Hospitals in a six-county area of Southern California, including Los Angeles, generated economic activity valued at $85.5 billion, or 12.1% of the regional gross product of $708 billion, according to a report prepared by the Los Angeles Economic Development Corp. (LAEDC).

The LAEDC study also found that hospitals and related businesses accounted for direct and indirect employment equivalent to 640,000 full-time jobs in the six-county region in 2004.

"This is an 'Aha' report," Jim Lott, vice president of healthcare policy and communications, Hospital Association of Southern California (Los Angeles), told Medical Device Daily. "We want to raise the level of understanding about what a hospital is all about and what a hospital does in the minds of those who will be asked to vote on or approve or otherwise contribute to the financial viability of hospitals."

Lott said that the timing of the report was important due to the explosive population growth in Southern California, which is increasing the need for hospital services. But many hospitals are operating at a loss, even though in some communities a hospital generates $6 for every $1 that it spends.

"Half the hospitals in California are operating in the red," Lott said. "It's a problem. We have to expand, but yet we're not remaining financially viable, so there's a paradox we're operating in."

The report attributes some of the financial hardship on Southern California hospitals to the mandate that hospitals be built according to strict regulations to enable them to withstand earthquakes.

While he suggested that this building code mandate added enormous costs for hospitals, he said there was no particular advocacy issue related to the report, which has been in progress for about two years. The report covered the economic output, employment and wages of hospitals in Los Angeles, Orange, Riverside, San Bernardino, Santa Barbara and Ventura counties.

"We thought it was important for people who have something to say and do about hospitals' financial visibility and about hospital growth and development, we wanted them to see this part of what hospitals' do for the community beyond simply providing healthcare," Lott told MDD.

According to the report, "hospital-sustained economic activity" generated more than $2 billion in government revenue in 2004, including $1.2 billion in state income taxes and $816 million in state sales taxes.

"Most of the revenue - $1.9 billion - was collected by the state government from state income and sales taxes," the report said.

It is expected that hospitals in Southern California will spend at least $8.2 billion on construction projects during the years 2005-2009.

Data collected for the report show that hospitals in the six-county area discharged 1.76 million patients and processed 17.4 million outpatient visits during 2004. "That was a 17% increase from the 1.5 million patients discharged in 1995 and 10% more than the 15.8 million outpatient visits that same year," the report said.

An interesting footnote to the report was that the Southern California economy ranks 10th among all countries, "just ahead of South Korea and Mexico, and just behind Canada and Spain," it said.

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