COVER STORY

Exeter Hospital President Kevin Callahan, Dr. Kimberly Marble, Dr. Tom Wharton and Dr. Carol Krasin. PHOTO JACKIE RICCIARDI

For more than 25 years, Kevin Callahan has been an eyewitness to the robust growth of the health care economy in the Seacoast. As the president and chief executive officer of Exeter Hospital, Callahan has seen a $25 million business grow into $250 million health care juggernaut. He oversees a major network of health carerelated services that comes under the umbrella of Exeter Health Resources.

"We are a mirror of the changing economics and demographics of the area," Callahan said. "We're a reflection of society." It's a society that during the past two decades has demanded more care, more services, more specialized services, and wants it all to be affordable. There is no doubt hospitals in the region - Exeter Hospital, Portsmouth Regional Hospital, Wentworth-Douglass Hospital in Dover, Frisbie Memorial Hospital in Rochester and York Hospital in York, Maine - are major economic players.

Often the largest or one of the largest employers in the cities where they are located, they also have vending contracts for hundreds of small businesses that provide a range of supplies, such as food, flowers, Web site design and uniforms. When Wentworth-Douglass spends more than $23 million in major capital projects or Exeter builds a new, $60 million addition to its campus or Portsmouth Regional invests millions in a new medical office building, the multiplier impact on the regional economy can be huge. Wentworth-Douglass has more than 1,600 employees and a payroll of more than $62 million. Portsmouth Regional has a payroll of more than $53 million and pays out another $15 million in staff benefits. Because Portsmouth Regional is a for-profit institution, it also pays up to $17 million annually in local, state and federal taxes.

"We employ more than 2,000 and that's a significant payroll for the community because of the high professional wage base," Exeter’s Callahan explained. But even more importantly, he said, was the harder to define indirect benefit to the community which included more than $10 million in charity care. "We contribute to the overall health status of the community and that is not insignificant," Callahan said. Hospitals are the easiest barometers to measure the more than billion-dollar economy in the Seacoast but not the only one.

Each hospital has scores of affiliated doctors' offices, and there are hundreds more independent physician practices for both primary and specialized care. The region has hundreds of dental offices and the relative wealth and strong demographic mix of the area has led to the development of a thriving alternative medicine industry in which, for example, yoga studios compete vigorously for business, for the health care dollar.

Billions of dollars

Ross Gittell, an economic researcher at the University of New Hampshire, says the Granite State closely follows the national average of health care spending equaling about one-sixth of total economic activity. For New Hampshire that totals more than $8 billion in health care spending.

Nationally, the total is $2 trillion, an amount that is expected to rise to $4 trillion by 2015, according to figures recently released by the federal Centers for Medicare and Medicaid Services. Total health care spending is expected to increase by around 7.2 percent annually, outgrowing increases in wages, inflation and the U.S. economy as a whole. By 2015, health care spending will take up one-fifth of all economic activity due to an aging population that will need and consume more medical care services.

Despite almost guaranteed cost hikes, Gittell said, "people aren't going to stop paying for health care. Demand is going to increase."

Hospitals have become larger, Kevin Callahan of Exeter Hospital said, to meet patient and demographic demand. They compete not only with local hospitals but also those in the Boston area and provide specialty care in a community hospital setting - unthinkable practices 10 to 15 years ago when most specialty care patients were sent to the Boston area.

Stuart Hemming, the chief operating officer of Portsmouth Regional, has been at the hospital for 17 years and finds himself continually amazed at changes taking place. "Who would have thought we would have an infectious disease (specialty)," he asked. In his time, Hemming said the medical staff has doubled to 185 physicians and the goal of creating a state-of-the-art facility with the latest in technological and medical advances has been reached.

By any measure, more health care is being consumed today than ever before. There are more babies being delivered in local hospitals, more varied kinds of surgeries and procedures being offered and more admissions. Private rooms are more available than ever and no hospital is complete without valet parking. The increase in medical offerings, from the most sophisticated in testing tools to basic fitness educational programs, has created an interesting dynamic as the region continues to draw wealthier and older people.

As Gittell of UNH explains, economic development and high quality health care go hand in hand. For example, more businesses are willing to locate in an area with good health care; the higher salaries of the health care workers has a multiplier impact, to name a few, on the local retail and real estate sectors.

And the specialists aren't just found in the hospitals and doctor offices. Allison Mulligan of Portsmouth is a specialist in Thai yoga body work, one of the few in the state with that certification. The 2,000-year-old practice of movement - 117 moves to be precise - and relaxation, Mulligan said, is a perfect fit for the region. "The (Seacoast) community is very progressive with a lot of independent thinkers," Mulligan said. What many of Mulligan's clients have in common is a growing alienation from modern medicine. "They are frustrated with the HMOs and insurance and doctors that don't really know them ... they seek out other kinds of modalities to nurture them," she said.

Stress lines

The health care economy is no more immune to financial ebbs and flows than any other sector. Hemming of Portsmouth Regional said the rise in specialty medicine has led to a decline in primary care physicians who are crucial to delivering quality health care. "It's one of the biggest issues we face," Hemming said.

There is also a severe national nursing shortage which is as threatening as the drop in primary care physicians ranks because nursing has evolved to fill many of the duties formerly carried out by those physicians. Local hospitals are offering flexible work schedules, more career education opportunities and, in the case of York Hospital, workers in critical care areas are eligible for a forgivable housing down payment loan. Affordable housing and health care insurance costs loom as major issues for the health care sector.

One of the remarkable aspects of the massive growth of the health care economy is that it has taken place in an extended era when the daily headlines scream health care crisis. And while the presence of these technological palaces of medicine may suggest otherwise, health care administrators at all levels find planning for the future more difficult than ever. "As we have grown, it becomes more and more of a challenge," Hemming said, to determine where to target limited financial resources. One of the great financial unknowns is how much reimbursement rates will continue to decline for health care providers treating patients covered by Medicare and Medicaid.

Hospitals in the region provide tens of millions of dollars in charity care and write off millions annually in bad patient debt losses. While the current system is volatile, what's coming down the road may be even more unsettling. Planners will have to consider how long the current system of employer-based health care will continue or gauge the impact of more consumer-driven health care reforms.

"We are as best prepared as we can be," said Kevin Callahan. When he started working at Exeter Hospital 25 years ago he thought "the economics of health care were not sustainable." A quarter-century later, Callahan said his opinion has not changed.