Indiana University Bloomington

Indiana's nonprofit health care industry: a source of economic growth

  • Sept. 17, 2013

FOR IMMEDIATE RELEASE

BLOOMINGTON, Ind. -- As Indiana recovers from the Great Recession, a new Indiana University report shows the state’s nonprofit health care industry is a stable source of growth and high-paying jobs.

Researchers found the industry thrived even during the depths of the recession and is now a leading contributor to the state’s slow but steady recovery, concluding: “Health care nonprofits not only provide critical services but also employ a significant number of workers with wages higher than most other Indiana industries.”

From 1995 to 2011, employment in Indiana health care nonprofits grew more than a third, and nonprofit payroll in health care grew 65 percent (adjusted for inflation).

“Over the time period, health care was a dominant force in the nonprofit sector, employing more than half of Indiana’s nonprofit employees: over 137,700 in 2011,” the report says. “Importantly, nonprofit payroll in all three major health care sub-industries -- hospitals, nursing and residential care facilities, and ambulatory health care services -- increased almost every year.

This is familiar territory for this industry. During the recessions of 2001-02 and 2007-09, total nonprofit health care payroll increased from $4.4 billion to $4.7 billion and from $5.1 billion to $5.5 billion, respectively.

“In this way, nonprofits in health care helped to offset contraction in other Indiana industries, lessening the severity of the recessions,” said Kirsten Grønbjerg, the Efroymson Chair in Philanthropy at the Lilly Family School of Philanthropy in Indianapolis and a professor at the Indiana University Bloomington School of Public and Environmental Affairs.

Grønbjerg is the project director and lead author of "Indiana Nonprofit Employment: Historical Trends in Health Care, 1995-2011." The report is a joint project of SPEA, the Indiana Business Research Center at IU's Kelley School of Business, the Indiana University Lilly Family School of Philanthropy and the Johns Hopkins Center for Civil Society Studies.

The report also documents the growing competition between nonprofit and for-profit sectors and shows that both the nonprofit and the for-profit sectors added employees and establishments over the period. Some of the growth reflects privatization of government facilities and is especially visible in hospitals and facilities for nursing and residential care.

In the health care industry overall, for-profits have the largest share of employment and almost 10 times more establishments than the nonprofit sector. This pattern reflects the types of establishments in each sector. Nonprofits dominate the very large hospital complexes with around 65 percent of workers. Meanwhile, for-profits employ the majority of employees in nursing homes and residential care services as well as in ambulatory health care services. Nursing homes and residential care services employ many workers who are low-paid and/or part-time, while ambulatory health care services include smaller firms such as doctors’ and dentists’ offices, urgent care clinics and home health care services.

Across all sectors, average wages in health care increased from 1995 to 2011. Nonprofit health care employees, disproportionately working in hospitals, saw their wages increase on average from $34,800 in 1995 to $42,100 in 2011, a 21 percent increase adjusted for inflation. The relatively few government employees, also mainly working in hospitals, saw the largest increase in wages, from $34,600 in 1995 to $44,600 in 2011, a 29 percent increase. For-profit wages increased just less than 1 percent during the time frame, from $40,800 to $41,200, reflecting in part the low wages in nursing homes and residential care services.

This report confirms that Indiana’s health care industry has expanded rapidly in terms of employment, payroll and wages in the past decade and a half, and also that nonprofits have been a large component of this growth. The integral role of nonprofits in health care expansion is particularly remarkable. They face pressure from for-profit competition and rapidly shifting federal and state health care policies. They’re also under fiscal constraints since unlike for-profits, they are unable to raise capital from investors and so are reliant on service fees, contracts and donations to operate. 

Public policy will, without a doubt, remain a dominant factor in the health care industry as many of the major components of the Patient Protection and Affordable Care Act are about to come into effect and will affect how Hoosiers pay for health care. This report provides a baseline profile of the Indiana health care industry and will help document how the new payment structures will affect the composition of the industry, if at all.

“The challenges facing nonprofits are likely to become more acute as the population grows and ages with increased life expectancy, and as government pressure to rein in costs places additional demands on the medical system,” Grønbjerg said. “Nonprofits must simultaneously meet these challenges while balancing their traditional role as providers of care for citizens who are marginalized and in need.”

Given the resiliency and adaptability illustrated by historical trends in the health care industry, the report’s authors say it seems likely that nonprofits will continue to play a significant role in the health and safety of Indiana residents.

More about the report:

The report is the eighth nonprofit employment report in the Indiana Nonprofits: Scope and Community Dimensions project, which Grønbjerg directs. The full report and a four-page summary are available online.

Co-authors are IU doctoral students Kellie L. McGiverin-Bohan and Lauren Dula and master’s students Weston Merrick, Alexandra Toledo, Deb Seltzer and Katherine Zilvinskis.

For more information or to speak with Grønbjerg, contact Jim Hanchett at the School of Public and Environmental Affairs, 812-856-5490 or jimhanch@indiana.edu, or Steve Hinnefeld at IU Communications, 812-856-3488 or slhinnef@iu.edu.

About the School of Public and Environmental Affairs

SPEA is a world leader in public and environmental affairs and is the largest school of public administration and public policy in the United States. In the 2012 "Best Graduate Schools" by U.S. News & World Report, SPEA ranks second and is the nation's highest-ranked professional graduate program in public affairs at a public institution. Four of its specialty programs are ranked in the top-five listings, including nonprofit management, ranked first. SPEA's doctoral programs in public affairs and public policy are ranked by the National Academy of Science as the best in the country.

About the Lilly Family School of Philanthropy

The Indiana University Lilly Family School of Philanthropy is dedicated to improving philanthropy to improve the world by training and empowering students and professionals to be innovators and leaders who create positive and lasting change. The school offers a comprehensive approach to philanthropy -- voluntary action for the public good -- through its academic, research and international programs and through The Fund Raising School, Lake Institute on Faith & Giving and the Women’s Philanthropy Institute. 

About the Indiana Business Research Center

The Indiana Business Research Center, an integral part of Indiana University's Kelley School of Business since 1925, collects, transforms and interprets vast amounts of data for and about Indiana and the nation. The center's work product includes multiple websites, including STATS Indiana, STATS America, The Stats House and, in partnership with the Indiana Department of Workforce Development, the Hoosiers by the Numbers workforce data site. Its keystone publications are the Indiana Business Review and IN Context.

About the Johns Hopkins Center for Civil Society Studies

The Johns Hopkins Center for Civil Society Studies is a leading source of research and knowledge about the nonprofit sector, social investing and the tools of government. The center's research and educational programs seek to improve current understanding, analyze emerging trends and promote promising innovations in the ways that government, civil society and business can collaborate to address social and environmental challenges. The center is directed by Dr. Lester Salamon and is part of the Johns Hopkins Institute for Health and Social Policy.

Related Links

Kirsten Grønbjerg

Kirsten Grønbjerg

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Media Contacts

Jim Hanchett

  • School of Public and Environmental Affairs
  • Office 812-856-5490
  • jimhanch@indiana.edu

Steve Hinnefeld