Medical Development as a Catalyst for Economic DevelopmentKeith Dines, Executive Vice President, Strategic Development

2Source: American Hospital Association TrendWatch, May 2004, Vol.6, No. 1

Health care is a major contributor to the U.S. economy…National Expenditures on Health Services and Supplies as a Percentage of

Gross Domestic Product 2004

Other – 27%

Prescription Drugs – 11% Nursing Home Care – 7%

Physician Services – 23%

Hospital Care – 33%

$1.8 Trillion

U.S. GDP 2004

HealthServices

and Supplies

14.9%

Other Sectors85.1%

3

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

0

- 4

5

- 9

10 - 1

4

15 - 1

9

20 - 2

4

25 - 2

9

30 - 3

4

35 - 3

9

40 - 4

4

45 - 4

9

50 - 5

4

55 - 5

9

60 - 6

4

65 - 6

9

70 - 7

4

75 - 7

9

80 - 8

4

85

+

Age Groups

Nat

iona

l Pop

ulat

ion

2000 2010 2020 2030

…fueled by a growing, changing population.

Wave of Aging Baby-BoomersWave of Aging Baby-Boomers

0.050.0

100.0150.0

200.0250.0

300.0

Under

18

5-17 18-24 25-44 45-64 65+

Age Groups

% G

row

th

10-yr growth 20-yr growth

Trend Increasing

over long term

Trend Increasing

over long term

Source: US Census Bureau; Sun Health Strategic Planning Department; Healthcare Advisory Board,2006

National Age Distribution2000-2030

Growth By Age CohortOver the next 25 years, the population will grow at an accelerated rate in the age groups with the highest utilization of medical services

4

Medical Employment vs. Employment in Other Industries2005(1)

Source: Department of Labor, Bureau of Labor Statistics, Current Employment Statistics Survey, custom data request

(1) Data are as of September 2005

Thousa

nds

Healthcare is the largest private-sector employer ...

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Full-servicerestaurants

Generalmedical &surgicalhospitals

Employmentservices

Limited-service

eating places

Grocerystores

Offices ofphysicians

Buildingequipmentcontractors

Departmentstores

5

Healthcare Employment by Occupation Type2004

Source: Department of Labor, Bureau of Labor Statistics, 2004 National Industry-Specific Occupational Employment and Wage Estimates

54.8

84.3

125.4

153.3

180.6

194.6

262.2

685.8

793.0

2,686.5

0 500 1,000 1,500 2,000 2,500 3,000

Installation, Maintenance, and Repair

Business and Financial Operations

Community and Social Services

Food Preparation and Serving

Management

Building and Grounds Cleaning and Maintenance

Other Occupations

Healthcare Support

Office and Administrative Support

Healthcare Practitioner and Technical

Number of Employees (Thousands)

…supporting a range of workers with varying skill levels…

6

Average Weekly Earnings of Workers, Health Care(1) vs. All Service-providing Industries

1990 - 2004

All Service-providingIndustries

Health Care

Source: Department of Labor, Bureau of Labor Statistics, Current Employment Statistics Survey

(1) Includes physicians employed by hospitals.

… with jobs that offer higher pay than other industries…

$0

$100

$200

$300

$400

$500

$600

$700

$800

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04

7

Quart

erl

y (

3-M

onth

) Perc

ent

Change

Percent Change in Employment, Seasonally-Adjusted: Health Care vs. All Industries1 2002 – 2005

Source: Department of Labor, Bureau of Labor Statistics; Recession period defined by National Bureau of Economic Research

1 – Non-farm

Hospitals

All Industries (Total nonfarm)

Qtr 1

2002 2003 2004

Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4

2005

… and provide job stability, even during uncertain times.

Recession of 2001*

-0.4%

-0.2%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

In the United States, one out of every nine jobs is

supported by the health care industry, offering stable

employment even in times of economic strain.

In the United States, one out of every nine jobs is

supported by the health care industry, offering stable

employment even in times of economic strain.

8

Percent of Health Care Costs(1) by Type of Expense2Q05

Professional Fees - 5.7%

Utilities – 1.7%

All Other: Non-labor Intensive – 3.6%(2)

All Other: Labor Intensive – 2.7%

Professional LiabilityInsurance – 5.7%

Other Products(e.g., Food,

Medical Instruments)

Other Service

s

Prescription Drugs

19.3% 6.5%

19.5%Wages &Benefits54.7%

Source: Centers for Medicare and Medicaid Services, September 2005, using base year 2002 weights

(1) Does not include capital

(2) Includes postage and telephone expenses

Health Care entities purchase a variety of services…

9

Health Care Services Impact on Sectors of the U.S. Economy (in $ billions)

2004

Source: The Lewin Group analysis of American Hospital Association 2004 Annual Survey data using BEA industry multipliers for the hospital sector

Health Care and Social Assistance $570.6Manufacturing 240.0Real Estate and Rental & Leasing 151.5Finance and Insurance 102.0Professional, Scientific, and Technical Services 66.8Retail Trade 65.0Wholesale Trade 52.3Information 52.2Administrative and Waste Management Services 49.9Transportation and Warehousing 49.9Accommodation and Food Services 40.9Other Services 40.0Management of Companies and Enterprises 32.3Utilities 28.4Agriculture, Forestry, Fishing, and Hunting 23.5Educational Services 12.8Arts, Entertainment, and Recreation 11.4Mining

10.1Construction 8.0

Total $1,607.6

Economic ImpactIndustry

… and fuel sectors of the economy outside healthcare…

10

Impact of Health Care on U.S. Economy (in $ billions)2004

Source: The Lewin Group, using BEA RIMS-II multipliers applied to 2004 American Hospital Association Annual Survey data

Direct Effect Ripple Effect Total Contribution

… while supporting businesses and jobs across the country...

$591

$1,608

$343

$1,113

$249

$495

Impact on

Wages &

Salaries

Impact on

Economy

11Source: The Lewin Group, using BEA RIMS-II multipliers applied to 2004 American Hospital Association Annual Survey data

Impact of Health Care on U.S. Jobs (in millions)2004

… generating more jobs throughout the entire economy...

12.9

8.0

4.9

Total Jobs

Ripple Effect

Direct Jobs

12

The Arizona health sector holds a quarter-million jobs…

Arizona Industry Employment Projections

2006

7,963

12,097

21,816

28,000

31,159

45,532

50,848

69,342

92,407

100,921

110,393

121,709

176,469

179,691

193,656

214,835

220,792

227,263

235,642

258,162

295,662

Mining

Utilities

Management of Companies & Enterprises

Agriculture, Forestry, Fishing & Hunting

Arte, Entertainment, & Recreation

Real Estate & Rental & leasing

Information

Transportation & Warehousing

Other Services (Except Government)

Wholesale Trade

Professional, Scientific, & Technical Services

Finance & Insurance

Manufacturing

Total Self-Employed & Unpaid Family Workers

Construction

Accommodation & Food Services

Public Administration (Government

Admin/Support/Waste Mgmt & Remediation Svcs

Educational Servicces

Health Care & Social Assistance

Retail Trade

Source: Arizona Dept of Economic Security; US Dept of Labor, Bureau of Labor Statistics note – Includes non-hospital based healthcare employees

13

…with robust job growth projected to continue.

Health Sector1 Leads State-wide in New Job Growth Through 2013

Source: Arizona Dept of Economic Security; US Dept of Labor, Bureau of Labor Statistics (1) – Includes non-hospital based employees

51% 10-year

growth rate

403

2,486

3,342

3,629

3,966

4,915

6,403

6,976

8,055

14,154

14,251

18,644

22,687

26,077

39,673

41,754

45,820

57,032

68,508

105,544

114,332

Mining

Utilities

Management of Companies & Enterprises

Total Self-Employed & Unpaid Family Workers

Agriculture, Forestry, Fishing & Hunting

Information

Arte, Entertainment, & Recreation

Real Estate & Rental & leasing

Manufacturing

Other Services (Except Government)

Transportation & Warehousing

Finance & Insurance

Professional, Scientific, & Technical Services

Wholesale Trade

Public Administration (Government

Accommodation & Food Services

Educational Servicces

Construction

Retail Trade

Admin/Support/Waste Mgmt & Remediation Svcs

Health Care & Social Assistance

14

…boosting overall economic and social well-being.

Across the country healthcare providers make significant contributions to the economy, providing large numbers of high-paying, stable jobs to healthcare workers.

At a local level, healthcare providers can fuel economic development both through the direct impact of their payroll dollars, as well as through the purchasing of other goods and services that support the provision of care.

Further, the presence of healthcare providers boosts the region’s attractiveness to new residential and commercial interests through a variety of services that maintain the optimum health status of the community.