Health services industry (SIC
80) employment, consisting
of physician and dental offices,
hospitals, nursing facilities and
other allied medical services, is
one of the fastest growing segments
in both the national and
state economies. According to
national employment projections
to the year 2005, the fastest
growth rates will be concentrated
in health services employment,
expanding twice as fast as the economy as a
whole. Of the ten
fastest growing
occupations
through 2005,
half will be
health-related
(Table 1 on page
3). Connecticut
appears to be
following the
national trend. In
1991, Connecticut
employed
approximately 120,300 people in the health
services industry. By 1996, that
number had increased by 4,600,
or about four percent, in spite of
a recession and sluggish economic
growth in the early 1990s.
Occupational growth projections
through the year 2005 for
Connecticut's health services
employment range from approximately
12 percent for dentists up
to 40 percent for home health
care aides, medical assistants and physical therapists.
Growth in health care employment
has been accompanied by
basic structural changes. The
impact of legislative initiatives,
economic forces and social health
care reform has transformed the
industry's employment composition
(See Table 2). An examination of the
factors influencing health services
employment provides a
framework for understanding the transformation in the health care
marketplace.
Managed Care Growth is Major Influence
Perhaps the most notable
influence on the composition of
the industry is the recent growth
in managed care. In Connecticut,
41 percent of the state's population
is currently enrolled in one of
16 health maintenance organizations
(HMOs). While the State continues to lag behind the
nation in managed care penetration,
it has experienced a 77
percent increase in HMO enrollment
over the past five years.
This growth in HMO enrollment
may have been stimulated in
1994, when Connecticut created
a more conducive environment
for managed care's expansion
when it deregulated hospital
prices and discount arrangements
and allowed hospitals to
negotiate rates and payment
methods with all payers, not just
qualifying HMOs. In turn, managed
care growth may have
stimulated hospital and medical
service plans (SIC 6324) employment,
which increased by 55
percent (over 2,100 jobs) from
1991 to 1996.
Managed care enrollment
grew in response to spiraling
health care costs. With managed
care, HMOs contract with health
care providers for the treatment
of enrolled members for a flat fee
per person, known as capitation.
The goal of managed care is to
provide quality outcomes while
controlling costs by monitoring
patient utilization, encouraging
the use of the most effective
treatments and procedures, and
emphasizing preventive care.
Traditional indemnity insurance
companies enable both patients
and doctors to take advantage of
state-of-the-art treatment, diagnostic
testing and facilities, but
do not necessarily provide incentives
for consumers and health
care providers to contain health
care service consumption and
spending.
Hospitals React to Managed Care
With increased managed care
proliferation and a more competitive
environment, hospitals must
now more rigorously compete for
patient volume as well as for
shrinking federal, state and private health care dollars.
Consequently, hospitals have
enacted major cost-cutting
programs in order to preserve
profit margins. Nearly all of the
State's 32 acute care hospitals
have reacted by forming vertical
and horizontal affiliations, alliances,
mergers and in some
cases, their own managed care
organizations. Because the State
is somewhat of a newcomer in
terms of such integration, this
trend may continue over the next
few years.
Hospital mergers and affiliations,
along with reduced occupancy
rates, have forced many
hospitals to reduce staff. All but
eight of the State's acute care
hospitals have experienced a
decline in full time equivalent
positions since 1991. As a result,
general medical and surgical
hospital (SIC 8062) employment
in Connecticut has dropped by
9.5 percent or 5,600 jobs from
1991 to 1996 (Table 2).
Health Care Service Delivery Changes
Health care market changes
have had a definite impact on
health care service delivery. First,
there has been a move from
inpatient treatment to less costly
outpatient treatment. Furthermore,
medical advances and
innovations are lessening the
need for facility-based services
that have virtually defined hospitals
for years. Due to improved
medical technology and changes
in hospital reimbursement policies,
outpatient volume has
increased by approximately 30
percent from 1991 to 1995. On
the other hand, hospital inpatient
days have dropped by more than
21 percent during the same time
period. A decline in inpatient
admissions was at least partially
responsible for the recent closing
of Winsted Memorial Hospital.
While there have been medical and surgical acute care employment
losses, other areas of the
health care industry have experienced
gains. Patients not well
enough to go home following hospitalization for illness or
surgery are frequently transferred
to nursing facilities rather than
remaining in higher-cost hospital
settings. From 1991 to 1996, employment in
Connecticut's
skilled nursing
care facilities (SIC
8051) grew by 22
percent or 6,500
jobs. In addition,
the state's intermediate
care
facilities' (SIC
8052) employment
grew by 12.5
percent or 300
jobs. Furthermore,
analysts predict
long-term care
could more than
triple in the next
five years.
Connecticut's aging population will place even
greater demands on the health
care delivery system over the
next several decades.
As shorter hospital stays (down 21 percent over the last
five years) and technological
advances have taken hold, the
home health care services industry
(SIC 8082) has benefited.
Treatments formerly only available
in hospitals can now be
administered in the patient's
home at a lower cost. Nationally,
the overall job market for home
health care is projected to grow
at an annual rate of 20 to 25
percent with pediatrics, geriatrics
and persons with AIDS representing
most patients. According to
national projections, the number
of home health care aides will
more than double by the year
2005. In Connecticut, home
health care services employment
grew by nearly 60 percent or
4,700 jobs from 1991 to 1996
(Table 2) and is projected to grow
by over 40 percent through the
year 2005.
National projections indicate
medical and dental labs (SIC
8071 and SIC 8072) should
continue to flourish as managed
care forces some hospitals to
contract out more of their lab
work due to cost and efficiency
concerns. In addition, federal restrictions and paperwork
requirements of the Clinical and
Laboratory Improvement Amendments
of 1988 have caused
thousands of physicians to
discontinue laboratory testing in
their offices and instead use
outside labs to perform their
routine testing.
While kidney dialysis centers'
(SIC 8092) marked increase in
employment is not the result of
the growth of managed care, it is
interesting to note that within
the health services industry, it
has experienced the greatest
increase, at 200 percent (Table
2). This jump is likely the result
of a shortage of dialysis centers
in the early nineties, coupled with
the fact that as the State's population
continues to live longer,
dialysis services are needed more
frequently.
Connecticut's psychiatric and
specialty hospitals (SIC 8063 and
SIC 8069), which include cancer,
rehabilitation and children's
facilities, have experienced overall
declining employment since 1991,
likely due to limitations on length
of stay by payers. But, if Connecticut
follows other states' initiatives, industry
employment appears
to be poised for
growth during the
coming years. Like
many states, Connecticut
is considering
legislation requiring
insurers to include
psychiatric
coverage in their
medical benefits
packages. Furthermore,
possible increased
use of psychiatric
facilities could
stem from improved
drug and alcohol
treatments and
changing social
attitudes which have lessened the stigma associated
with dependency or mental
illness problems.
Conclusion
The health services industry
is a key contributor to the wellbeing
of Connecticut's economy,
comprising nearly 25 percent of
the State's services sector employment.
Despite experiencing
profound changes in recent
years, it continues to grow. It will
no doubt expand in the future as
technological advances, an aging
population, shifting patient
settings, new treatment methods
and increased competition among
providers place new and even
greater demands on service
delivery.
The Connecticut Office of Health Care
Access, through the collection of hospital
financial and billing data, is a resource
in the analysis and reporting of
evolving trends in the utilization of
health services, access and quality of
care. Additional data used in this article
were provided by the Connecticut
Insurance Department and the Connecticut
Department of Labor.
TABLE 1:
Occupation |
Number (in thousands) 1994 |
Number (in thousands) 2005 |
Percent Change |
Personal and Home Care Aides |
179 |
391 |
118% |
Home Health Aides |
420 |
848 |
102% |
Systems Analysts |
483 |
928 |
92% |
Computer Engineers |
195 |
372 |
91% |
Physical and Corrective Therapy Assistants and Aides |
78 |
142 |
82% |
Electronic Pagination Systems Workers |
18 |
33 |
83% |
Occupational Therapy Assistants and Aides |
16 |
29 |
81% |
Physical Therapists |
102 |
183 |
79% |
Residential Counselors |
165 |
290 |
76% |
Human Services Workers |
168 |
293 |
74% |
Source: U.S. Bureau of Labor Statistics 1994-2005 Employment Projections.
TABLE 2:
SIC Number |
SIC Name |
June 1991 |
June 1996 |
Difference 1991-1996 |
Percent Change |
8051 |
Skilled Nursing Care Facilities |
29,600 |
36,100 |
6,500 |
22.0% |
8052 |
Intermediate Care Facilities |
2,400 |
2,700 |
300 |
12.5% |
8059 |
Nursing & Personal Care Facilities, Not Elsewhere Classified (NEC) |
2,800 |
2,200 |
-600 |
-21.4% |
8062 |
General Medical & Surgical Hospitals |
59,200 |
53,600 |
-5,600 |
-9.5% |
8063 |
Psychiatric Hospitals |
5,200 |
4,200 |
-1,000 |
-19.2% |
8069 |
Specialty Hospitals, Except Psychiatric |
2,800 |
2,400 |
-400 |
-14.3% |
8071 |
Medical Laboratories |
2,200 |
2,500 |
300 |
13.6% |
8082 |
Home Health Care Services |
8,200 |
12,900 |
4,700 |
57.3% |
8092 |
Kidney Dialysis Centers |
100 |
300 |
200 |
200.0% |
8093 |
Specialty Outpatient Facilities, Not Elsewhere Classified (NEC) |
3,100 |
2,700 |
-400 |
-12.9% |
8099 |
Health & Allied Services, Not Elsewhere Classified (NEC) |
600 |
1,200 |
600 |
100.0% |
80 |
Health Services (TOTAL) |
116,200 |
120,800 |
4,600 |
4.0% |
Source: Connecticut Labor Department.
The Connecticut Department
of Economic and Community
Development announced that
Connecticut communities
authorized 442 new housing
units in February 1997, a 2.1%
increase compared to January
1997 when 433 were authorized.
The Department further
indicated that the 442 units
permitted in February 1997
represent an increase of 14.8%
from the 385 units permitted in
February 1996, and that the
year-to-date permits are up 25%
from 700 in 1996 to 875 in 1997.
Reports from municipal
officials throughout the state
indicate that New London County
showed the greatest percentage
increase in February compared to
the same month a year ago:
60.7%. Litchfield County reported
the greatest percentage
decline: 22.7% for the same
period.
Fairfield County documented
the largest number of new,
authorized units in February with
112. New Haven County followed
with 103 units and Hartford County had 77 units. Milford
led all Connecticut communities
with 20 units, followed by
Newtown with 16 and South
Windsor with 11.
Year-to-date totals indicate
that Fairfield County has
issued the most building
permits through February of
1997 with 225, followed by
New Haven County with 195
and Hartford County with 165.
Milford authorized 26 new
units during this period,
followed by Fairfield, Newtown,
and Shelton with 23.
This month marked the
release of the annual benchmark revisions in Connecticut
employment data, which affects
the Connecticut coincident index.
We've reported in this column over
the past 12 months how much
more robust the expansion in
1996 was relative to the prior
years of the current recovery. Well,
the revised data tell a more restrained
story. The estimated
number of State residents employed
(household survey) was
revised significantly downward
and, correspondingly, the total
unemployment rate was revised
significantly upward in all of 1996.
The average of the preliminary
unemployment rates for 1996,
before revision, was just under 5.0
percent; after revision, 5.7 percent.
The quandary with the benchmark
revisions does not stop here. The
new data indicate that the (preliminary)
January 1997 unemployment
rate drops to 5.1 percent,
which seems more consistent with
the data before this latest revision.
And only in March 1998 will we
get the next benchmark revisions
and see whether this January
1997 unemployment rate sticks, or is revised upward. Conversely,
estimates of jobs were mostly
revised upward. Annual average
nonfarm employment for 1996 was
3,400 higher than originally
estimated, with January 1996's
estimate slightly lower and
December's 10,000 higher.
What is the bottom line? The
robust growth in the coincident
index identified over 1996 has
turned into a more modest expansion,
although still better than in
years prior to 1996. Connecticut's
coincident employment index,
nevertheless, did generally rise
since January 1996, only falling
slightly in September 1996. The
January 1997 upward blip in the
coincident index (see chart) must
be viewed with some skepticism.
Connecticut's leading employment
index, which is unaffected by
the benchmark revisions, rose
from its December value with the
release of the (preliminary) January
data. The leading index also
rose significantly above its level a
year ago in January. The leading
index, a barometer of future
employment activity, continues to
bounce around. The leading index
has still not moved in the same direction, either up or down, for
more than two consecutive months
since December 1994. It currently
remains close to its recent (November)
peak of 89.9.
In summary, the coincident
employment index rose from 81.9
in January 1996 to 88.4 in January
1997. All four index components
point in a positive direction
on a year-over-year basis with
higher nonfarm employment,
higher total employment, a lower
insured unemployment rate, and a
lower total unemployment rate.
The leading employment index
rose from 83.2 in January 1996 to
89.5 in January 1997. All five
index components sent positive
signals on a year-over-year basis
with a lower short-duration (less
than 15 weeks) unemployment
rate, higher total housing permits,
lower initial claims for unemployment
insurance, higher Hartford
help-wanted advertising, and a
longer average work week of
manufacturing production workers.
This year-over-year rise in the
leading index, largely due to the
one month fall in January 1996 to
its lowest level since April 1992,
needs careful interpretation.
Source: Connecticut Center for Economic Analysis, University of Connecticut. Developed by Pami Dua [(203) 461-6644,
Stamford Campus (on leave)] and Stephen M. Miller [(860) 486-3853, Storrs Campus]. Tara Blois [(860) 486-4752, Storrs
Campus] provided research support.
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