Dominance of the Johns Hopkins

Institutions in the Baltimore Economy

from Putting Baltimore's People First (2004)

If increasing low service sector wages is to be the engine of a responsible economic development plan, the plan must begin by examining the critical role of the employer that has the most profound impact on Baltimore's private-sector economy: the Johns Hopkins Institutions. As the largest private employer in the state of Maryland, with over 46,00 employees in 2002, the Johns Hopkins Institutions have surpassed and replaced Bethlehem Steel and other manufacturing industries as the economic powerhouse of Baltimore's new economy.

Hopkins' Profitability

According to a report commissioned by Hopkins, the non-profit Johns Hopkins Institutions -- comprised of Johns Hopkins University, the Schools of Medicine, Public Health, Nursing, and other post-graduate institutions, as well as the Johns Hopkins and Health System -- generate over $7 billion in business statewide: one of every 28 dollars in the Maryland economy.

The Hopkins Institutions are among the most "profitable" of all private institutions in Maryland, both non-profit and for-profit. The Hopkins Institutions earned a combined income of over $200 million in the 2002 fiscal year. Their unparalleled renown in research and medical care attracts more grant funding than any other academic institution: $1.4 billion in 2002, more than twice the amount of the second-highest ranking recipient.

From the National Institutes of Health alone, Hopkins received $510 million in 2002, nearly $100 million more than the second-highest recipient [University of Pennsylvania, $418,546,510; University of Washington, $405,729,042; University of California at SF, $365,364,909; Washington University, $343,792,077] of NIH grants.

The Hopkins Institutions also regularly attract the nation's top doctors and medical students, having earned Hopkins Hospital the top spot in US News and World Report's annual hospital rankings for 13 years in a row.

Tax-Exempt Status

The Hopkins Institutions' non-profit status does not come without a cost. As Baltimore struggles with a dwindling tax base, the City's charitable institutions, and Hopkins in particular, generate an ever greater portion of overall income -- and these institutions are exempt from taxes. Within Baltimore City alone, Hopkins Institutions own $505 million worth of tax-exempt property, according to current tax assessments.

Were these properties subject to taxation, Hopkins would have to pay $12 million a year in property taxes to the City. Instead, the burden of paying for schools and other services falls on the rest of Baltimore's residents and businesses.

The Johns Hopkins Hospital

The Johns Hopkins Hospital plays an enormous role in both the Hopkins universe and the local economy. Johns Hopkins Hospital generated over $40 million in net operating income for the system as a whole in 2002, more than double the amount it earned the year before, and its total fund balances (net worth) grew $110 million for the five years ending in fiscal year 2002, to a total of $380 million.

As a non-profit entity, the hospital is obliged to reinvest those earnings in the community which it serves.

In comparison to other hospitals, however, Johns Hopkins Hospital devotes a much smaller percentage of its care to local residents. According to the Hopkins report . . . nearly one quarter of all Johns Hopkins Hospital's total revenue came from out-of-state patients, compared to just 4% at Bayview Medical Center and just over 2% at Howard County General Hospital, both components of the Johns Hopkins Health System.

Indirect Funding: Hidden Subsidies

As noted above, a substantial number of Hopkins Hospital service workers are eligible for public assistance while working full-time at the hospital. Thus public assistance to full-time workers is a hidden government subsidy to the hospital, supplementing the low wages it pays to its service employees. As the chart below shows, Hopkins and other Baltimore hospitals shift the burden of wage payments into the community at large

Shifting the Burden of Low Wages

A Hopkins Hospital environmental service worker who earns an annual income of $20,800 a year ($10/hour) while supporting two children, qualifies for the following public assistance programs:

America's Leading Hospital Is No Wage Leader

Johns Hopkins Hospital employs far more workers than any other hospital in the City. Including Hopkins Bayview Hospital, Johns Hospital medical institutions account for 35 percent of the city's hospital workforce. [Bon Secours 2%; Maryland General 4%; Harbor 5%; Mercy 6%; Good Samaritan, 7%; St. Agnes 8%; Union Memorial, 8%; Sinai 8%; University of Maryland 11%]

Hopkins thus has the greatest influence over wage rates among Baltimore hospital employers. Yet Hopkins Hospital is not the wage leader among Baltimore hospitals.

[Compared to wages paid by University of Maryland Medical Systems and Prince Georges Hospital Center, Hopkins 2003 Wages comes in 3rd for the positions of Maintenance Mechanic (slightly above $18/hour), Nursing Aide (less than $14/hour), File Clerk (less than $12/hour); Environmental Service Worker ($10/hour); Dietary Aide (less than $10/hour)]

Despite the millions it earns in net income, Johns Hopkins Hospital directs only a small portion of its tax-exempt earnings toward raising the wages of its most poorly paid employees. Despite Hopkins' robust growth and profitability, the wages it pays its employees fall well behind the wages paid to service and maintenance employees at a number of other private Maryland hospitals.

In many job classifications, Hopkins Hospital's average base wage rates rank in the bottom half of all Maryland acute care hospitals. many of the hospitals leading Hopkins in wages are also located in Baltimore, and earn far less in net operating revenue than Johns Hopkins.

Hopkins service and maintenance employee wage policies are clearly independent of the hospital's ability to pay. Hopkins simply chooses not to pay.

The result of that choice is a longstanding wage stagnation for all Baltimore health care workers. Other employers don't have to pay middle-class wages if Johns Hopkins does not.

Higher Wages in Hospitals' Interest

Henry Ford realized early in his career the self-interest employers have in paying their workers fairly: besides providing labor, employees make up much of the industry's consumer base. Ford could not expect to sell cars if his own workers were not paid enough to afford one of their own.

Baltimore's hospitals could learn from this example.

Johns Hopkins, geographically, serves a community with enormous needs for health care services, yet without sufficient means to pay for them. 

[Baltimore area residents spent an average of $4,252 on health care, compared to $3,532 for those in the national capital area. Low wage workers, who are heavily concentrated in Baltimore, are far less likely to receive fully-paid health insurance from their employers. Few low-wage workers can afford to pay for private health insurance. . . . The rate of increase of out-of pocket health care expenses for Maryland residents continue to rise -- There are 550,000 Marylanders who are without any form of health insurance.]

Nationwide, predominantly minority minority and low-income neighborhoods such as East Baltimore, where the Hopkins medical campus is located, have some of the highest rates of asthma, diabetes, cardiovascular disease, sexually transmitted diseases and HIV-related illnesses.

Baltimore area residents already spend more on health care than residents of other regions in Maryland. When they cannot afford health coverage, however, many are either forced to rely on charity care, at great cost to the hospital, or forego care entirely until their situation is dire, at great cost to the entire community.

Better wages would go  directly into the community Hopkins serves, resulting in increased utilization of health services, a shift in reliance from emergency facilities to preventive medicine, and a greater number of privately insured patients, improving the hospital's payor mix.

Additionally higher wages decrease employee turnover and cut down on training costs, allowing for a more stable workforce to provide hospital services. Workforce stability is of great importance for patient care. Studies show that patient satisfaction and employee satisfaction at hospitals go hand in hand.

A Matter of Public Policy

Raising hospital workers' wages needs to become more than an issue of employer responsibility to Baltimore. It needs to become a matter of public policy, as well, if only to prevent the further deterioration of the communities in which health industry employers like Johns Hopkins and other hospitals operate.

Bold and visionary leadership is needed to compel trend-setting employers like Johns Hopkins to pay self-sufficiency wages, at the very least, to the workers they employ.

If the influence of such leadership is not brought to bear on Baltimore hospitals, these hospitals and the service sector employers that compete with them for labor will only continue to pay wages so low as to force their employees to rely on public assistance, creating additional burdens for a city that already lacks sufficient resources.

If leading Baltimore hospitals like Johns Hopkins are encouraged to raise their wages to self-sufficient wages levels, the rising incomes and spending power of Baltimore service workers will be harnessed as a major engine of economic growth and development that will contribute to meeting the human needs of Baltimore families, local businesses, and struggling communities of our city.

Source: Putting Baltimore's People First: Keys to Responsible Economic Development of Our City (2004). For your copy contact: District 1199E-DC, SEIU, AFL-CIO / 611 N. Eutaw Street, 2nd Floor, Baltimore, MD 21217 / 410.332.1199 / 202.328.0321 / Fax: 410.332.1291

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update 24 July 2008