Healthcare Industry in Orange County
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Healthcare Industry in Orange County

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  • 1. Issue 5The Health Care Sector in Orange Countyby Luis Nieves-Ruiz, AICPIntroductionFor the past several months, the healthcare sector has been one of the few industries that continueto add jobs, despite the economic downturn. This has led the sector to be considered “recessionproof.” The Central Florida area is projected to add more jobs in this sector with the development ofthe “Medical City” in Lake Nona, which will include the Nemours Children’s Hospital, a newVeteran’s Hospital, and the University of Central Florida (UCF) medical school. These new facilitieswould be near the Sanford-Burnham Institute facility, a top biotech research facility in the areas ofdiabetics and cardiovascular diseases. The agglomeration of these facilities within the Lake Nonaarea 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 issmall. However, in recent years, local life science employment has been outpacing the nationalaverage by 38 percent (Milken Institute, 2007). As the County focuses on business andemployment growth within these two fields, it is important to understand these sectors’ componentsand characteristics. Competition in these areas is expanding at the national and global levels. Forexample, over 40 states have initiatives to promote the development of biotechnology, and severaleconomic development agencies have listed biotechnology as one of its targets for economicdevelopment.This issue of the Economic Research Initiative discusses the current state of the health care andbiotechnology sectors, two different, but related, industries in Orange County. The method used toanalyze both sectors is the location quotient comparison for all sectors comprising the local healthcare industry. Location quotients measure economic specialization by comparing the local economy(Orange County) with a reference economy (the United States). Basic industries, those that exportmost of their output, have a location quotient higher than 1. This analysis is followed by anestablishment search using the InfoUSA establishment database to find where health carebusinesses are concentrated.Health Care SectorThe healthcare sector is comprised of four industries: Ambulatory Health Services (NAICS 621),Hospitals (NAICS 622), Nursing and Residential Care Facilities (NAICS 623), and SocialAssistance (NAICS 624) establishments. Ambulatory Health Services establishments provide directand indirect ambulatory services to patients. Services within this sector include physicians, mentalhealth specialists, dentists, and other health practitioners. It also includes other outpatient medicalservices, such as ambulances, medical laboratories, and home health care services. Hospitalsprimarily provide medical, diagnostic, treatments services, and accommodation services toinpatients. They also provide inpatient services that require specialized facilities and equipment.Nursing and Residential Care Facilities provide a variety of medical services and residential carefor its residents, including residential facilities for the elderly and mentally disabled and substanceabuse facilities. Finally, Social Assistance establishments provide a variety of social services, suchas child care, family services, and relief services. ECONOMIC OUTLOOK FEBRUARY 2010
  • 2. The InfoUSA database had a total of 3,397 establishments within the Health Care and SocialAssistance Sector that employed 82,774 people (Exhibit 1). These are large numbers, but no sectorhad a location quotient approaching 1, which suggests that the health care sector is not a basicindustry in Orange County. This was surprising, because Orlando Health Center and Florida Centerare two of the County’s largest employers. This situation, however, is not exclusive to OrangeCounty, as most jurisdictions across the United States also have low location quotients in the healthcare sector. Nelson (2009) noted that the benefits of hospitals to the local economy go beyondemployment. 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 Medicarefunding to a local economy by bringing patients from other regions. Exhibit 1: Characteristics of the Health Care Sector in Orange County NAICS Code Location Number of Estimated Number Quotient Establishments of Employees 621 Ambulatory Health 0.75 2,518 26,763 Services 622 Hospitals 0.91 56 39,873 623 Nursing and Residential 0.54 136 7,395 Care 624 Social Assistance 0.48 687 8,743 Source: InfoUSA, Location Quotient Calculator 2009 Location Quotients are based on 2008 employment numbers.International medical tourism is also another avenue used by most hospitals that could be consideredan 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 medicalmeetings with 170,000 attendees in 2008. It is hard to quantify the economic impact of theseactivities, especially when our area receives over 40 million visitors annually.There are two types of hospital facilities: General Medical and Surgical Hospitals (NAICS 62211) andSpecialty Hospitals (NAICS 62231). Orange County has 25 General Hospital facilities that employed39,085 people in 2008. The County has six Specialty Hospitals, all of them oncology clinics thatemploy 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 nationallevel.Healthcare High TechAlthough they do not provide any direct service to patients, high technology companies are becomingan important part of the health care sector. Medical high tech establishments can be classified intotwo main groups: manufacturers of medicine and medical devices and laboratory and researchestablishments. Pharmaceutical and Medicine Manufacturing (NAICS 3254), Electronic InstrumentsManufacturing (3345), and Medical Equipment and Supplies (NAICS 3391) are in the first category.Establishments within these industries produce drugs, medical instruments, and diagnosticequipment used by hospitals and doctor’s offices. These sectors have low location quotients, andbetween them, employ less than 1,000 people (Exhibit 2). Pharmaceutical manufacturing is one ofthe sectors linked to the burgeoning biotechnology sector, and the County’s limited representation inthis sector may be an indicator that biotechnology is not an established sector within the localeconomy. Electromedical Apparatus manufacturing had the highest location quotient of all medicalmanufacturing industries.Two medical high technology sectors had location quotients higher than 1: Medical and Diagnostic ECONOMIC OUTLOOK FEBRUARY 2010
  • 3. Labs (NAICS 6215) and Scientific and Research Development Services (NAICS 5417). InfoUSA datadepict 98 establishments that had more than 2,300 employees (Exhibit 3). Exhibit 2: Medical Manufacturing Establishments in Orange County NAICS Code Location Number of Estimated Number of Quotient Establishments Employees 3254 Pharmaceutical and ND 3 34 Medicine Manufacturing 3345 Electromedical 0.76 5 51 Apparatus Manufacturing 3391 Medical Equipment 0.32 75 511 and Supplies 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 establishmentsThe Medical and Diagnostic Labs sector includes all establishments providing analytic or diagnosticservices to the medical profession or to patients who are referred by a medical practitioner. These firmseither 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 theseimaging centers are establishments that provide CT Scans, MRI, and X-ray laboratories. Exhibit 3: Laboratory Establishments in Orange County NAICS Code Location Number of Estimated Quotient Establishments Number of Employees 54171 Scientific Research 1.22 16 579 and Development Services 6215 Medical and Diagnostic 1.26 82 1,815 Labs 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.Establishments within the Scientific Research and Development Services (NAICS 54171) sectorconduct original investigation or apply their research findings to create new products or services. Thissector, together with the Pharmaceutical and Medicine manufacturing sector, comprises what is oftencalled the biotechnology sector. However, few of the local research establishments do biologicalresearch. Most of the local research laboratories specialize on environmental sciences, energygeneration, and optics.Another sector that may prove to be important for the local biotechnology industry is Blood and OrganBanks (NAICS 621991). These establishments collect, store, and distribute blood and blood productsand body organs. There are ten of these locations in the County, and they employed over 300 peoplein 2008. The professional expertise and lab experience of the workers within this industry could behelpful to the support of the local biotechnology industry. Currently, this sector employs about 300people and has a location quotient of 1.51. ECONOMIC OUTLOOK FEBRUARY 2010
  • 4. Medical WholesaleThe last sector studied was medical suppliers, which distribute specialized equipment for laboratories,hospitals, and medical offices. These include establishments within the Medical, Dental, and HospitalEquipment Supplies (NAICS 42345), Ophthalmic Goods Merchant Wholesalers (NAICS 42346), andOther Professional Equipment and Supplies (NAICS 42349) sectors. The Medical EquipmentWholesale sector had the highest location quotient at 1.38 and employs over 1,300 people. These highnumbers confirm the importance of the medical sector as a purchaser of goods and services in the localeconomy.Cluster DevelopmentOn a national level, economic development theory and site selection initiatives continue to focus on thedevelopment and enhancement of industry “clusters” as indicators of successful economicdiversification and high-quality employment. However, the low location quotients of most of OrangeCounty’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 thefacilities (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 agingof the population and suburbanization trends in Orange County may have contributed to theproliferation of medical facilities throughout the County.Because of the location of health care facilities all through the County, staff made the decision to studyonly the agglomerations of medical services anchored by a large hospital or clinic. The assumption isthat 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 OrangeCounty. Orange Avenue could be referred to as the major health care corridor in Orange County, as twoof the agglomeration areas are located here. The first is located along South Orange Avenue and iscomprised of 8 hospitals and clinics, 317 ambulatory establishments, 27 medical high techestablishments, and 7 wholesale establishments. Over 22,000 people work within this area. OrlandoRegional Healthcare hospital, one of the largest County employers, anchors this agglomeration. Thishospital provides surgical, medical, rehabilitative, and emergency care services and has the area’s onlyLevel One Trauma Center, a specialized service for critical injuries. There are also other generalmedical and surgical hospitals, including the Arnold Palmer Children’s Hospital, the Nemours clinic(children hospitals), and the Winnie Palmer Hospital (obstetrics and gynecological services). Alsolocated here is the MD Anderson Cancer Center, which performs clinical cancer research and iscreating a tissue bank (www.orlandohealth.com).The second Orange Avenue agglomeration is anchored by the Florida Hospital complex near WinterPark, which includes a general hospital, a children’s hospital, and an oncology center. This hospitalcomplex employs over 16,000 people. This area has 12 medical high tech establishments, includingthree medical laboratories, two research and development laboratories, four medical laboratories, onediagnostic imaging center, and two blood and organ banks. With about 350 employees, the FloridaPathology Lab is the largest in the area. The area also has three medical wholesale establishments and153 ambulatory service establishments. Both Florida Hospital and Orlando Regional Heath Care arealso 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 WestColonial Drive, Health Central and Ocoee Family Medical Center. It also includes five medical high techestablishments, including two medical laboratories, one research laboratory, a surgical appliance lab,and a diagnostic imaging center. It also includes two wholesale establishments and 87 ambulatoryestablishments. ECONOMIC OUTLOOK FEBRUARY 2010
  • 5. ConclusionsBased on this research, there are some small agglomerations within Orange County that could bestrengthened to help the overall development of the health care sector in Orange County. The LakeNona “Medical City” area may resemble or surpass these corridors in the future, but there will also besome major differences. The addition of the UCF Medical School is expected to bring additionalresources and research funds to the area. Moreover, the Veteran’s and Nemours Hospitals willprobably bring special programs that are not currently available in Orange County. The threeinstitutions will partner with the Burnham Institute to help increase the amount of clinical research donein our area. Developing a local life science cluster will be challenging, but at the same time, it will helpto diversify the local economy. Exhibit 4: Concentration of Medical Services in Orange County Source: InfoUSA 2009 ECONOMIC OUTLOOK FEBRUARY 2010
  • 6. ReferencesBureau 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.govLOCATION_QUOTIENT/servlet/lqc.ControllerServletCorthright, Joseph and Mayer, Heike (2002) Signs of Life: The Growth of Biotechnology Centers in the U.S. TheBrookings 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 Geographyof Knowledge-Based Industries. Milken Institute.Executive Office of the President, Office of Management and Budget. (2007). North American IndustryClassification System United States 2007. Lanham: BernanInfoUSA Database License Group. (2009). Orange County Business Leads Report .Keller, A. Medical Tourism in Thriving. Florida Trend. Originally published on March 1, 2009. Retrieved fromhttp://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. EconomicDevelopment 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 ofMedicine. Milken Institute [electronic version] Orange County Growth Management Department Planning Division Research & Intergovernmental Coordination Section Post Office Box 1393 Issue Month of Publication Orlando, FL 32802-1393 Economic Research Initiative March Telephone: 407.836.5600 Conclusions Fax: 407.836.5862 E-Mail: planning@ocfl.net ECONOMIC OUTLOOK FEBRUARY 2010