AAMC Reporter: February 2007

New Study: Medical Schools, Teaching Hospitals are Major Economic Engine

Medical schools and teaching hospitals have a strong economic effect on their communities and the American economy, a new AAMC study found. Titled "The Economic Impact of AAMC-Member Medical Schools and Teaching Hospitals," the report showed that the AAMC's 125 accredited member medical schools and approximately 400 member teaching hospitals and health systems generated $451.6 billion nationally in 2005.

"While we are justifiably proud of our core mission contributions in education, research, and clinical care, this report underscores the major economic influence medical schools and teaching hospitals have on their communities," said AAMC President Darrell G. Kirch, M.D. "From job creation to tax revenue, AAMC member institutions play a critical role in local, state, and national economies, and have an enormously positive effect from coast to coast."

The report found that AAMC member institutions are a major engine for employment as well, with nearly 1,670,000 individuals holding jobs there, including physician employees, independent physician contractors, and staff.

"Perhaps the benefit that comes closest to home is the sheer number of U.S. citizens who depend on AAMC members…for their jobs and livelihoods," the report stated. "AAMC members are responsible for a substantial component of national employment."

Additionally, more than 3 million full-time jobs—one out of every 48 wage earners in the United States— exist either directly or indirectly as a result of a medical school or teaching hospital.

"The business volume generated by AAMC members creates jobs in a broad range of sectors throughout the nation's economy," the report stated.

	* direct and indirect	Source: Tripp Umbach economic model

These institutions also generated more than $20 billion in state tax revenue in 2005 through income and sales taxes, corporate income taxes, and capital stock and franchise taxes paid by businesses that collect revenue from these institutions.

The $451.6 billion aggregate figure is based on the direct and indirect business volume generated by AAMC member institutions including institutional spending; employee spending; and spending by patients, their families, and visitors (excluding spending for patient care and medical services). According to the report, every dollar spent by a medical school or teaching hospital indirectly generates an additional $1.30 when it is "re-spent" on other businesses or individuals, resulting in a total impact of $2.30 per dollar.

In addition, in 2005 medical schools and teaching hospitals generated more than $15 billion in out-of-state, medical-visitor-related revenue in 2005, including direct spending in local communities by out-of-state patients and their friends and families. Medical schools and teaching hospitals are also major sponsors of meetings and conferences in their states, drawing a significant number of visitors whose spending boosts local economies.

In a state-by-state breakdown, New York's medical schools and teaching hospitals had the largest economic effect in dollars, with more than $66 billion. Pennsylvania and California were second and third, with $35.6 billions and $35.5 billion, respectively.

The AAMC report does not include the economic impact of patient-care related spending at hospitals, nor does it account for the economic benefits of the community service and physician training programs that are the hallmark of academic medical institutions. "The Economic Impact of AAMC-Member Medical Schools and Teaching Hospitals" was prepared for the AAMC by health care consulting firm Tripp Umbach.

—By Scott Harris

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