MTPR

Economist Weighs In On Billings Clinic Land Purchase

Jan 11, 2016

Last week Billings Clinic announced that it has purchased 54 acres of land in Bozeman.

Economist Bryce Ward at the University of Montana’s Bureau of Business and Economic Research said it’s not surprising to see Billings Clinic expanding its presence in Bozeman.

Billings Clinic is the biggest hospital company in the state. It operates a 304 bed hospital in Billings, is co-owner of Missoula’s Community Hospital, and manages 11 smaller hospitals across Montana, Wyoming and North Dakota. Right now it’s the only facility in Bozeman that has an obstetrics and gynecology clinic.

"They’ve obviously been growing in Billings itself a lot," Ward said. "There’s lots of new buildings over there. It certainly seems like they’re an entity that’s thinking about these things and be a little more aggressive."

Right now, there’s only one hospital in Bozeman, Bozeman Deaconess, which has 86 beds. Ward said there’s obviously going to be a growing need for health care services in the Gallatin Valley.

"Certainly if not now, in the near future. If you look at Gallatin County’s population, it’s basically where Missoula’s was in 2000. Missoula’s had two hospitals for a long time," Ward said. "And if you look at recent population growth rates, just the past three years and project them forward, Gallatin County will be bigger than Missoula County in ten years."

And, ten years from now, Ward said, that larger population is also projected to be significantly older than it is now. People over age 65 now make up about 16 percent of Montana’s population. In a decade, that’s expected to be about 25 percent.

According to Ward, aging population means lots more demand for healthcare.

"Obviously old people spend a lot more on healthcare. 15 years from now, so 2030, we’re going to add I think it’s $2.3 billion in healthcare spending, just from the aging of the population. Which is like a 31 percent increase," he said.

Ward said that beyond people hitting age 65 and becoming eligible for Medicare benefits, there’s another driver boosting the healthcare sector in Montana’s economy. It’s the Affordable Care Act. People are now buying subsidized health coverage on the HealthCare.gov exchange, and more will get coverage through the Medicaid expansion that Montana has chosen to launch this year. Those two things will eventually cut the state’s uninsured rate in half, Ward said. And more people with health coverage means more people getting health services, and having the means to pay for them.

Ward said the forecast for Montana associated with both exchanges and Medicaid expansion suggests that there’s a roughly 4 percent increase  in health care utilization.

"Now, 4 percent seems like a small number, but when you say, look, healthcare spending in Montana is like $7.2 billion or something like that, 4 percent is several hundred million dollars in additional healthcare spending. So I feel comfortable asserting that there will be a positive effect on the healthcare industry from the Affordable Care Act," Ward said.

Ward said healthcare is already Montana’s biggest employer, by a long shot. Healthcare jobs provide about one in five jobs in the state.

He said it’s unclear how many more new healthcare jobs to expect in Montana as the uninsured rate drops, and there’s a need for overall health spending here and across the country to come down. Moves like Billings Clinic buying land in Bozeman could help bring prices down in that particular market.

"In general, more competition in healthcare leads to lower prices, and we see markets that have something that resembles competition kind of consistently have lower prices for the same procedure than markets where there’s a monopolist," he said.

Bryce Ward is an economist and the health care director at the University of Montana’s Bureau of Business and Economic Research.