% |
2.0% |
2.2% |
1.0% |
1.6% |
1996 |
2.8% |
1.1% |
-0.2% |
4.5% |
-0.5% |
1.6% |
1997 |
4.4% |
2.3% |
-4.8% |
3.4% |
4.6% |
1.6% |
1998 |
2.2% |
3.5% |
-0.2% |
3.9% |
4.7% |
1.4% |
Average |
2.7% |
3.5% |
2.1% |
2.6% |
4.8% |
1.8% |
Total |
46.7% |
58.8% |
36.4% |
43.8% |
81.7% |
29.9% |
Employment in private health services has proved to be largely immune to recessions, unlike many other industries. Health services employment continued to grow during the most recent recessions (1980, 1981-82, and 1990-91), in sharp contrast with total nonfarm employment which fell over these same time periods. Health services does behave differently during recessions due to (1) the service being demanded is not easily substitutable or deferrable; and (2) the industry’s output is largely purchased with funds unavailable for the purchase of other goods and services. Unlike other goods and services, living without satisfactory health, even temporarily, is a difficult proposition. Demand for health services cannot be appreciably restricted during recessionary times, because of the constant demand for a basic standard of health. And, demand for health services is more or less facilitated by a steady stream of financing. During hard times, health insurance represents a dedicated pool of money that cannot be used to buy other goods and services.
Washington’s private sector health services employment has also been growing faster than population in Washington. In recent years, employment growth has tapered off in a number of health services sectors, particularly in hospitals and nursing homes.
Washington Health Workers Per 1,000 State Population, 1981-1998
Sources: Washington Employment Security and
Office of Financial Management
For more detail of above graphic
As an aside, employment in Washington’s health-related industries of health insurance and pharmaceutical and medical instrument manufacturers increased at an annual average rate of 14.9 percent between 1981 and 1998. During the same time period, average annual employment in Washington’s health insurance industry grew 7.2 percent while nonfarm wage and salary employment grew at 2.75 percent.
An unusually large share—47 percent—of the state’s health services workers hold professional or technical positions. These highly skilled, highly compensated positions include doctors and surgeons; dentists and dental hygienists; nurses and physician assistants; physical, respiratory, and occupational therapists; social workers and pharmacists; and medical records technicians, radiology technologists, and medical laboratory technicians. Nearly a quarter of the workforce are in service occupations (e.g., institutional cooks, food preparation workers, dental and medical assistants, nursing and home health aides, physical and occupational therapy aides, maids and janitors) and a fifth of the health services occupations are in clerical and administrative support (e.g., medical secretaries, receptionists, typists, bookkeeping and general office clerks).
Table 4
Occupational Profile of Health Services Workers in Washington,
1998 and 2008
Source: Washington Employment Security Department
Estimated 1998 |
Projected 2008 |
|||
| Health Services, SIC 80 | Estimated Employment |
Percent of Total Employment |
Projected Employment |
Percent of Total Employment |
| Managerial & Administrative | 8,164 |
4.0% |
10,589 |
4.1% |
| Professional, Paraprofessional & Technical | 83,986 |
41.5% |
106,601 |
41.4% |
| Sales & Related Occupations | 378 |
0.2% |
496 |
0.2% |
| Clerical & Administrative Support | 39,445 |
19.5% |
49,115 |
19.1% |
| Service Occupations | 47,500 |
23.5% |
62,492 |
24.3% |
| Agriculture, Forestry & Fishing | 21 |
0.0% |
22 |
0.0% |
| Production, Operating & Maintenance | 2,555 |
1.3% |
3,069 |
1.2% |
| Operators, Helpers & Laborers | 2,149 |
1.1% |
2,719 |
1.1% |
| Undefined Occupations | 18,349 |
9.1% |
22,258 |
8.7% |
| TOTAL | 202,547 |
100.0% |
257,361 |
100.0% |
The average annual wage for private health services employees was $30,514 in 1998, below the statewide average of $33,922. The highest average wages were reported in offices and clinics of doctors ($36,771), followed by hospitals ($36,401). Workers in nursing and personal care facilities ($19,929), followed by home health care services reported the lowest annual wages followed by ($20,226). Average wages for the health services industry are lower due to the substantial number of semi-skilled and unskilled workers, particularly in nursing and personal care facilities. Nearly two-thirds of nursing home workers earn $10 per hour or less, compared to all nonfarm workers (35 percent) and hospitals (13 percent ) and rest of health services (30 percent).
Table 5
Real Average Wages for Washington Health Services, 1981-1998
(1998 dollars)
Sources: Washington Employment Security Department,
U.S. Bureau of Economic Analysis
| Sector | 1981 |
1983 |
1985 |
1987 |
1989 |
1991 |
1993 |
1995 |
1997 |
1998 |
| Offices & Clinics of Doctors | ||||||||||
$39,285 |
$30,319 |
$25,383 |
$28,153 |
$30,350 |
$32,729 |
$34,776 |
$35,191 |
$36,758 |
$36,771 |
|
| Offices & Clinics of Dentists | ||||||||||
$23,993 |
$19,623 |
$16,818 |
$17,517 |
$18,355 |
$19,874 |
$21,709 |
$22,785 |
$24,102 |
$25,054 |
|
| Offices of Osteopathic Phys. | ||||||||||
$25,180 |
$19,855 |
$16,711 |
$16,032 |
$17,366 |
$19,092 |
$19,888 |
$20,247 |
$21,127 |
$21,930 |
|
| Offices of Other Health Pract. | ||||||||||
$19,190 |
$16,462 |
$14,883 |
$15,557 |
$17,433 |
$18,988 |
$21,106 |
$22,406 |
$22,701 |
$24,016 |
|
| Nursing & Personal Care Fac. | ||||||||||
$13,036 |
$13,427 |
$13,362 |
$13,599 |
$15,254 |
$16,648 |
$18,148 |
$19,985 |
$19,419 |
$19,929 |
|
| Hospitals | ||||||||||
$22,815 |
$24,531 |
$25,403 |
$26,813 |
$27,597 |
$29,654 |
$31,752 |
$33,207 |
$33,949 |
$36,401 |
|
| Medical & Dental Labs | ||||||||||
$25,188 |
$23,791 |
$23,411 |
$26,481 |
$26,682 |
$28,143 |
$28,496 |
$28,501 |
$30,107 |
$31,428 |
|
| Home Health Care Services | ||||||||||
$28,366 |
$29,427 |
$31,242 |
$30,291 |
$14,849 |
$17,505 |
$20,005 |
$19,643 |
$20,903 |
$20,226 |
|
| Health & Allied Services, NEC | ||||||||||
$18,702 |
$18,844 |
$16,762 |
$16,885 |
$23,071 |
$25,313 |
$26,470 |
$27,048 |
$27,848 |
$28,971 |
|
| Total, Health services | ||||||||||
$23,629 |
$22,359 |
$21,570 |
$22,592 |
$23,727 |
$25,760 |
$27,482 |
$28,405 |
$29,398 |
$30,514 |
|
| Total services | ||||||||||
$22,525 |
$21,216 |
$20,583 |
$21,493 |
$21,592 |
$23,948 |
$24,908 |
$26,490 |
$30,653 |
$35,996 |
|
| Total Nonfarm | ||||||||||
$28,783 |
$27,789 |
$27,313 |
$27,304 |
$27,167 |
$27,928 |
$28,575 |
$29,046 |
$31,504 |
$33,922 |
|
Average Hourly Wages of Health Services Workers in Washington,
1997
Source: Washington Employment Security Department
For more detail of above graphic
Health Services Under the Scope:
Contribution to the State’s Economy
Health services make a significant contribution to economic developments within Washington. Clearly, health services (clinics, offices, nursing homes, hospitals and the like) serve the communities in which they are located. However, because of the specialized healthcare services offered by some hospitals, clinics, and other health services organizations in the state, these facilities also treat a significant number of patients from outside the state. Besides being a leading employer, health services draw "new money" into the state by exporting products and services, primarily through care of nonresident patients. According to the latest Washington State Input-Output Study, exports of state health services were valued at $274 million in 1987, roughly five percent of this sector’s total business volume. This "export revenue"—whether it emanates from the production of manufactured goods or health services, is a driving force in economic growth, since it constitutes new money flowing into the economy. From the input-output study, the health services employment multiplier—the ratio of total change in employment in all industries of the state economy to the direct change in the health services’ employment—was estimated at 2.01, implying that for every health services job in Washington State there is another 1.01 job created within the state. This industry has a relatively high employment multiplier because (1) induced effects on the economy through consumer spending of health services workers is greater, since most health services pay higher wages than other service industries; and (2) compared to other service industries, health services make relatively greater demands on the state economy for needed supplies and services.
Prognosis for Washington Health
Services
What does the future bode for health services? The sector’s robust employment growth during the 1970s and 1980s are unlikely to be played out in the future. The trend of slower health services employment growth is likely to continue in the state and nationwide. The health services industry is becoming much more cost conscious as it grapples with political and economic realities. The increase in the 85-and-older-age group and the aging of the massive baby boom generation will strain health resources as these groups place increased pressure on demand for health services; the political realities require cost containment in medicaid and medicare; and new technologies, while lowering overall costs of treatment and diagnosis, also enables identification and treatment of conditions not previously treatable. As a result of these pressures, a number of trends have developed. One trend is the consolidation of health care institutions, particularly those that create integrated delivery systems providing primary, hospital, and specialty care tied to health insurance maintenance organizations. An emphasis on preventative health measures (i.e., keeping clients healthy and out of hospitals), is another trend exemplified by health maintenance organizations. Another trend is the greater use of outpatient treatment, pushed by higher overhead costs of hospital stays and facilitated by technological developments. Such trends have ameliorated the growth of the health services industry, especially that of hospitals. However, overall growth is still expected to be strong in the future because of demand pressures. The projected growth rates of the state’s health services employment is over 3.0 percent, significantly higher than the statewide growth in non-farm employment.
Washington Hotel & Other Lodging Wage & Salary Employment Forecast,
2000-2020
Sources: Washington Office of Financial Management,
Washington Employment Security
Department
