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FINAL REPORT

ECONOMIC

IMPACT

STATEMENT

ALABAMA COLLEGE OF

OSTEOPATHIC

MEDICINE

2013, 2020 AND 2030

Tripp Umbach

November 15, 2011

ECONOMIC IMPACT STATEMENT

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TABLE OF CONTENTS Study Objectives .......................................................................................... 2

Executive Summary ...................................................................................... 3

First Glance ............................................................................................... 12

Project Overview ........................................................................................ 13

Conclusions ............................................................................................... 30

Appendix A: Ancillary Benefits ..................................................................... 31

Appendix B: Methodology Employed in the Economic Quantification Study ......... 33

Appendix C: Impact Categories .................................................................... 36

Appendix D: Definition of Terms .................................................................. 37


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STUDY OBJECTIVES It is within this framework that Tripp Umbach was retained to quantify the potential range of economic impact of the Alabama College of Osteopathic Medicine (ACOM) on the State of Alabama, Houston County and the surrounding region. This report represents an Executive Summary of economic, employment and government revenue impacts of ACOM. The report also quantifies the potential range of impact of research commercialization in Alabama resulting from the interaction of the broader biotechnology research and business community and the presence of Alabama College of Osteopathic Medicine. The goals of this study included:

To quantify the economic impact of ACOM in 2013 (fiscal year), when the first class of medical students is admitted;

To project the economic impact of ACOM in 2020 and 2030;

o In 2020, the campus will include ACOM, research commercialization, future

workforce and hospital partners such as Southeast Alabama Medical Center; o In 2030, the campus will include all elements from 2020 and the bio‐science

industry cluster expansion.

To project the economic and employment impact of ACOM construction.

To project the economic impact of commercialized research as a result of the presence of a new osteopathic college in Southeast Alabama.

To quantify other ancillary benefits such as cost savings as well as charitable contributions and voluntary services.


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EXECUTIVE SUMMARY Tripp Umbach was retained by the Dothan Area Chamber of Commerce (DACC) to conduct a comprehensive economic impact study of the proposed Alabama College of Osteopathic Medicine (ACOM) on the State of Alabama, Houston County and the surrounding region. Tripp Umbach calculated economic, employment and government revenue impact for ACOM for the

benchmark years 2013, 2020 and 2030.1 ACOM will be Alabama’s first college of osteopathic

medicine to help fill the state’s shortage of an estimated 400 primary care physicians. Developed by the Houston County Health Care Authority and operated by a private, not‐for‐profit board with local and state representation, the college plans to enroll its first class of 150 students in the fall of 2013.2 All impact projections are based on ACOM receiving accreditation from the American Osteopathic Association's Commission on Osteopathic College Accreditation (COCA). Representing more than 78,000 osteopathic physicians (DOs) around the world, the American Osteopathic Association (AOA) serves as the professional family for all DOs and osteopathic medical students. In addition to serving as the primary certifying body for DOs, the AOA is the accrediting agency for all osteopathic medical schools and has federal authority to accredit hospitals and other health care facilities.3 DOs are one of the fastest growing segments of health care professionals in the United States. At the current rate of growth, it is estimated that more than 100,000 osteopathic physicians will be in active medical practice by the year 2020.4 In addition to the DO population growth, the osteopathic medical student population is increasing. In fact, since the fall of 2003, six new osteopathic medical schools, three new branch campuses, and three new additional locations have opened.5 Tripp Umbach developed customized models that calculate the economic, employment, and government revenue impacts associated with the proposed school of osteopathic medicine at Southeast Alabama Medical Center (SAMC). Data used in this study were provided by ACOM and Tripp Umbach. It is important to note that much of the data included in Tripp Umbach’s models were based on actual historic data from medical schools similar in size to the proposed ACOM, as well as previous research with more than 140 osteopathic and allopathic medical schools and more than 400 teaching hospitals.

1 All models are based upon 2011 dollars. 2 "Alabama College of Osteopathic Medicine." Southeast Alabama Medical Center - Dothan, Alabama - 334.793.8111. Web. 13 June 2011. <http://www.samc.org/index.php/ourhospital/acom.html>. 3 "About the AOA." AOA Homepage. Web. 13 June 2011. <http://www.osteopathic.org/inside aoa/about/Pages/default.aspx>. 4 "Growth in the Osteopathic Medical Profession." AOA Homepage. Web. 13 June 2011. <http://www.osteopathic.org/inside-aoa/about/who-we-are/Pages/growth-in-the-osteopathic-medical-profession.aspx>. 5 Ibid.


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For the years 2013 and 2020, the scenarios modeled include projected ACOM operations and ACOM related clinical practice. In 2030, Tripp Umbach assumes that additional health care clinical and research business spin‐offs will have been developed in the region in addition to the entities already present in 2020. Furthermore, the economic impact findings also include those related to the projected research activities in Houston County and the region for the years 2020 and 2030. The report also includes the economic impacts associated with physicians who will graduate from ACOM and practice medicine in Alabama and the region. Finally the report quantifies other ancillary impacts such as associated health care cost savings attributable to primary care physicians who practice in underserved communities. To calculate the economic impact of ACOM and research commercialization in the state of Alabama, Tripp Umbach used a methodology derived from the original set of research tools and

techniques developed for the American Council on Education (ACE).6 The ACE‐based

methodology employs linear cash flow modeling to track the flow of institution‐originated funds through a delineated spatial area. In addition, Tripp Umbach utilized a forward‐linkage modeling methodology to measure the potential impact of ACOM and research commercialization in the state of Alabama. Traditional economic impact studies are based on direct spending and re‐spending, which are driven by the institution’s operations. Forward‐linkage models measure the broader impacts that occur or may occur in the economy as a result of the research and development activities of an institution – beyond the traditional direct and indirect (multiplier effect) impacts. Examples of forward‐linkage impacts include businesses that spin‐off from research activities, new and existing businesses, and sponsored hospital relationships. Tripp Umbach is the national leader in providing economic impact analysis to leading health care organizations and academic health centers. The firm has completed more than 200 economic impact studies for clients such as the University of Alabama at Birmingham, Mayo Clinic, University of Cincinnati Medical Center, Florida International University School of Medicine, Lake Erie College of Medicine (LECOM), Ohio University College of Medicine, and The Ohio State University Medical Center.

6 Caffrey, John and Isaacs, Herbert, "Estimating the Impact of a College or University on the Local Economy,” American Council on Education, 1971.


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STATE OF ALABAMA ECONOMIC IMPACT FINDINGS

Tripp Umbach estimates ACOM will become an important generator of economic impact in Southeast Alabama and statewide. Tripp Umbach estimates that the total economic impact of the osteopathic medical college and other health science programs, the physician workforce who remain to practice in Alabama, the ACOM hospital partners, Southeast Alabama Medical Center, the commercialization of research and the expansion of the bio‐science industry cluster will result in a total economic impact of approximately $295.7 million by 2030. Included in this number are the following components:

o By 2030, the osteopathic college’s operational impact is expected to generate $96.7 million annually.

o In addition to the College’s operational impact, the commercialization of

research is projected to generate approximately $13.4 million in the state’s economy by 2030.

o Research activities associated with ACOM will result in the formation of

startup institutions and businesses. The expansion of the bio‐science industry cluster will result in an economic impact of approximately $25 million by 2030.

o The presence of a strong health care industry in the Houston County region

will assist in attracting future economic development to the state.

The impact of the construction phase of the new medical school will also be significant. The projected price tag for completing ACOM is $47.5 million. The direct and indirect economic impact of the construction phase is projected to exceed $87 million and support approximately 311 construction and support jobs in Alabama.

STATE OF ALABAMA EMPLOYMENT IMPACT FINDINGS

Tripp Umbach estimates that the total employment impact of the osteopathic medical college and other health science programs, the physician workforce who remain to practice in Alabama, the ACOM hospital partners, Southeast Alabama Medical Center, the commercialization of research and the expansion of the bio‐science industry cluster will result in a total employment impact of 1,935 jobs by 2030. Included in this number are the following components:

o ACOM operations are estimated to generate between 104 jobs (2013) and 511 jobs for Alabama residents (2030).


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o The commercialization of research will result in the creation of an additional 58 jobs (2020) and 98 jobs for Alabama residents (2030).

STATE OF ALABAMA GOVERNMENT REVENUE FINDINGS

By 2030, it is estimated that the State of Alabama will receive $13.0 million in total state tax impact due to the presence of the osteopathic medical college and other health science programs, the physician workforce who remain to practice in Alabama, the ACOM hospital partners, Southeast Alabama Medical Center, the commercialization of research and the expansion of the bio‐science industry cluster; thereby receiving approximately $3.00 in taxes for every dollar invested. Included in this number are the following components:

o ACOM will generate substantial tax revenue for the State of Alabama. Operational activities of the new osteopathic college will generate more than $967,000 annually in 2013 and more than $2.9 million annually by 2030.

o Additional government revenue of more than $417,000 by 2020 and more

than $701,000 by 2030 will be generated from the commercialization of research. Further government revenue will accumulate from graduating ACOM physicians who remain in Alabama to practice ($4.8 million by 2030).


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PROJECTED ECONOMIC IMPACTS OF ACOM – STATE OF ALABAMA

Economic Impacts (in millions) 2013 2020 2030 ACOM medical school operations $34.5 $68.2 $96.7 Other health science programs impact - $13.6 $19.3 ACOM graduates who practice in Alabama - $54.6 $91.0 Commercialization of research - $7.9 $13.4 Hospital partner impact - $25.0 $50.0 Bio-science industry cluster expansion - - $25.4

Total Impact (in millions) $34.5 $169.3 $295.7 Employment Impacts (FTEs) 2013 2020 2030

ACOM medical school operations 104 319 511 Other health science programs impact - 64 102 ACOM graduates who practice in Alabama - 401 669 Commercialization of research - 58 98 Hospital partner impact - 184 368 Bio-science industry cluster expansion - - 187

Total Jobs (FTEs) 104 1,027 1,935 Government Revenue (in millions) 2013 2020 2030

ACOM medical school operations $0.9 $2.0 $2.9 Other health science programs impact - $0.7 $1.0 ACOM graduates who practice in Alabama - $2.9 $4.8 Commercialization of research - $0.4 $0.7 Hospital partner impact - $1.3 $2.6 Bio-science industry cluster expansion - - $1.0

Total Taxes (in millions) $0.9 $7.3 $13.0

Table 1: Projected Economic Impact & Sources – State of Alabama Table 1 illustrates the projected economic impact associated with the development of ACOM and the additional economic benefits related to the potential growth of the healthcare and research economy in the future. Initially, economic impact will be generated by the operations of the medical school; however, Table 1 illustrates the projected economic impact over time as additional health sciences programs may be added, physicians trained at ACOM begin to practice in the region and additional economic impacts develop.


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SOUTHEAST ALABAMA ECONOMIC IMPACT FINDINGS

Tripp Umbach estimates that the total economic impact of the osteopathic medical college and other health science programs, the physician workforce who remain to practice in Alabama, the ACOM hospital partners, Southeast Alabama Medical Center, the commercialization of research and the expansion of the bio‐science industry cluster will result in a total economic impact greater than $236.6 million by 2030. Included in this number are the following components:

o ACOM operations are expected to generate $77.3 million in annual economic impact for Southeast Alabama by 2030.

o In addition to ACOM’s operational impact, the commercialization of research

is proposed to generate up to $10.7 million in the regional economy by 2030.

The direct and indirect economic impact of the construction phase is projected to generate $55 million of economic impact and support more than 220 construction and support jobs in Southeast Alabama.

SOUTHEAST ALABAMA EMPLOYMENT IMPACT FINDINGS

Tripp Umbach estimates that the total employment impact of the osteopathic medical college and other health science programs, the physician workforce who remain to practice in Alabama, the ACOM hospital partners, Southeast Alabama Medical Center, the commercialization of research and the expansion of the bio‐science industry cluster will be 1,548 jobs by 2030. Included in this number are the following components:

o ACOM operations are estimated to support between 83 jobs (2013) and 409 jobs (2030) annually for Southeast Alabama residents.

o The commercialization of research will result in the creation of an additional

47 jobs by 2020 and 79 jobs by 2030 within the region. SOUTHEAST ALABAMA GOVERNMENT REVENUE FINDINGS

By 2030, the region will receive $10.4 million in tax revenue as a result of the osteopathic medical college and other health science programs, the physician workforce who remain to practice in Alabama, the ACOM hospital partners, Southeast Alabama Medical Center, the commercialization of research and the expansion of the bio‐science industry cluster. Included in this number are the following components:


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o ACOM operations will generate significant government revenue for Southeast Alabama. Operational activities of the new osteopathic college will generate nearly $774,000 annually by 2013 and more than $2.3 million annually by 2030.

o Additional government revenue will be generated by research

commercialization ($561,000 by 2030) and from physicians who graduate from ACOM and remain in the region to practice ($3.8 million by 2030).

PROJECTED ECONOMIC IMPACTS OF ACOM – SOUTHEAST ALABAMA

Economic Impacts (in millions) 2013 2020 2030 ACOM medical school operations $27.6 $54.5 $77.3 Other health science programs impact - $10.9 $15.5 ACOM graduates who practice in Southeast Alabama

- $43.7 $72.8

Commercialization of research - $6.4 $10.7 Hospital partner impact - $20.0 $40.0 Bio-science industry cluster expansion - - $20.3


ACOM medical school operations 83 255 409 Other health science programs impact - 51 82 ACOM graduates who practice in Southeast Alabama

- 321 535

Commercialization of research - 47 79 Hospital partner impact - 147 294 Bio-science industry cluster expansion - - 149

Total Jobs (FTEs) 83 821 1,548 Government Revenue (in millions) 2013 2020 2030

ACOM medical school operations $0.8 $1.6 $2.3 Other health science programs impact - $0.6 $0.8 ACOM graduates who practice in Southeast Alabama

- $2.3 $3.8



Table 2: Projected Economic Impact & Sources – Southeast Alabama


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HOUSTON COUNTY ECONOMIC IMPACT FINDINGS

Tripp Umbach estimates that the total economic impact of the osteopathic medical college and other health science programs, the physician workforce who remain to practice in Alabama, the ACOM hospital partners, Southeast Alabama Medical Center, the commercialization of research and the expansion of the bio‐science industry cluster will be more than $189.3 million by 2030. Included in this number are the following components:

o ACOM operations are expected to generate $61.9 million in annual economic impact for Houston County by 2030.

o In addition to ACOM’s operational impact, the commercialization of research

is proposed to generate up to $8.5 million in the county economy by 2030.

The direct and indirect economic impact of the construction phase is projected to generate nearly $40 million of economic impact and support approximately 150 construction and support jobs in Houston County.

HOUSTON COUNTY EMPLOYMENT IMPACT FINDINGS

Tripp Umbach estimates that the total employment impact of the osteopathic medical college and other health science programs, the physician workforce who remain to practice in Alabama, the ACOM hospital partners, Southeast Alabama Medical Center, the commercialization of research and the expansion of the bio‐science industry cluster will be 1,238 jobs by 2030. Included in this number are the following components:

o ACOM operations are estimated to support between 67 jobs (2013) and 327 jobs (2030) annually for Houston County residents.

o The commercialization of research will result in the creation of an additional

37 jobs by 2020 and 63 jobs by 2030 within Houston County. HOUSTON COUNTY GOVERNMENT REVENUE FINDINGS

By 2030, Houston County will receive $8.3 million in tax revenue as a result of the osteopathic medical college and other health science programs, the physician workforce who remain to practice in Alabama, the ACOM hospital partners, Southeast Alabama Medical Center, the commercialization of research and the expansion of the bio‐science industry cluster. Included in this number are the following components:


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o ACOM operations will generate significant government revenue for Houston County. Operational activities of the new osteopathic college will generate approximately $619,000 annually by 2013 and nearly $1.9 million annually by 2030.

o Additional government revenue will be generated by research

commercialization ($449,000 in 2030) and from physicians who graduate from ACOM and remain in Houston County to practice ($3.1 million in 2030).

PROJECTED ECONOMIC IMPACTS OF ACOM – HOUSTON COUNTY

Economic Impacts (in millions) 2013 2020 2030 ACOM medical school operations $22.1 $43.6 $61.9 Other health science programs impact - $8.7 $12.4 ACOM graduates who practice in Houston County

- $35.0 $58.2



ACOM medical school operations 67 204 327 Other health science programs impact - 41 65 ACOM graduates who practice in Houston County

- 257 428

Commercialization of research - 37 63 Hospital partner impact - 118 235 Bio-science industry cluster expansion - - 119

Total Jobs (FTEs) 67 657 1,238 Government Revenue (in millions) 2013 2020 2030

ACOM medical school operations $0.6 $1.3 $1.9 Other health science programs impact - $0.5 $0.6 ACOM graduates who practice in Houston County

- $1.8 $3.1



Table 3: Projected Economic Impact & Sources – Houston County


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FIRST GLANCE With a population of 4.7 million residents, Alabama is the 23rd most populous state and growing annually.7 The State of Alabama and Houston County is in a unique position to become a center for advanced health care research, teaching and clinical care through the development of a new medical school in the City of Dothan. The city, which is located in southeast Alabama, serves as the main transportation and commercial hub for a significant part of southeast Alabama, southwest Georgia, and nearby portions of the Florida Panhandle. In addition, it is situated approximately 20 miles west of the Georgia state line and 18 miles north of Florida. Such a school will incorporate and build upon the significant investment already made by the State in the areas of education and health care while helping to improve the overall health for southeast Alabama and the State. The state has heavily invested in aerospace, education, health care, and banking, and various heavy industries, including automobile manufacturing, mineral extraction, steel production and fabrication. According to the United States Bureau of Economic Analysis, the 2009 total gross state product was $165.8 billion. Alabama College of Osteopathic Medicine (ACOM) will become an important economic engine for the region and Alabama, as well as a magnet for local, regional and national health care research and clinical organizations. In addition to training physicians, the proposed medical school will help to improve the quality and availability of health care in the region, foster the development of research, attract dollars to the region, and develop innovations in education and health care delivery. Academic medical centers are among the most important contributors to a state’s economy. Research conducted in 2009 by Tripp Umbach for the Association of American Medical Colleges indicates that medical schools and their affiliated teaching hospitals account for more than $512 billion annually. The national economic impact for osteopathic medical schools and their clinical teaching affiliates is also substantial and will continue to grow relative to growth of the profession. DOs are one of the fastest growing segments of health care professionals in the United States. At the current rate of growth, it is estimated that more than 100,000 osteopathic physicians will be in active medical practice by the year 2020.8 In addition to the DO population growth, the osteopathic medical student population is increasing. The proposed Alabama College of Osteopathic Medicine will support the growth of Alabama’s academic medical industry. The Alabama Osteopathic College of Medicine will train the physicians Alabama needs for the future, provide the opportunity to attract industries that will help build economic infrastructure, develop medical research and improve the health of its citizens. 7 Population Division, U.S. Census Bureau (July 1, 2009), “Annual Estimates of the Resident Population for the United States, Regions, States, and Puerto Rico. April 1, 2000 to July 1, 2009” (NST-EST2009-01). 8 "Growth in the Osteopathic Medical Profession." AOA Homepage. Web. 13 June 2011. <http://www.osteopathic.org/inside-aoa/about/who-we-are/Pages/growth-in-the-osteopathic-medical-profession.aspx>.


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PROJECT OVERVIEW Tripp Umbach calculated both direct and indirect employment numbers for Alabama College of Osteopathic Medicine (ACOM) in all benchmark years.9 It is projected that as ACOM continues to grow and increase the number of students on campus, that staffing levels will increase incrementally. The models are predicated upon specific assumptions which were necessary to project the range of possibilities for the economic, employment and government revenue impacts out into the future. The final impact of physician workforce is based upon the underlying assumption that the ACOM ultimately grows its student body to 160 – 200 students per class. In addition to expanding operations of the osteopathic medical school, the models developed for this report assume scenarios to include the following areas: Alabama Osteopathic College of Medicine and Other health science programs, Physician Workforce, Research Commercialization, Hospital Partners, and Bio‐science Industry Clusters. Scenario development utilized existing osteopathic medical schools and historical growth patterns from inception to present day. For example, Western University of Health Sciences founded in 1977 as the first single site for a college of osteopathic medicine, has grown substantially over the past 34 years. Western University now operates 15 health sciences programs ranging from biomedical sciences to veterinary medicine. Lake Erie College of Medicine (LECOM) is another example of an osteopathic medical school expanding into additional health science program offerings to meet student demand and community need. LECOM was chartered in 1992 and graduated its inaugural DO class in 1997. Approximately 20 years later, LECOM has successfully launched a pharmacy school and will be introducing a dental school in 2012. The economic impact of research is based on scenarios and assumptions from previous Tripp Umbach studies, data collected from the Dothan Area Chamber of Commerce and industry research (See Figure 1).

FIGURE 1: DESCRIPTION OF MODELS AND TIMETABLE FOR ACOM 2013

(Opening) 2020

2030

• College of Osteopathic Medicine


• Other health science programs

• Physician Workforce • Research Commercialization

• Hospital Partners


• Other health science programs

• Physician Workforce • Research Commercialization

• Hospital Partners • Bio‐science Industry Cluster Expansion

9 All models are based upon 2011 dollars.


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ALABAMA COLLEGE OF OSTEOPATHIC MEDICINE - STATE OF ALABAMA OPERATIONAL IMPACT FINDINGS STATE OF ALABAMA OPERATIONAL ECONOMIC IMPACT The net operational economic impact10 of Alabama College of Osteopathic Medicine (ACOM) in 2013 on the state of Alabama is expected to equal $34.5 million. By 2020, the operational impact of ACOM, including other health science programs, is projected to be $81.8 million. In 2030, the overall impact is expected to reach $116.0 million. (See Figure 2)

FIGURE 2: STATE OF ALABAMA OPERATIONAL ECONOMIC IMPACT (DIRECT AND INDIRECT)

10 The operational economic impact of ACOM equals both direct and indirect business volume. Direct impact is defined as the sum of ACOM expenditures for capital, goods and services, staff spending within the study area, and out-of area spending from patients and/or visitors. Indirect impact is defined as the standard multiplier as recommended by American Council on Education representing the re-spending taking place in the study area.

0

20

40

60

80

100

120

2013 2020 2030

$34.5

$81.8

$116.0

in m

illions


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STATE OF ALABAMA OPERATIONAL EMPLOYMENT IMPACT In 2013, the impact of operational employment at ACOM will be 104 new direct and indirect jobs. The impact of employment generated by ACOM and other health science programs in 2020 is projected to be 383 jobs. By 2030, the ACOM and other health science programs are expected to support 613 new jobs (See Figure 3).

FIGURE 3: STATE OF ALABAMA EMPLOYMENT IMPACT11

(DIRECT AND INDIRECT)

2013 2020 2030 DIRECT EMPLOYMENT 58 JOBS 213 JOBS 341 JOBS INDIRECT EMPLOYMENT 46 JOBS 170 JOBS 272 JOBS TOTAL EMPLOYMENT

104 JOBS

383 JOBS

613 JOBS

11 Employment projections presented in this report are based on the experience of actual medical schools that match the profile of the proposed ACOM.

0

100

200

300

400

500

600

700

800

2013 2020 2030

104

383

613

numbe

r of job

s


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STATE OF ALABAMA OPERATIONAL GOVERNMENT REVENUE IMPACT In order to quantify the financial returns to the State of Alabama, the models include a government revenue impact component, which calculates the total state tax revenue generated by ACOM operations. Upon its opening in 2013, ACOM will generate more than $967,000 in government revenue for the State of Alabama. In 2020, Tripp Umbach projects that the state is projected to receive $2.7 million in state tax revenues from ACOM and Other health science programs and by 2030 is projected to receive $3.9 million (See Figure 4).

FIGURE 4: STATE OF ALABAMA OPERATIONAL GOVERNMENT REVENUE IMPACT

0

1

2

3

4

5

2013 2020 2030

$1.0

$2.7

$3.9

in m

illions


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ALABAMA COLLEGE OF OSTEOPATHIC MEDICINE SOUTHEAST ALABAMA REGION OPERATIONAL IMPACT FINDINGS SOUTHEAST ALABAMA REGION OPERATIONAL ECONOMIC IMPACT The economic impact of ACOM operations is expected to be $27.6 million in 2013. The operational economic impact12 of ACOM and Other health science programs on the Southeast Alabama Region is estimated to be $65.4 million by 2020 and $92.8 million by 2030 (See Figure 5).

FIGURE 5: SOUTHEAST ALABAMA REGION OPERATIONAL ECONOMIC IMPACT (DIRECT AND INDIRECT)


0

25

50

75

100

125

2013 2020 2030

$27.6

$65.4

$92.8

in m

illions


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SOUTHEAST ALABAMA REGION OPERATIONAL EMPLOYMENT IMPACT In 2013, the employment impact of operations at ACOM will be 83 new direct and indirect jobs. The operational employment generated by ACOM and Other health science programs in 2020 is projected to be 306 jobs. By 2030, ACOM and Other health science programs are expected to create 491 new jobs (See Figure 6).

FIGURE 6: SOUTHEAST ALABAMA REGION OPERATIONAL EMPLOYMENT IMPACT (DIRECT AND INDIRECT)

2013 2020 2030 DIRECT EMPLOYMENT 59 JOBS 219 JOBS 351 JOBS INDIRECT EMPLOYMENT 24 JOBS 87 JOBS 140 JOBS SOUTHEAST ALABAMA REGION TOTAL EMPLOYMENT

83 JOBS 306 JOBS 491 JOBS

0

100

200

300

400

500

600

2013 2020 2030

83

306

491

numbe

r of job

s


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SOUTHEAST ALABAMA REGION OPERATIONAL GOVERNMENT REVENUE IMPACT In 2013, the total government revenue generated by the operations of ACOM is projected to be $774,000. In 2020, units of local government in the Southeast Alabama Region are expected to receive $2.2 million in revenue from the operations of ACOM and Other health science programs and by 2030 government revenue could reach $3.2 million (See Figure 7).

FIGURE 7: SOUTHEAST REGIONAL ALABAMA OPERATIONAL GOVERNMENT REVENUE IMPACT

0

1

2

3

4

2013 2020 2030

$0.8

$2.2

$3.2

in m

illions


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ALABAMA COLLEGE OF OSTEOPATHIC MEDICINE HOUSTON COUNTY OPERATIONAL IMPACT FINDINGS HOUSTON COUNTY OPERATIONAL ECONOMIC IMPACT The economic impact of ACOM operations is expected to be $22.1 million in 2013. The operational economic impact13 of ACOM and Other health science programs on Houston County is estimated to be $52.3 million by 2020 and $74.3 million by 2030 (See Figure 8).

FIGURE 8: HOUSTON COUNTY OPERATIONAL ECONOMIC IMPACT (DIRECT AND INDIRECT)


0

25

50

75

100

2013 2020 2030

$22.1

$52.3

$74.3

in m

illions


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HOUSTON COUNTY OPERATIONAL EMPLOYMENT IMPACT In 2013, the employment impact of operations at ACOM will be 67 new direct and indirect jobs. The operational employment generated by ACOM and Other health science programs in 2020 is projected to be 245 jobs. By 2030, ACOM and Other health science programs are expected to create 392 new jobs (See Figure 9).

FIGURE 9: HOUSTON COUNTY OPERATIONAL EMPLOYMENT IMPACT (DIRECT AND INDIRECT)

2013 2020 2030

DIRECT EMPLOYMENT 56 JOBS 204 JOBS 327 JOBS INDIRECT EMPLOYMENT 11 JOBS 41 JOBS 65 JOBS HOUSTON COUNTY TOTAL EMPLOYMENT


0

100

200

300

400

500

2013 2020 2030

67

245

392

numbe

r of job

s


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HOUSTON COUNTY OPERATIONAL GOVERNMENT REVENUE IMPACT In 2013, the total government revenue generated by the operations of ACOM is projected to be nearly $619,000. In 2020, units of local government in Houston County are expected to receive $1.7 million in revenue from the operations of ACOM and other health science programs. By 2030 government revenue could reach $2.5 million (See Figure 10).

FIGURE 10: HOUSTON COUNTY OPERATIONAL GOVERNMENT REVENUE IMPACT

0

1

2

3

2013 2020 2030

$0.8

$1.7

$2.5

in m

illions


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ALABAMA COLLEGE OF OSTEOPATHIC MEDICINE – IMPACT OF CONSTRUCTION The impact of the construction phase of the new medical school will also be significant. The projected price tag for completing ACOM is $47.5 million.14 The total amount of projected construction expenditures will not remain entirely within the region. Taking into account leakage of expenditures beyond the geographic area of our analysis, Tripp Umbach estimates the direct and indirect economic impact of the construction phase is projected to exceed $87 million for the State of Alabama and nearly $40 million for Houston County.15 Construction‐related impacts are in addition to the impacts resulting from the operations of the ACOM. (Figure 11)

FIGURE 11: ACOM CONSTRUCTION IMPACT

ACOM CONSTRUCTION IMPACT ALABAMA SOUTHEAST ALABAMA

HOUSTON

COUNTY ECONOMIC IMPACT $87.4 MILLION $54.7 MILLION $38.9 MILLION EMPLOYMENT IMPACT


14 Construction expenditure estimates used in the construction impact modeling were provided by ACOM. Estimates of the geographic distribution of construction expenditures were developed by Tripp Umbach using its national database of previously completed health care economic impact studies. 15 Based upon previously completed studies of health care-related construction projects, Tripp Umbach estimated that 80% of construction expenditures would be made with companies located within Alabama, of which, 80% of would be made with companies located within Southeast Alabama, with 80% of the Southeast Alabama expenditures being made in Houston County.


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ALABAMA COLLEGE OF OSTEOPATHIC MEDICINE GRADUATES WHO PRACTICE IN ALABAMA, THE SOUTHEAST REGION AND HOUSTON COUNTY IMPACT ON STATE OF ALABAMA, THE SOUTHEAST REGION AND HOUSTON COUNTY The U.S. health care system, with its model of medical education led by a faculty deeply involved in research and clinical practice, has created a national resource of health care practitioners with skills and training that can truly be called the best in the world. Medical professionals trained at Alabama College of Osteopathic Medicine (ACOM) will have the opportunity to learn from some of the region’s best physicians and researchers. This depth of teaching excellence will have a real affect on the caliber of medical students attracted to train in the state, and the physicians and other health care professionals who graduate from ACOM beginning in 2016 (after completing residencies with regional hospital partners) will be ready to serve the people of the greater region and Alabama.

By 2030, Tripp Umbach estimates that 535 jobs will be supported by ACOM graduates working as physicians in communities throughout Southeast Alabama, and 669 jobs throughout Alabama. Tripp Umbach estimates that ACOM graduates who practice in Alabama will generate $72.8 million annually in the Southeast Alabama economy by 2030 and $91.0 million annually in the State of Alabama.16 Tripp Umbach estimates that by 2030, the physician “community” of graduates from the new osteopathic college statewide, will generate sustainable employment and state tax revenue. It is important to note that the economic, employment, and government revenue impacts related to ACOM graduates is in addition to operational and research impacts.

FIGURE 12: WORKFORCE EMPLOYMENT IMPACT – ALABAMA

Economic Impacts (in millions) 2020 2030ACOM Graduates who practice in Alabama $54.6 $91.0Employment Impacts (jobs) 2020 2030ACOM Graduates who practice in Alabama 401 669Government Revenue (in millions) 2020 2030ACOM Graduates who practice in Alabama $2.9 $4.8

16 Tripp Umbach estimates from national benchmarks that 50% of all graduates from ACOM will practice medicine in the State of Alabama, with the majority of these graduates practicing in Southeast Alabama.


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FIGURE 13: WORKFORCE EMPLOYMENT IMPACT – SOUTHEAST ALABAMA

FIGURE 14: WORKFORCE EMPLOYMENT IMPACT – HOUSTON COUNTY

Economic Impacts (in millions) 2020 2030Total from ACOM Graduates who practice in Southeast Alabama $43.7 $72.8Employment Impacts (jobs) 2020 2030Total from ACOM Graduates who practice in Southeast Alabama 321 535Government Revenue (in millions) 2020 2030Total from ACOM who practice in Southeast Alabama $2.3 $3.8

Economic Impacts (in millions) 2020 2030Total from ACOM Graduates who practice in Houston County $34.9 $58.2Employment Impacts (jobs) 2020 2030Total from ACOM Graduates who practice in Houston County 257 428Government Revenue (in millions) 2020 2030Total from ACOM who practice in Houston County $1.8 $3.1


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IMPACT OF RESEARCH COMMERCIALIZATION Research and medical innovation will provide multiple benefits beyond pure economics and employment; it is fundamental to the future health status of Alabama residents. The development of a medical school and academic health center in Southeast Alabama is critical to the growth of future medical research in the region and the state. The economic impacts of research go beyond the prevention of future disease‐related costs. Research at academic health centers has a substantial and measurable effect on business formation and economic development. Surveys of research managers, conducted as early as 1985, found that university‐based research is an important source of innovation for industry, especially for those industries in the biological sciences.17 Research performed at the Harvard University Department of Economics has confirmed the relevance and importance of academic health centers and general university‐based research in the generation of spin‐off businesses.18 The findings were particularly strong in spin‐off effects for the drug industry, and the researchers concluded that the spin‐off effects "appear to be large." In fact, a wide spectrum of research since the 1980s indicates that the strength of the university‐to‐business spin‐off relationship is even stronger than Jaffe originally reported, and geographic proximity to the university or academic health center performing the research is an important driver of the location of these business spin‐offs. Alabama’s biotechnology, medical technology and biomedical companies will undoubtedly benefit from the development of a new osteopathic school with a rigorous academic research component. According to research completed by Tripp Umbach with regional economic development officials in major biomedical centers around the country, research is an important factor in the attraction of biomedical businesses. Research activities within the Southeast Alabama region, the employment of world‐class physicians, and the attraction of additional federal research funding represent only the starting point for future economic expansion and employment. This section of the report explores projected economic impacts associated with research commercialization that may be achieved as these discoveries are fully incorporated into medical practices by 2030. ECONOMIC IMPACT OF RESEARCH COMMERCIALIZATION Based on a review of research levels at peer medical schools19, Tripp Umbach estimates that the new Alabama Osteopathic College of Medicine will be able to attract $2 to $5 million in external research funding by 2030. Tripp Umbach used a conservative approach by using an estimate of existing research funding at peer institutions and the opportunity for research funding at such institutions over the past 20 years. 17 Nelson, Richard R., "Institutions Supporting Technical Advance in Industry," American Economic Review, May 1986, pp. 186-189. 18 Jaffe, Adam B., "Real Effects of Academic Research," American Economic Review, December 1989, pp. 957-970. 19 Tripp Umbach reviewed research activities at Ohio University College of Medicine and Lake Erie College of Medicine


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Tripp Umbach developed original economic impact models in 2003 for the Mayo Clinic and University of Minnesota that project the total economic, employment, and government revenue impacts attributable to external research activities. Models used by the Minnesota Partnership on Biotechnology were customized by Tripp Umbach to reflect the unique qualities of the Alabama economy (See Appendix B). Tripp Umbach estimates that the total annual economic impact attributable to commercial applications, start‐up companies, attraction of new companies to the Alabama economy, and growth within existing Alabama‐based companies will be approximately $13.4 million annually by 2030 (See Figure 15). It is important to note that these numbers are in addition to operational economic impact numbers presented in the previous section.

$58.0

$98.0

$47.0

$79.0

0

20

40

60

80

100

120

2020 2030

in m

illions

Figure 15: Economic Impact of Research Commercialization on Alabama: 2020 and 2030 Projections

Alabama

Southeast Alabama


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EMPLOYMENT IMPACT OF RESEARCH COMMERCIALIZATION Tripp Umbach estimates that total created and sustained employment within the state of Alabama attributable to commercial applications, start‐up companies, attraction of new companies to the State, and growth within existing Alabama based companies, will be 98 jobs (See Figure 16). It is important to note that these numbers are in addition to operational employment numbers presented in the previous section.

58

98

47

79

0

20

40

60

80

100

120

2020 2030

Num

ber o

f Job

s

Figure 16: Employment Impact of Commercialization on Alabama: 2020 and 2030 Projections

Alabama

Southeast Alabama


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GOVERNMENT REVENUE IMPACT RELATED TO RESEARCH COMMERCIALIZATION Future taxes to be generated as a result of commercialization of research will equal $417,000 annually by 2020 and $701,000 annually by 2030 (See Figure 17). It is important to note that these numbers are in addition to government revenue from operations presented in the previous section.

$0.4

$0.7

$0.3

$0.6

0.0

0.2

0.4

0.6

0.8

2020 2030

in M

illions

Figure 17: Government Revenue Impact Related to Commercialization on Alabama: 2020 and 2030

Alabama

Southeast Alabama


30

Annual Return on Investment

By 2030, the State of Alabama will receive $13.0 million in

total state taxes as a result of the college of osteopathy and other

health science programs, research commercialization and ACOM trained physicians who remain to practice in Alabama.

CONCLUSIONS In summary, by 2030 the proposed Alabama College of Osteopathic Medicine is expected to generate the following for the State of Alabama:

$295.7 million in annual total economic impact 1,935 total jobs $13.0 million in total tax revenue $87 million of construction related economic impact and support approximately 311 construction and support jobs in Alabama

$36 million in cost savings from medical school graduates practicing in underserved areas.

ACOM is expected to generate the following for the Southeast Alabama region:

$236.6 million in annual total economic impact 1,548 total jobs $10.4 million in total regional tax revenue $55 million of construction related economic impact and support approximately 220 construction and support jobs in Southeast Alabama

ACOM is expected to generate the following for Houston County:

$189.3 million in annual total economic impact 1,238 total jobs $8.3 million in total regional tax revenue Approximately $40 million of construction related economic impact and support approximately 150 construction and support jobs in Houston County


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APPENDIX A: ANCILLARY BENEFITS COMMUNITY BENEFITS RELATED TO ACOM STUDENTS, RESIDENTS, STAFF AND FACULTY

Academic medicine is an intricate linkage of education, research and health care programs. Each of the ACOM students, residents, physicians, faculty and staff have a broad and substantial focus on assisting the communities in which they are a part. The members of the ACOM and associated other health science programs will do more than spend money locally and attract visitors to the region. By 2020, Tripp Umbach projects that $1.7 million will be contributed annually to Alabama through volunteerism and direct donations provided by ACOM students, faculty and employees. In 2030, the number increases to $2.5 million (See Figure 18).

FIGURE 18: TOTAL DONATIONS AND VOLUNTARY SERVICES OF ACOM STUDENTS, RESIDENTS, STAFF AND FACULTY HEALTH CARE COST SAVINGS Significantly, health care research that results in innovative tools for earlier, more accurate disease diagnoses and novel, more effective treatment options likely will reduce health care cost expenditures while improving the overall health of Alabamians. The cost of health care is a critical issue facing the nation and Alabama. While this study does not include detailed economic impact models that calculate the potential cost savings attributable to research activities, a growing body of literature provides some potential insights. Breakthrough research by Silverstein et al. (1995) documented $69 billion in annual economic savings resulted from NIH‐supported research. The return on investment calculated by Silverstein was $7 in health care cost savings for every dollar invested in NIH

0

0.5

1

1.5

2

2.5

2013 2020 2030

$0.5

$1.7

$2.5

Millions


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sponsored research.20 Based on this study, Tripp Umbach estimates that the state of Alabama could achieve approximately $17 ‐ $29 million in health care cost savings by 2030, attributable to increased clinical and biomedical research completed by ACOM between 2020 and 2030. It is noteworthy that increasing medical education through the addition of a new osteopathic college will also provide significant medical cost savings to the state of Alabama. In addition to providing health care services to thousands of Alabamians, Tripp Umbach projects that each future graduate of ACOM who remains in Alabama after graduation and who engages in primary care services in medically underserved areas, will save the state approximately $28 million by avoiding unnecessary medical costs as a result of improved preventive care and access by 2020.21 Cost Savings (in millions) 2020 2030Cost Savings for the State of Alabama as a result of research completed at ACOM

$17.5 $29.4

Cost Savings for the State of Alabama of ACOM graduates practicing in underserved areas

$28 $36

ANCILLARY BENEFITS ‐ CONCLUSIONS

Medical students who remain in Alabama after graduation and who engage in primary care services in medically underserved areas will save the state approximately $36 million in unnecessary medical costs by 2030.

By 2020, $1.7 million will be contributed annually to Alabama through volunteerism and direct donations provided by ACOM students, faculty and employees. In 2030, the number increases to $2.5 million.

By 2030, cost savings to Alabama as a result of research completed at ACOM will equal approximately $30 million.

20 Cost Savings Resulting from NIH Research Support, NIH Publication No. 93. Silverstein, H.H. Garrison and S.J. Heinig, 1995. 21 Tripp Umbach estimates a medical school graduate who provides primary care services in an underserved area within Alabama will save the state $3.6 million. Tripp Umbach’s model estimates at a minimum that 5% of all graduates will remain in the State of Alabama and will be engaged in the provision of primary care in underserved areas.


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APPENDIX B: METHODOLOGY EMPLOYED IN THE ECONOMIC

QUANTIFICATION STUDY Tripp Umbach has performed more than 200 economic impact studies for both academic institutions and large health care systems, including the University of Alabama at Birmingham, Mayo Clinic Rochester, Mayo Clinic – Florida entities, UPMC Health System, and North Mississippi Health System. The methodology generally employed in these studies was originally derived from a set of research tools and techniques developed for the American Council on Education (ACE).22 The ACE‐based methodology employs linear cash flow modeling to track the flow of institution‐originated funds through a delineated spatial area. While this methodology is generally well suited to evaluate a hospital's impact on its local service area, it tends to be too limiting for a project with the complexity of a medical school with integrated systems. Based on previous economic impact studies performed for academic health centers in Pennsylvania and Virginia, Tripp Umbach recommended that the traditional model of economic impact for hospitals (see Figure 1), based on the ACE model, be modified for the purposes of this research.

Figure 1

22 Caffrey, John and Isaacs, Herbert, "Estimating the Impact of a College or University on the Local Economy,” American Council on Education, 1971.

Business spin-offsfrom research

& staff expertise

Hospital Economic Impact(A Traditional Model)

Multiplier Effect(Respending of hosp-

related income)

Hospital

Spending bypatients

Total ImpactTax receipts for

state & localgovernment

Direct hospital spending for goods

& services

Spending by staff, physicians &

facultySpending by

VisitorsSpending by

Students

Direct Impact(Business Receipts)


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The "traditional" model of hospital economic impact provides a good measure of the impact of hospital expenditures and their flow within an economy. However, the model does not account for the origination of hospital revenues, and thus counts the spending of revenues received by the hospital from in‐state sources. The traditional model counts some of the spending of dollars that already existed in the Alabama economy. The Tripp Umbach research team felt it important to distinguish the economic impact of ACOM that is attributable to funds brought into the state from out‐of‐state sources. The application of this "fresh dollar" model provides a first‐line measure of the initial direct expansion in the state economy caused by ACOM. The final model concept evolved into a hybrid model including a fresh‐dollar approach feeding into a traditional model which tracks in‐state spending. Thus the final model used for this research (See Figure 2) measures funds brought into the state together with the ultimate flow of these funds through the Alabama economy and the effect on economic expansion, job growth and enterprise development. The final methodology closely matches the impact study methodology recommended for individual medical schools and used in previous Tripp Umbach studies for accredited osteopathic medical schools.

Figure 2: ACOM Impact Model

Inputs

Economic impact outcomesfor traditional model.

Separated into figures fortotal economic impact &

impact allocable to out-of-state dollars

Hospital spending inthe state

(Start-point for traditionalmodel)

Out-of-state funds receivedby academic health center(gain for state economy)

Out-of-state patientsand their insurers

Out-of-statevisitors

Out-of-statestudents

Visiting doctors& faculty

Out-of-stateresearch funds


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Tripp Umbach researchers worked closely with representatives from ACOM to acquire the primary data utilized in this study. Tripp Umbach utilized a forward‐linkage modeling methodology to measure the potential impact of the commercialization of research and related commercial spin‐offs in Alabama, Southeast Alabama and Houston County. Traditional economic impact studies are based on direct spending and re‐spending within the economy (multiplier effect) driven from the institution itself. Forward‐linkage models measure the broader impacts that occur or may occur in the economy as a result of the research and development activities of an institution – beyond the traditional direct and indirect impacts. Examples of forward‐linkage impacts include new businesses based on academic research discoveries, academic intellectual property licensed to existing businesses for development, and sponsored research relationships. Original research conducted by Tripp Umbach for the Mayo Clinic and University of Minnesota was used as a starting point for customized analysis. The Mayo Clinic and University of Minnesota research involved the creation of a series of 36 customized economic impact models based upon numerous assumptions. The basic architecture of these models is the methodology most widely accepted within the industry. Due to the complexity of measuring the impact of biotechnology and medical research, Tripp Umbach researchers developed a series of customized economic impact models showing the economic, employment and government revenue impacts of both the recipient institutions and potential business spin‐offs in the calendar years 2020 and 2030. The linear cash flow models developed for this project represent annual, point‐in‐time economic impact projections. Economic projections for each scenario are based upon a specific and detailed set of assumptions. Each assumption is based upon secondary data research, primary research and Tripp Umbach’s industry expertise.23 Key Assumptions for Research Commercialization Models:

Each scenario assumes that research funds will be leveraged to generate research funding from other sources (leveraged funding), primarily by the attraction of National Institutes of Health (NIH) research support.

Each scenario assumes that other state and private programs designed to assist life science companies will continue through 2030.

23 Tripp Umbach is confident in the model construction and projections presented herein; however, shifts in the overall economic climate in the state and nation and changes in state governmental policy toward biomedical science and medical research are not calculated or accounted for in this study. The projections presented in this study are based upon the state moving forward to make medical research and health care services an increasingly important industry sector in the South Alabama region.


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APPENDIX C: IMPACT CATEGORIES ACOM Medical School Operations – The economic impacts associated with the expenditures related to operations of the college of osteopathic medicine. Non‐ACOM Educational Impact – The potential development of additional economic benefits generated by the development of additional educational programs affiliated with a college of osteopathic medicine; i.e. physician’s assistant, nursing, etc. ACOM Graduates Practicing in Alabama, Southeast Alabama and Houston County – The economic impact associated with graduate physicians from ACOM practicing in the area. Commercialization of Research – The generation of research related economic impact (spin‐off businesses and companies) as a result to increased research efforts attributable to the developing college of osteopathic medicine. Hospital Partner Impact – The additional economic impact that hospital partners which include, Southeast Alabama Medical Center and possibly others, will have in the future due to increased economic activity and operations affiliated with the college of osteopathic medicine such as expanded residency programs. Bio science Industry Cluster Expansion ‐ The generation of bio‐science related economic impact (spin‐off businesses and companies) as a result to increased research efforts attributable to the developing college of osteopathic medicine.


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APPENDIX D: DEFINITION OF TERMS

TOTAL ECONOMIC IMPACT The total economic impact of an institution includes both the direct economic impact and the indirect economic impact, generated in the economy as a result of the direct impact. Direct impact includes items such as institutional spending, employee spending, and spending by out‐of‐area visitors to the institution. Indirect economic impact, also known as the multiplier effect, includes the re‐spending of dollars within the local economy.

TOTAL STATE BUSINESS VOLUME Total sales receipts generated within a given geographic area (State of Alabama, Southeast Alabama and Houston County). Business volume includes wholesale, retail, service sector spending as well as value added in the manufacturing process.

MULTIPLIER EFFECT The multiplier effect is the additional economic impact created as a result of the institution’s direct economic impact. Local companies that provide goods and services to an institution increase their purchasing, creating a multiplier.

INDIRECT TAX PAYMENTS Government revenue that is collected by governmental units in addition to those paid direct by an institution, including taxes paid directly by employees of the institution, visitors to the institution, and vendors who sell products to the institution.

DIRECT EMPLOYMENT Total Employees based on Full‐Time Equivalents (FTEs).

INDIRECT EMPLOYMENT Indirect employment is the additional jobs created as a result of the institution’s economic impact. Local companies that provide goods and services to an institution increase their number of employees as purchasing increases, creating an employment multiplier.

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