Estimating medical industry impacts on a regional economy

Abstract

The authors demonstrate a large-scale, computerized simulation model to estimate the economic impacts of the regional health services industry on a seven-county region in Northeast Minnesota, known as the Arrowhead Region. The model, known as SIMLAB, was developed at the University of Minnesota. SIMLAB is designed to simulate the economic performance of a subnational region. Three scenarios were developed: one to illustrate a regional economy functioning normally, one to show how the area's economy would operate in the absence of its entire health services industry, and one to show the regional economic impacts of the closing of a single major hospital within the region. The first two scenarios were compared, with the differences between them representing the impact estimates for the region. The findings give a graphic demonstration of how vitally important health services are to the region. Without the health sector, the region's total gross output for all industries is estimated to fall by more than $1 billion by 1990. A comparison of the first and third scenarios demonstrates the sensitivity of SIMLAB to smaller but still significant economic dislocations, such as the closing of a single major health care facility.