Healthcare Industry in Orange County

Introduction For the past several months, the healthcare sector has been one of the few industries that continue to add jobs, despite the economic downturn. This has led the sector to be considered “recession proof.” The Central Florida area is projected to add more jobs in this sector with the development of the “Medical City” in Lake Nona, which will include the Nemours Children’s Hospital, a new Veteran’s Hospital, and the University of Central Florida (UCF) medical school. These new facilities would be near the Sanford-Burnham Institute facility, a top biotech research facility in the areas of diabetics and cardiovascular diseases. The agglomeration of these facilities within the Lake Nona area has been seen as the catalyst for the creation of a life science cluster in Orange County. The current impact of the life science and health care sectors in Orange County’s economy is small. However, in recent years, local life science employment has been outpacing the national average by 38 percent (Milken Institute, 2007). As the County focuses on business and employment growth within these two fields, it is important to understand these sectors’ components and characteristics. Competition in these areas is expanding at the national and global levels. For example, over 40 states have initiatives to promote the development of biotechnology, and several economic development agencies have listed biotechnology as one of its targets for economic development. This issue of the Economic Research Initiative discusses the current state of the health care and biotechnology sectors, two different, but related, industries in Orange County. The method used to analyze both sectors is the location quotient comparison for all sectors comprising the local health care industry. Location quotients measure economic specialization by comparing the local economy (Orange County) with a reference economy (the United States). Basic industries, those that export most of their output, have a location quotient higher than 1. This analysis is followed by an establishment search using the InfoUSA establishment database to find where health care businesses are concentrated.

Health Care Sector The healthcare sector is comprised of four industries: Ambulatory Health Services (NAICS 621), Hospitals (NAICS 622), Nursing and Residential Care Facilities (NAICS 623), and Social Assistance (NAICS 624) establishments. Ambulatory Health Services establishments provide direct and indirect ambulatory services to patients. Services within this sector include physicians, mental health specialists, dentists, and other health practitioners. It also includes other outpatient medical services, such as ambulances, medical laboratories, and home health care services. Hospitals primarily provide medical, diagnostic, treatments services, and accommodation services to inpatients. They also provide inpatient services that require specialized facilities and equipment. Nursing and Residential Care Facilities provide a variety of medical services and residential care for its residents, including residential facilities for the elderly and mentally disabled and substance abuse facilities. Finally, Social Assistance establishments provide a variety of social services, such as child care, family services, and relief services.

ECONOMIC OUTLOOK FEBRUARY 2010

The Health Care Sector in Orange County by Luis Nieves-Ruiz, AICP

Issue 5

The InfoUSA database had a total of 3,397 establishments within the Health Care and Social Assistance Sector that employed 82,774 people (Exhibit 1). These are large numbers, but no sector had a location quotient approaching 1, which suggests that the health care sector is not a basic industry in Orange County. This was surprising, because Orlando Health Center and Florida Center are two of the County’s largest employers. This situation, however, is not exclusive to Orange County, as most jurisdictions across the United States also have low location quotients in the health care sector. Nelson (2009) noted that the benefits of hospitals to the local economy go beyond employment. They also are large purchasers of goods and services, provide spaces for innovation, and help to attract other amenities to the community. Research hospitals also attract Medicare funding to a local economy by bringing patients from other regions.

International medical tourism is also another avenue used by most hospitals that could be considered an export activity. Locally, Orlando Health serves more than 6,000 international patients every year (Keller, 2009). Our area also attracts medical conferences. The area hosted more than 215 medical meetings with 170,000 attendees in 2008. It is hard to quantify the economic impact of these activities, especially when our area receives over 40 million visitors annually. There are two types of hospital facilities: General Medical and Surgical Hospitals (NAICS 62211) and Specialty Hospitals (NAICS 62231). Orange County has 25 General Hospital facilities that employed 39,085 people in 2008. The County has six Specialty Hospitals, all of them oncology clinics that employ about 454 people. The professional expertise of these institutions is extremely important, because they help to differentiate Orange County’s health care industry from others at the national level. Healthcare High Tech Although they do not provide any direct service to patients, high technology companies are becoming an important part of the health care sector. Medical high tech establishments can be classified into two main groups: manufacturers of medicine and medical devices and laboratory and research establishments. Pharmaceutical and Medicine Manufacturing (NAICS 3254), Electronic Instruments Manufacturing (3345), and Medical Equipment and Supplies (NAICS 3391) are in the first category. Establishments within these industries produce drugs, medical instruments, and diagnostic equipment used by hospitals and doctor’s offices. These sectors have low location quotients, and between them, employ less than 1,000 people (Exhibit 2). Pharmaceutical manufacturing is one of the sectors linked to the burgeoning biotechnology sector, and the County’s limited representation in this sector may be an indicator that biotechnology is not an established sector within the local economy. Electromedical Apparatus manufacturing had the highest location quotient of all medical manufacturing industries. Two medical high technology sectors had location quotients higher than 1: Medical and Diagnostic


Source: InfoUSA, Location Quotient Calculator 2009 Location Quotients are based on 2008 employment numbers.

Exhibit 1: Characteristics of the Health Care Sector in Orange County

NAICS Code Location Quotient

Number of Establishments

Estimated Number of Employees

621 Ambulatory Health Services

0.75 2,518 26,763

622 Hospitals 0.91 56 39,873

623 Nursing and Residential Care

0.54 136 7,395

624 Social Assistance 0.48 687 8,743

Labs (NAICS 6215) and Scientific and Research Development Services (NAICS 5417). InfoUSA data depict 98 establishments that had more than 2,300 employees (Exhibit 3). The Medical and Diagnostic Labs sector includes all establishments providing analytic or diagnostic services to the medical profession or to patients who are referred by a medical practitioner. These firms either analyze bodily fluids or produce patient images. The Diagnostic Imaging Center (NAICS 621512) sector in Orange County is particularly strong with a location quotient of 1.96. Examples of these imaging centers are establishments that provide CT Scans, MRI, and X-ray laboratories.

Establishments within the Scientific Research and Development Services (NAICS 54171) sector conduct original investigation or apply their research findings to create new products or services. This sector, together with the Pharmaceutical and Medicine manufacturing sector, comprises what is often called the biotechnology sector. However, few of the local research establishments do biological research. Most of the local research laboratories specialize on environmental sciences, energy generation, and optics.

Another sector that may prove to be important for the local biotechnology industry is Blood and Organ Banks (NAICS 621991). These establishments collect, store, and distribute blood and blood products and body organs. There are ten of these locations in the County, and they employed over 300 people in 2008. The professional expertise and lab experience of the workers within this industry could be helpful to the support of the local biotechnology industry. Currently, this sector employs about 300 people and has a location quotient of 1.51.


Exhibit 2: Medical Manufacturing Establishments in Orange County




3254 Pharmaceutical and Medicine Manufacturing

ND 3 34

3345 Electromedical Apparatus Manufacturing

0.76 5 51

3391 Medical Equipment and Supplies

0.32 75 511

Source: InfoUSA, Location Quotient Calculator 2009

Location Quotient based on 2008 Average Employment Records were adjusted to show only establishments directly related to health care and bio technology. ND-Not Disclosable because of the low number of establishments

Exhibit 3: Laboratory Establishments in Orange County




54171 Scientific Research and Development Services

1.22 16 579

6215 Medical and Diagnostic Labs

1.26 82 1,815

Source: InfoUSA, Location Quotient Calculator 2009 Location Quotient based on 2008 Average Employment Records were cleaned to show only establishments directly related to health care and bio tech.

Medical Wholesale

The last sector studied was medical suppliers, which distribute specialized equipment for laboratories, hospitals, and medical offices. These include establishments within the Medical, Dental, and Hospital Equipment Supplies (NAICS 42345), Ophthalmic Goods Merchant Wholesalers (NAICS 42346), and Other Professional Equipment and Supplies (NAICS 42349) sectors. The Medical Equipment Wholesale sector had the highest location quotient at 1.38 and employs over 1,300 people. These high numbers confirm the importance of the medical sector as a purchaser of goods and services in the local economy. Cluster Development On a national level, economic development theory and site selection initiatives continue to focus on the development and enhancement of industry “clusters” as indicators of successful economic diversification and high-quality employment. However, the low location quotients of most of Orange County’s health care sectors indicate that there likely is not yet an established cluster in our area. Moreover, it was very difficult to discern areas of concentration of medical services, because the facilities (hospitals, ambulatory services, medical high tech establishments, and wholesale suppliers) are spread throughout the County, which has a total land area of hundreds of square miles. The aging of the population and suburbanization trends in Orange County may have contributed to the proliferation of medical facilities throughout the County.

Because of the location of health care facilities all through the County, staff made the decision to study only the agglomerations of medical services anchored by a large hospital or clinic. The assumption is that large institutions would attract more suppliers and ancillary medical services near their location. The results of this analysis are portrayed on Exhibit 4 on the next page. Using this assumption, there are three major areas of concentration of health care activity in Orange County. Orange Avenue could be referred to as the major health care corridor in Orange County, as two of the agglomeration areas are located here. The first is located along South Orange Avenue and is comprised of 8 hospitals and clinics, 317 ambulatory establishments, 27 medical high tech establishments, and 7 wholesale establishments. Over 22,000 people work within this area. Orlando Regional Healthcare hospital, one of the largest County employers, anchors this agglomeration. This hospital provides surgical, medical, rehabilitative, and emergency care services and has the area’s only Level One Trauma Center, a specialized service for critical injuries. There are also other general medical and surgical hospitals, including the Arnold Palmer Children’s Hospital, the Nemours clinic (children hospitals), and the Winnie Palmer Hospital (obstetrics and gynecological services). Also located here is the MD Anderson Cancer Center, which performs clinical cancer research and is creating a tissue bank (www.orlandohealth.com). The second Orange Avenue agglomeration is anchored by the Florida Hospital complex near Winter Park, which includes a general hospital, a children’s hospital, and an oncology center. This hospital complex employs over 16,000 people. This area has 12 medical high tech establishments, including three medical laboratories, two research and development laboratories, four medical laboratories, one diagnostic imaging center, and two blood and organ banks. With about 350 employees, the Florida Pathology Lab is the largest in the area. The area also has three medical wholesale establishments and 153 ambulatory service establishments. Both Florida Hospital and Orlando Regional Heath Care are also teaching hospitals, which increase their importance for the community. The third area of concentration is located in Ocoee and is anchored by two hospitals/clinics on West Colonial Drive, Health Central and Ocoee Family Medical Center. It also includes five medical high tech establishments, including two medical laboratories, one research laboratory, a surgical appliance lab, and a diagnostic imaging center. It also includes two wholesale establishments and 87 ambulatory establishments.


Conclusions Based on this research, there are some small agglomerations within Orange County that could be strengthened to help the overall development of the health care sector in Orange County. The Lake Nona “Medical City” area may resemble or surpass these corridors in the future, but there will also be some major differences. The addition of the UCF Medical School is expected to bring additional resources and research funds to the area. Moreover, the Veteran’s and Nemours Hospitals will probably bring special programs that are not currently available in Orange County. The three institutions will partner with the Burnham Institute to help increase the amount of clinical research done in our area. Developing a local life science cluster will be challenging, but at the same time, it will help to diversify the local economy.


Exhibit 4: Concentration of Medical Services in Orange County

Source: InfoUSA 2009

References Bureau of Labor Statistics, U.S. Department of Labor. 2007 Location Quotient Statistics for Orange County, Orlando MSA, and State of Florida. Retrieved on December 20, 2009 from http://data.bls.gov LOCATION_QUOTIENT/servlet/lqc.ControllerServlet Corthright, Joseph and Mayer, Heike (2002) Signs of Life: The Growth of Biotechnology Centers in the U.S. The Brookings Institution of Urban and Metropolitan Policy [electronic version] Devol. R.C. Klowden K., Bedroussian A and Benjamin Y. North America’s High Tech Economy: The Geography of Knowledge-Based Industries. Milken Institute. Executive Office of the President, Office of Management and Budget. (2007). North American Industry Classification System United States 2007. Lanham: Bernan InfoUSA Database License Group. (2009). Orange County Business Leads Report . Keller, A. Medical Tourism in Thriving. Florida Trend. Originally published on March 1, 2009. Retrieved from http://floridatrend.com/article.asp?page=1&aid=50631 on February 8, 2010. Nelson, Marla. Are Hospitals an Export Industry? Empirical Evidence from Five Lagging Regions. Economic Development Quarterly. Volume 23. Number 3. August 2009 [electronic version] Orlando Regional Health Care Website (www.orlandohealth.com). Wong, P. & Bedrousssian, A. (2006) Economic Benefits of Proposed University of Central Florida College of Medicine. Milken Institute [electronic version]

Issue Month of Publication

Economic Research Initiative March

Conclusions

Orange County Growth Management Department Planning Division

Research & Intergovernmental Coordination Section Post Office Box 1393

Orlando, FL 32802-1393

Telephone: 407.836.5600 Fax: 407.836.5862

E-Mail: [email protected]


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Healthcare Industry in Orange County