Physician Group Says Medical Practices Are Good for Economic Health

Andrew Kitchenman | April 22, 2014 | Health Care
Study finds that average NJ doctor supports 10.5 jobs, generates $1.74 million in economic activity

Lawrence Downs, CEO of the Medical Society of New Jersey
New Jersey doctors provide healthcare to the state’s residents – and they also help keep the state’s economy healthy, according to a new study.

The average New Jersey doctor in private practice supports 10.5 jobs and $1.74 million in annual economic activity, according to the study by IMS Data on behalf of the American Medical Association.

The study comes at a time when advocates for medical practices are warning policymakers and insurers that cuts to reimbursements could harm medical practices.

Jobs generated by doctors’ activity range from the nurses, billing personnel and scheduling staff who work at doctor’s offices to employees of medical supply companies, electronic medical record companies, medical liability insurers, and vaccine and pharmaceutical manufacturers.

Lawrence Downs, CEO of the Medical Society of New Jersey, said it’s important to look at physicians as more than just medical practitioners. The society is the AMA’s state affiliate. He noted that the study found that New Jersey doctors generate $1.7 billion in state and local taxes.

“It’s certainly something that any policymakers should be mindful of,” said Downs, adding: “Medical practices also support local economies, not only in their contributions as taxable entities, but also in supporting good-paying jobs.”

Downs added that the study provides an updated snapshot of a previous study that the society did in 2010 in conjunction with Rutgers University’s Bloustein School of Planning and Public Policy.

That study found that while the rest of the state’s economy had been stagnant in adding jobs over the previous decade, doctor’s offices had fueled constant expansion.

Downs didn’t identify any particular policy proposals as being posing a threat to doctors, but he said doctors’ economic contributions shouldn’t be ignored.

“I don’t know if there is a threat, but as we continue to look at downward pressure on the rates that physicians are paid by insurers and the federal government, (and) physicians’ practices need to be financially viable to continue to contribute those kinds of economic gains to the state,” Downs said.

Downs noted that the study only covers a portion of the economic benefits from doctors’ work, since it didn’t include the additional productivity from workers who are healthy due to the medical care they receive. He also noted that the study was limited to private practices and didn’t include the economic impact of hospitals and federally qualified health centers.

While policy analysts have focused on the rising cost of healthcare, Downs noted that the study also reflects the important economic activity related to these costs.

“Efficiencies are there to be gained – no one disputes that,” Downs said, but he added: “The offices of private physicians are a major source of economic activity that the state and local and county governments benefit from. Too often the healthcare system in general and physicians in particular are seen as too expensive or as charging too much…there is a significant economic benefit.”

Nationally, doctors’ offices generate 9.97 million jobs — one-third as direct employees and two-thirds indirectly through vendors. The $1.6 trillion in economic activity nationwide equals 10.2 percent of the gross domestic product, a slightly higher percentage than the 7.7 percent of gross state product from $39 billion of activity generated by New Jersey doctors. This includes the total value of goods and services generated by the doctors’ offices, as well as the industries that are supported by those offices.