## INTRODUCTION

If the hospital you are modeling is private, you can simply model spending through Industry 490 - Hospitals. As always, enter as much data for the Industry Event as you have (Output, Employee Compensation, Proprietor Income, and/or Employment). If you have data for more than one of these elements, you can (and should) override IMPLAN’s estimates with your known values.

You can also modify the Industry Spending Pattern and couple that with a Labor Income change to account for any known spending differences in the hospital you are modeling. This technique is known as Analysis-by-Parts (ABP).

## EXAMPLE

Let’s say a new private hospital is going to open in Mecklenburg County. We are told they will spend $5M in operations and $1.5M in Employee Compensation (EC) in their first year. We have no information about Proprietor Income (PI), so we will only enter EC. Remember, Labor Income = EC + PI.

If we are given any further information on the proposed spending by Commodity, we can click the Advanced button and edit the percentages of the Industry Spending Pattern. We may know, for example, that they will not be purchasing anything from a retail store; instead using only wholesalers. We can zero out all Retail Services entering zero in the place of the current percentages. Then, choose Normalize in the Advanced Menu so that the Sum of Percentages is again 100.0%.

Now drag the two Events into the Mecklenburg County Group and hit Run.

Our Results give us Indirect and Induced effects, so we will need to add back in the Direct effect from the information we were given by the hospital.

To calculate our Direct effect for our example, we will examine the Output equation in the model by navigating to the Regions screen, choosing Customize, then selecting Industry 490 - Hospitals.

You can use the template ABP - Recalculating Directs with TOPI and OPI to fill in your data.

**Direct Employment** = known Direct Employment. If Employment is unknown, you can calculate it on your own by dividing Direct Output by Output-per-worker. For this clinic, we know that Output is $5M and Output/Worker is $178,061, so we can divide them and find 28.08 Direct employees.

**Direct Output **= Intermediate Inputs + Value Added. In this example, we know the total Output was $5M.

**Direct Value Added** = Direct Labor Income + Tax on Production and Imports + Other Property Income

- From the Output equation, we know the average TOPI and OPI per worker
- Multiply these figures by the total employment
- Add Labor Income + TOPI + OPI

**Direct Labor Income** = EC + PI.

Now we have our final results table below showing our calculated Direct effect and the modeled Indirect and Induced effects.

## TEMPLATE

ABP - Recalculating Directs with TOPI and OPI

## RELATED TOPICS

Hospitals: Considerations when Conducting Hospital Economic Impacts

Hospitals: Modeling Public & NonProfit Hospital Impacts with Analysis-by-Parts

ABP: Introduction to Analysis-By-Parts

## CASE STUDY

The Economic Impact of Mayo Clinic: Now, Then & All Points in Between

Written August 21, 2019

Updated May 20, 2020

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