Hospitals an economic engine

With construction of the North Coast's first new hospital in more than two decades under way along Highway 101, a report released Friday by a hospital trade group shows the enormous impact the fast-growing medical sector has across five North Bay counties.

Hospitals generate spending of nearly $5 billion a year and more than 35,000 jobs in Sonoma, Marin, Mendocino, Lake and Napa counties, according to data from the Hospital Council of Northern and Central California.

Those jobs pay above-average wages and are more resistant to cuts during recessions, the report said. Plus, the sector is expected to grow faster than the rest of the economy, on average, the report said.

The economic impact report cites $2.8 billion in direct spending by 24 hospitals, including $1.6 billion in wages and benefits and $1.2 billion on supplies, research, education and capital improvements.

An additional $767 million comes from spending by companies that supply hospital goods and services, and an additional $1.3 billion is attributed to spending by employees of the hospitals and their suppliers on housing, food, transportation and other expenses.

The $4.9 billion total and 35,480 employees represent the hospitals' overall economic impact.

In Sonoma County, seven acute care hospitals spend $882.7 million on wages and benefits, plus purchases of supplies, research and education, the report said.

A Sonoma County Economic Development Board report prepared by Moody's last year said the health and wellness sector accounted for $1.83 billion, or 8 percent of Sonoma County's $23.3 billion in annual economic activity. That puts it on par with the $1.9 billion generated by the agriculture, food and wine sector.

Kaiser Permanente, St. Joseph Health and Sutter Medical Center are the three largest private sector employers in the county with a combined workforce of nearly 6,600 last year, according to the Moody's report.

Only one other business, Agilent Technologies, had more than 1,000 employees.

Health care salaries in Sonoma County average $71,839 a year, 44 percent higher than the overall average salary of $50,024, according to Friday's report.

In Mendocino and Lake counties, health care salaries are 49 percent higher than the average, compared with just 20 percent higher in the Bay Area, including Marin County.

Hospitals employ highly trained people, including nurses, pharmacists and imaging technicians, and operate "high-end technology" to treat patients, said Todd Salnas, president of St. Joseph Health, Sonoma County, which includes Santa Rosa Memorial and Petaluma Valley hospitals.

By law, California hospitals may not directly employ physicians, and they are not included in the data released Friday, Salnas said.

It is unclear how many of the new Sutter hospital's 1,000 workers will be new hires, but Friday's report said the $284 million building accounts for more than half of the $523 million in North Bay hospital construction costs over the next five years. Howard Memorial Hospital in Willits is building a new $62 million facility, and Marin General Hospital in Greenbrae has plans for new $445 million structure, but the economic impact report includes just $165.6 million over the five-year period.

Santa Rosa Memorial Hospital's $15 million emergency room expansion is not included in the report.

Memorial's trauma center, which receives patients from the Golden Gate Bridge to the Oregon border and beyond, requires a high level of investment to treat the "sickest of the sick," Salnas said.

Memorial's annual spending of $327 million is the highest among the 24 hospitals included in the report.

Hospitals are naturally an economic mainstay, said Robert Eyler, director of the Center for Regional Economic Analysis at Sonoma State University.

"It's an expensive service and there's no end to demand," he said.

Economists use the term "inelasticity of demand" to describe services or products, such as health care, that people will pay for no matter the cost.

Tough times impact hospitals as people put off elective surgery and more uninsured patients come to the emergency room, Salnas said.

But for the most part, he said, "when people need health care they're going to get it."

The 17 acute care hospitals in the economic impact report provided more than $374 million in charity and non-reimbursed care in 2010, the economic impact report said.

Throughout the North Bay, health care jobs are growing faster than the average for all occupations, the report said.

In Sonoma County, health care jobs are expected to increase by 17.7 percent from 2008-2018, compared with 9 percent overall job growth, according to California Employment Development Department forecasts.

In Mendocino and Lake counties, health care jobs will expand by 12.1 percent, twice the overall rate.

The nation's aging population will "drive higher health care utilization, Salnas said.

The St. Joseph system expects to focus its expansion in services outside hospitals, with increased emphasis on wellness, outpatient and ambulatory care aimed at reducing costs, he said.

You can reach Staff Writer Guy Kovner at 521-5457 or guy.kovner@pressdemocrat.com.