Technical Notes

In 1996, The Greater San Antonio Chamber of Commerce conducted its first Medical Economic Impact Study.  This effort was sponsored by the Major Industry Council’s Medical Committee, whose overall charge was to maintain, expand, and promote San Antonio as a world-class center of excellence in medical care and the biosciences.  It was widely acknowledged that the Healthcare and Bioscience sector’s contribution to the local economy was substantial, but there had never before been an attempt to quantify that impact.

The Committee subsequently decided to compile this information on a regular, and now biennial, basis.  The present report is the 18^th iteration of the study.

The Medical Committee and its current successor, The Chamber’s Healthcare and Bioscience Committee, have employed an inclusive definition of the Healthcare and Bioscience industry.  It includes not only hospitals and direct healthcare providers (physicians, dentists, optometrists and others), but also medical and biological research centers, producers of pharmaceuticals and other healthcare-related products, health insurance companies and (in the comprehensive version first offered in the 2009 study) medical education.  Publicly funded providers of primary healthcare and health-related social services are also included, as are military and veterans’ healthcare.  The definition of “healthcare” includes both preventive care and the traditional medical services.

Information Sources

The information for the “traditional” estimates presented here is derived from the Texas Workforce Commission’s Covered Employment and Wages database.  This data (total employment and wages) is assembled from unemployment insurance reports to the State.  The data is aggregated by the TWC into the lines of business defined by the North American Industrial Classification System (NAICS) coding framework.   It represents essentially a 100% sample of all the businesses with employees in each NAICS subcode.

The specific subcodes included in this study are listed at the end of the report.  They cover both the healthcare and related industry segments in great detail.

Since the TWC is constantly revising its historical data in the interest of greater accuracy, the data used in this study for 2017 and earlier years reflect many small changes from the data upon which previous Economic Impact Studies were based.  The figures in this report are based upon the latest release of the TWC data, so they represent the most accurate measure now available of the industry and its subsectors in those earlier years.

Selecting which NAICS codes to include is not a simple task.  Often it is obvious that all (or virtually all) of the businesses classified in a given NAICS category are part of the Healthcare and Bioscience industry (for example, NAICS category 32541, Pharmaceutical and medicine manufacturing).  In other sectors, however, health-related products and services make up only a fraction of the activity included in that code.  For example, category 44611 (Pharmacies and drug stores) describes a group of businesses that are an integral part of the healthcare delivery system but which also sell items, like greeting cards, that really do not belong in this sector.

It is therefore a matter of judgment to determine which industries to include and which to exclude.  The rule the Committee followed was to include any 5- or 6-digit (the narrowest definitions) industry that in San Antonio seems to include a high proportion of medical- or bioscience-related businesses and to exclude other categories for which only a small proportion of the included business activity is medically related.  Thus, industry 54171 (Physical, engineering and biological research) was included even though many of the kinds of research described in the NAICS code book are not health-related, because the Committee believes that in this city the largest share of such research is medical or biological in nature.  Similarly, the Committee excluded code 6113 (Colleges, universities and professional schools), even though it includes the UT Health San Antonio and many other educational and research activities relevant to Healthcare and Bioscience, because these programs constitute only a small portion of higher education in San Antonio.  The inclusion of The UT Health Science Center and the Baylor College of Medicine in the comprehensive estimates, using data from a different source, is an attempt to address this limitation.  By following this rule, the overall estimates of employment, payroll and economic impact should be approximately correct even though some relevant activity has been left out and some irrelevant activity included.  Studies using the TWC database will always be constrained to this sort of compromise.  However, the database’s advantages of near-100% coverage of employers, consistent collection procedures and ready availability are considerable.

The information necessary for the inclusion of UT Health San Antonio, the Baylor College of Medicine and the military presence in San Antonio’s medical industry was derived from data supplied by these two entities from their own financial reports.  Since these data are compiled for a different purpose than that reported to the TWC, using different procedures, the additional contributions attributed to these activities must be understood as approximations.  Still, their impact is so great that it would be a significant understatement to exclude them.

Methodology

The TWC provides employment and salary information for each quarter of the calendar year.  The employment figures for the four quarters in each year were averaged to obtain a representative employment level, and payroll figures were computed by summing the wages reported for each of the four quarters.  Average salaries were calculated by dividing the total payroll by the number of employees.

Translating payroll information into economic impact involves the application of a conversion factor.   Sales or revenue for each NAICS industry is calculated from the TWC’s payroll figures using the ratio of sales to payroll for the corresponding industry in the San Antonio Metropolitan Statistical Area as reported in the most relevant economic census.  Thus, conversion factors based on the 2012 Economic Census were applied to data from years 2009-2019; factors based on the 2002 Economic Census were used for the 2004 estimates; while conversion factors based on the 1997 Economic Census were used for 1999 and 1994.  These figures are specific to each NAICS code, and ranged (in 2012) from a low of 1.64 for services to the elderly to a high of 23.842 for druggists’ goods merchant wholesalers.  This conversion factor simply translates payroll information into the amount of economic activity or impact generated for each specific industry.  Sectors in which labor costs are a small portion of total costs will thus have the largest conversion factors.

This conversion factor is not the multiplier often employed in economic impact studies to calculate the total impact of an industry’s export sales on the local economy.  Multiplier effects represent the added impact on a region’s economy from sales or services provided to customers outside that region.  When such sales take place, new money is injected into the local economy, which in turn is spent (in part) on local goods and services.  This additional spending generates economic activity that would not have taken place if all sales had been internal.  Until 2009 none of The Chamber’s Healthcare and Bioscience studies included multiplier effects, but more recently the committee has decided to include them in the comprehensive estimates.  The committee members consulted experts in the many subsectors of the industry to determine plausible export percentages for each.  Since multiplier effects are generated only by export sales, a credible estimate of export percentages is essential to the inclusion of those effects.  The dollar value of the multiplier effects is calculated by applying multipliers from RIMS II model of the U. S. Department of Commerce’s Bureau of Economic Analysis to the estimated export sales.  The BEA updates the RIMS II multipliers regularly, so the estimates presented here use the set of multipliers closest in time to the year being studied.