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Commonwealth:  A Journal of Political Science       Volume 14, Number 1      December 2008 
Special Policy Issue on Public Health             2008 PPSA/LORL, PA House of Reps.  ISSN 0890-2410 

 

 

 

Financial Analysis and Structural 
Considerations to the Problem of Rural Public 

Health in Pennsylvania* 
 

Alberto J.F. Cardelle, PhD, MPH, East Stroudsburg University 

 

Abstract 
Currently, none of Pennsylvania's 48 rural counties has a local health 

department (LHD). This is despite the existence of laws that provide 
locales with per capita funding for public health and environmental 
services. This study examines the financial issues that may influence the 
establishment of a robust public health infrastructure in rural areas. The 
study looks at 10 rural counties in the state and, through financial 
analysis of different LHD models (using the 2003-04 financial data) for 
rural counties, helps demonstrate that the relatively high levels of local 
funds required to establish LHDs would be a major financial 
undertaking. Testing three models – single-county, bi-county and tri-
county LHDs – the study shows that locales would require an average of 
$16 per capita annually in local funds. The model analysis shows that 
small population size, large geographic area, and the low availability of 
primary care services drive expenses higher. Since rural counties have 
low population density, cover broad geographic expanses, and suffer 
from chronic lack of primary care services, rural LHDs covering rural 
counties have to cover a very large geographic area, a critical cost driver 
especially for environmental services such as water supply testing. 
Geographically large rural counties are also pressured to provide 
personal health services given the limited number of primary care 
providers. The result is a local health department with very high 
expenses. The paper concludes with policy considerations that may help 
to overcome these barriers, including establishing secondary formulas 
that are an alternative to per capita funding as well as creation start-up 
costs funds. 
 
 
*The research for this article was funded by the Center for Rural Pennsylvania. 



100 FINANCIAL ANALYSIS AND STRUCTURAL CONSIDERATIONS TO 
THE PROBLEM OF RURAL PUBLIC HEALTH IN PENNSYLVANIA 

 
 

 

Introduction 

In Pennsylvania, the creation of local public health departments 
(LHD) is left to the discretion of local government. This has meant that 
out of 67 counties in the Commonwealth of Pennsylvania, only five have 
a LHD.  In addition, five municipalities have local health bureaus.1 All of 
the 42 rural counties in Pennsylvania lack a LHD, meaning that 
2,824,642 persons or 23% of the Commonwealth’s population lack the 
services of a LHD. In the eventuality of a disease outbreak in any of the 
42 rural counties of Pennsylvania, it is fair for the residents of these 
counties to ask, “Whom should we call?” In 2003, when 500 people in 
Beaver County, Pennsylvania, were infected with Hepatitis A as a result 
of eating at a local restaurant, the county had to rely on nurses and 
physicians mobilized by the Pennsylvania Department of Health from 
other parts of the state to complete the necessary vaccinations and carry 
out the necessary epidemiological investigations. While Beaver County 
is not rural, the hepatitis outbreak highlighted many of the difficulties 
faced by counties without a LHD. Although the source of the outbreak 
turned out to be contaminated food, the contrast between counties with 
LHDs and those without LHDs emerged. For example, it became evident 
that restaurants in Beaver County were inspected by the State 
Department of Agriculture, while those in Allegheny County, just over 
the county line, are regulated by one of 15 restaurant inspectors in the 
Allegheny County Health Department. While inspectors from both 
agencies look at the same food safety practices, the Allegheny County 
Health Department requires that restaurants always have an employee 
on-site who is trained in food safety by the county or an equivalent 
program in food safety (Rotstein and Snowbeck 2003). The events in 
Beaver County suggest that Pennsylvania’s 42 rural counties lack the 
necessary resources to address a disease outbreak.   

According to the Health Resources and Services Administration 
(HRSA), the estimated national public health workforce – including 
federal employees and the salaried staff of a limited number of voluntary 
agencies – is 448,254 employed workers, a ratio of 138 per 100,000 
persons. Pennsylvania has 37 workers per 100,000 people, the lowest 

                                                 
1Counties with health departments are Montgomery, Bucks, Chester, Erie, and 
Allegheny; municipal bureaus include Philadelphia, York, Allentown, Bethlehem, and 
Wilkes-Barre. 



Alberto J.F. Cardelle         101 
 
 
 

 

ratio of public health workers to population in the nation.  Of the federal 
workforce, 3.6% are identified as holding official/administrative 
positions, 44.6% are in professional positions, 13.9% in technical 
positions, and 12.9% in clerical/support positions.2 In stark contrast in 
Pennsylvania, 12% of the public health workforce is identified as holding 
official/administrative positions, 49% are in professional positions, 6% in 
technical positions, and 20% in clerical/support positions. Therefore, not 
only does Pennsylvania have the smallest public health workforce, it has 
a very low percentage of professionals in the technical fields, particularly 
in the areas of mental health and substance abuse (Gebbie 2000).  

Pennsylvania Act 315, passed by the legislature in 1951, governs the 
establishment of LHDs. In accordance to Act 315, county health 
departments will receive a grant equal to 50% of the total of the 
department expenditures but not to exceed more than $6 for every person 
within the jurisdiction of the county department of health. Additionally, 
Act 12 provides established LHDs an additional annual grant of not more 
than $1.50 per capita resident for environmental health services provided 
by the county or municipality. Therefore, existing legislation provides 
any county with a LHD up to $7.50 per capita resident in funding. In 
addition to these grants, areas with LHDs have increased likelihood of 
qualifying for state and federal categorical health grant funding. Across 
the state, existing LHDs receive an average of $3.14 per person in 
categorical grants. Many federal categorical health grants are available 
only to local health departments, and even those for which it is not 
necessary to have a LHD, counties with LHDs have a significant 
comparative advantage.  

Given these health and financial advantages to establishing LHDs, 
this paper identifies the structural and financial obstacles that keep rural 
counties from establishing LHDs and it examines LHD models suitable 
for rural counties.  

 

Existing Literature 

Similar to Pennsylvania, the national public health system varies 
greatly by geography, and fails to provide an equitable distribution of 

                                                 
2The remaining 25% could not be assigned to a specific category. 



102 FINANCIAL ANALYSIS AND STRUCTURAL CONSIDERATIONS TO 
THE PROBLEM OF RURAL PUBLIC HEALTH IN PENNSYLVANIA 

 
 

 

services. As a nation, the United States has used a “Band-aid” approach 
to funding in public health, favoring short-term interventions instead of 
long-term investment in the country’s public health infrastructure (Ohara 
2001). Estimates show that 95% of United States’ health spending goes 
toward medical interventions, and only 5% to population-based health 
interventions and various research activities (Levi et al. 2007). The Trust 
for America’s Health (TFAH) showed that “the United States has made a 
major commitment to biomedical research, as evidenced by the $28 
billion budget for the National Institutes of Health, but has not yet made 
a similar commitment to public health” (Levi et al. 2007). 

Before the events of 9/11, there had been a 10-year decline in public 
health infrastructure funding. From 1990 to 1993, the percentage of the 
nation’s health care dollars spent on public health declined from 2.7% to 
1% (Johnson 2001). In some parts of the country, the combination of the 
Balanced Budget Act of 1997 and government cutbacks saw the per 
capita spending in public health decline by 33% between 1997 and 2003 
(NACCHO 2003). Surveys and studies conducted before September 11, 
2001, found that many communities lacked adequate laboratories or 
epidemiologists trained to detect infectious disease outbreaks. Even the 
Centers for Disease Control and Prevention (CDC), the nation’s premier 
public health agency, relied heavily on antiquated laboratories 
constructed in the 1960s and 1970s. Furthermore, prior to 1999, one-
third of public health departments serving fewer than 25,000 people did 
not have access to the Internet or electronic mail, and almost 20% of all 
LHDs had no e-mail capacity at all (Frist 2002). After the anthrax 
outbreaks of 2001, CDC funds have increased from just under $4 billion 
in 2000, to $7.7 billion in 2003, and to $8.4 billion in 2006. However, 
much of this can be attributed to post-9/11 terrorism preparedness 
activities rather than core public health functions (Levi et al. 2007).  For 
example, even though HIV continues to be a domestic epidemic, funding 
for HIV has decreased 21% since 2001 (Levi et al. 2007). Similarly, the 
current level of chronic diseases, which account for the vast majority of 
morbidity and mortality in the United States, capture only marginal 
public health interest or financial support (Beitsch et al. 2006).   

This lack of a national commitment has meant that the tendency in 
the country is for local government control and funding of public health 
service. Today most states in the United States organize their public 



Alberto J.F. Cardelle         103 
 
 
 

 

health systems around county health departments3 (Mays et al. 2004). 
The National Association of County and City Health Officials 
(NAACHO) has currently identified 2,865 local public health agencies in 
the United States (NACCHO 2005; Beitsch et al. 2006). Of these, 59% 
were county-wide, 14% covered a city and county, 9% covered more 
than one county4 with the remainder (18%) covering smaller geographic 
areas (towns and townships) (NACCHO 2005). Sixty-two percent of 
LHDs in the United States serve populations of less than 50,000 persons 
and 40% of LHDs serve even less populated rural areas (NACCHO 
2005). The existing LHDs vary immensely in their per capita 
expenditures. A comparison of the expenditures of small boards of health 
with the expenditures of large city departments shows an average 
differential of 600%5 (NACCHO 2005). LHDs also vary with regard to 
workforce. More than 30% of LHDs have fewer than 10 full-time staff, 
with a median of 19 employees (NACCHO 2005). The small entities 
typically employ a manager/ director, nurses, an environmental 
specialist, and clerical staff, while the specialized staff such as 
nutritionist, health educator, emergency preparedness coordinator, and 
epidemiologist, are in LHDs serving larger jurisdictions (NACCHO 
2005). The variation in resources resulted in variation of services 
provided. Of the 75 public health-related activities and services offered 
by LHDs, three-quarters or more of LHDs offered only eight of them 
(NACCHO 2005). 

A strong reliance on local resources has been an important factor in 
the development of the United States’ “fragmented and uneven” public 
health infrastructure (Baker et al. 2005). The NACCHO survey showed 

                                                 
3An agency of local government, a local health department (LHD) develops and 
administers programs and services that are aimed at maintaining a healthy community. 
To ensure that these efforts address a community's most important health problems and 
concerns, the local health department encourages residents to participate in assessing 
public health needs and in formulating a community health plan. It also works with other 
community organizations to assure that needed services and programs are available. 
4Bi-county or tri-county health departments are like single-county health departments 
except they serve a larger area and are responsible to more than one county board. With 
this arrangement, a board of health is created with representatives from each county. The 
revenues and expenses are shared proportionally. 
5The median per capita expenditure is a low of $9 per capita in Massachusetts to a high of 
$94 per capita in Maryland (NACCHO 2005). 



104 FINANCIAL ANALYSIS AND STRUCTURAL CONSIDERATIONS TO 
THE PROBLEM OF RURAL PUBLIC HEALTH IN PENNSYLVANIA 

 
 

 

that 65% of the funding for existing LHDs comes from local government 
sources, the state, or is pass-through grants from the state. An additional 
30% of the funding comes from fee-for-service programs and 
competitive grants sought by each department. Additionally, how LHDs 
access these funds varies, and states use multiple funding mechanisms to 
fund local public health programs. These include: 1) a combination of 
per capita funding and activity-specific or staff-specific grants; 2) 
negotiated contracts for local services; 3) formulas incorporating 
variables of health status and financial resources of the local population; 
4) per capita distribution of state funds based on local population 
statistics; 5) reimbursement of allowable expenditures for pre-established 
set of services; and 6) state funding for local agencies that are extensions 
of the state agency (Potter and Fitzpatrick 2007).    

The lack of an entity with comprehensive authority and 
responsibility for creation, maintenance, and oversight of the nation’s 
public health infrastructure has resulted in the country’s fragmented 
system. However, Potter and Fitzgerald found three key trends in state 
funding of public health that show that in cases where the state 
government plays a greater managerial role, funding increases. The three 
trends are: first, that the degree of state oversight and the procedures 
used for oversight of local budgets and programs are related to funding 
levels; second, an association between service mandates on LHDs and 
levels of state funding; and third, state mandates for local public health 
services appear typically to be funded mandates (Potter and Fitzpatrick 
2007). In Pennsylvania, these trends are not present. There are no 
mandates requiring local governments to establish LHDs, however, if 
locales do establish LHDs, there are service mandates, but the state funds 
only 50% of the services. Overall, the public health infrastructure in 
Pennsylvania is reliant on local government to generate funds or identify 
funding, and there is a fragmented system depending upon whether or 
not a county has a LHD.  

 

Methodology 

The project methodology is divided into three general tasks – data 
gathering, data analysis, and modeling. The first task was acquisition and 
preparation of the data. Twelve rural counties without a LHD that were 
most similar to counties with LHDs were purposefully sampled (Table 



Alberto J.F. Cardelle         105 
 
 
 

 

1). The 42 rural counties in the state were grouped by health district. The 
counties were then stratified by income, population density, and poverty 
rates. Three counties from four of the six health districts were selected.  
The Southeast Health District was not used because it includes only one 
rural county, and the Southwest Health District was not sampled because 
it had an unrepresentative population density level among its rural 
counties. Three counties from the remaining four districts were sampled, 
using counties that were most similar with regard to the mean income, 
population density, and poverty rate of the counties with LHDs. 

 
Table 1:  Sampled Counties 

Health District County 

Northwest 
McKean 
Clarion 

Jefferson 

Northcentral 
Bradford 
Snyder 
Tioga 

Northeast 
Monroe 

Susquehanna 
Wyoming 

Southcentral 
Mifflin 
Fulton 
Juniata 

 

The 2003-04 budgets from the sampled counties, as well as the 
budgets from the counties and municipalities with existing LHDs, were 
collected. Legislative language of Act 315 and Act 12 and the 
Pennsylvania Code guiding the establishment of LHDs were gathered.   
Policymakers from all counties with LHDs and from the Pennsylvania 
Department of Health were interviewed. In addition, a purposeful 
sample6 of policymakers of the sampled counties was interviewed.   

The data analysis consisted of analyzing the mandated financial 
requirements of the legislation. The financial statements of counties and 
                                                 
6The sample consisted of policymakers who agreed to speak to the project researchers 
and who felt they had enough information on the process. 



106 FINANCIAL ANALYSIS AND STRUCTURAL CONSIDERATIONS TO 
THE PROBLEM OF RURAL PUBLIC HEALTH IN PENNSYLVANIA 

 
 

 

the existing LHDs were analyzed in order to determine the prototypical 
balance sheets, revenue streams and expense categories. The financial 
statements were also analyzed to identify the key cost drivers (per capita, 
per services, or personnel). Forecasted revenues were calculated by using 
the total population to be served as a multiplier for all potential revenue 
sources. In addition, the percent of the population living below poverty 
was used to determine categorical grant revenue since levels of poverty 
are a significant categorical grant revenue driver, and the grant revenues 
were forecasted by giving both factors (population and poverty level) 
equal weight. 

The expenses were forecasted by categories. These figures were 
forecasted using population and land area covered, and medically 
underserved areas. Population and land area to be covered were used to 
forecast all of the expense categories. Underserved areas were used to 
forecast personal health expenses since the availability of primary care 
was a significant cost driver of personal health expenses. 

Finally, the organizational structures of the existing LHDs were 
analyzed, and a prototypical organizational structure (personnel, 
programmatic, and decision-making) was developed. The final step, the 
modeling process, included the creation of an organizational, 
programmatic, and budget structure for a prototypical single county 
health department adequate for three of the sampled counties, for two bi-
county LHDs (four counties), and two tri-county LHDs (six counties). 
Based on these structures, which provide a more specific expense 
structure, reconciled expense budgets for each model were developed. 

 

Financial Requirements of Act 315 and Act 12 

According to Act 315, the Secretary of Health annually computes the 
disbursement to LHDs based on LHDs’ eligible public health 
expenditures. The State’s 315 disbursement provides LHDs with 50% of 
the funding of all expenditures that are public health related and not paid 
for out of any special grants received from the state or the federal 
government. LHDs will also receive a disbursement $1.50 per capita 
from Act 12 for environmental health services. There is no required 
match of local funds for funds drawn down through Act 12.   



Alberto J.F. Cardelle         107 
 
 
 

 

As Table 2 demonstrates, the revenue structure of existing LHDs 
vary, but on average Act 315 and Act 12 funds represent about 30% of 
the funds employed by the LHDs.   

 
Table 2 

 Percent of Budget by 
Funding Source 

 

Extant 
LHD 

Total Budget 
Act 

315/12 
Grants Fees 

Direct 
Funds 

Per Capita 
Cost 

ROI 
Per 

Capita 
Benefits 

Allegheny* $43,866,737 21% 51% 9% 20% $6.93 399% $27.62 

Bucks $ 9,056,640 42% 18% 10% 29% $4.51 241% $10.89 

Chester $ 7,493,410 43% 26% 21% 9% $1.63 960% $15.65 

Montgomery $ 7,200,000 42% 23% 9% 19% $1.93 414% $8.01 

Allentown $ 3,048,295 25% 22% 5% 48% $13.74 108% $14.85 

York $ 1,096,246 29% 44% 3% 21% $5.72 383% $21.89 

Average $11,960,221 28% 40% 10% 21% $5.74 417% $16.48 

 
*The Allegheny LHD budget includes monies for its emergency medical system. 

 
Usually, the second most important source of funding for LHDs are 

grants. These are usually either state or federal categorical and block 
grants. All of the existing departments and bureaus reported that any 
increase in funding is a result of the availability of non-Act 315 or Act 12 
grants. Existing LHDs receive an average of $2.3 million dollars in 
federal categorical grants. The most common categorical grants received 
by LHDs are for immunization, family planning, clean water, 
HIV/AIDS, and cancer prevention. Existing LHDs receive an average of 
$1.8 million in state grants (non-Act 315 and 12). A majority of these 
funds are passed through from the Preventive Health and Health Services 
(PHHS) Block Grant that the state of Pennsylvania receives from the 
federal government. The PHHS block grant is the primary source of 
flexible funding that provides states the latitude to fund any of 265 
national health objectives available in the nation's Healthy People 2010 
Health Improvement Plan. In fiscal year 2001, Pennsylvania chose 17 



108 FINANCIAL ANALYSIS AND STRUCTURAL CONSIDERATIONS TO 
THE PROBLEM OF RURAL PUBLIC HEALTH IN PENNSYLVANIA 

 
 

 

priority areas for distributing its PHHS block grant and received 
approximately $8 billion.7  

The third source of funding for LHDs is inspection fees and 
licensures costs. LHDs that carry out public and recreational pool and 
restaurant inspections charge the sites a fee for the inspection and 
license. Although these services are Act 12 reimbursable services, the 
LHDs use this money to not only offset their additional environmental 
services costs, but also as part of the funds that are eligible for the Act 
315 match. Any income that LHDs can generate as a result of their 
services serves to offset the amount of funds that the county must 
generate as direct contribution to the LHD, which is the fourth source of 
revenue for LHDs. Direct funding is any source not generated from 
reimbursable grants, categorical grants, or fees collected. These direct 
funds are usually not new funds collected by the local government for the 
purposes of subsidizing the LHDs. These funds may support other health 
services that the local government has historically provided and which is 
protecting the public’s health. These services include: county funds used 
for vector control (mosquito and Gypsy Fly control), drug and alcohol 
prevention programs, preventative health services provided to seniors in 
long-term care settings (chronic disease screenings), preventive health 
service provided to prisoners in county jails (STD screenings), solid 
waste and litter control programs, weights and measures certification, 
county/municipal health services information and referral systems, 
county/municipal health and wellness fairs, and any other service that is 
designed to protect the health of the public. 

Since counties may not use financial resources from state and federal 
grants as match, direct funds are the most critical financial issue 
associated with the reimbursable grants (Act 315) because these are the 
most common source of financing available for the match. These funds 
usually emanate from revenues or from intergovernmental transfer from 
an existing department to a new department, in order for the LHD qualify 
for the grants. Although as the data shows (Table 2, page 107), the 

                                                 
7Cancer, Diabetes, Educational and Community-Based Programs, Heart Disease and 
Stroke, Heart Disease and Stroke, Immunization and Infectious Diseases, Injury and 
Violence Prevention, Nutrition and Overweight, Oral Health, Physical Activity and 
Fitness, Public Health Data, Surveillance, Epidemiology, and Training, Respiratory 
Diseases, Rape or Attempted Rape, Administrative Cost. 



Alberto J.F. Cardelle         109 
 
 
 

 

investment made by counties with LHDs for LHD activities and the 
match demonstrate a return on investments (ROI)8 of over 100%, the 
earmarking of these matching funds during the creation of a LHD 
represents a major barrier for counties. In the long term, these funds 
represent a very good investment with existing LHDs producing an 
average ROI of over 400%. For example, Chester County’s Department 
of Health has almost an annual 1000% ROI. For its annual investment of 
about $700,000 of direct county revenues into the Chester County Health 
Department, that health department offers the county $7.5 million in 
services.  

 

Revenue Drivers 

The analysis looked at various different revenue drivers (factors 
driving revenue) to determine the factors that most influenced the LHD’s 
ability to generate revenue. The drivers explored were population, 
poverty rates, geographic size of the areas covered, size of the local 
government, and the demographic structure of the population covered.   
These factors were selected based on the qualitative data generated from 
the interviews with LHD administrators. Each of these factors was 
identified by at least one administrator as being a factor that affected 
their ability to generate funds. The two factors that show the strongest 
influence on revenue are population and levels of poverty in the 
community served. The other factors were either not significant, or 
closely related to population (number of townships for example). Table 3 
shows the Pearson correlation coefficient9 between the different revenue 
sources and total population and percentage of the population below 
poverty. The data means that as the population covered by the LHD 
increases, so does the revenue. The same relationship exists between 
revenue and poverty levels. In other words, as poverty levels increase, 
revenues increase. Although this is an expected trend given that Act 315 

                                                 
8The ROI was calculated by dividing the total amount of financial resources used to 
provide public health services (not including the direct funds) by the amount of LHD 
budgets stemming from direct funds. 
9Pearson Correlation coefficient is a measure of how closely to variables relate to each 
other.  A coefficient of close to one means that the two variables are positively correlated, 
or in other words as one rises the other also tends to rise.  



110 FINANCIAL ANALYSIS AND STRUCTURAL CONSIDERATIONS TO 
THE PROBLEM OF RURAL PUBLIC HEALTH IN PENNSYLVANIA 

 
 

 

and Act 12 funds are reimbursable on a per capita basis, the analysis 
shows these funds are not the only source that is dependent on population 
size. Table 3 shows there is a strong positive relationship between 
population and grants (a Pearson correlation coefficient of 0.84). This is 
explained by the fact that many of the non-reimbursable grants are 
formula grants based on the population covered. These trends are an 
important consideration for rural areas with small populations. Rural 
areas would be less likely to generate the additional funds from grants 
and fees, therefore requiring a relative greater proportion of the revenues 
to come from local government.  

 
Table 3:  Correlation10 Between Sources of Revenue and 

Revenue Drivers and Types of Services 
 

 
Population

Poverty 
(%) 

Personal 
Health 

Services 

Environmental 
Health Services

Public 
Health 

Services 

Act 315 & 12 revenue  0.96 0.98       0.144  0.54 -0.36 

Grant revenue  0.84 0.99       0.580  0.06 -0.61 

User fee revenue   0.88 0.92      -0.200  0.91 -0.38 

Direct funds revenue   0.86 0.97      -0.550 -0.78  0.95 

 

A second important revenue driver is the level of poverty in the 
county. Table 3 shows that there is a strong correlation between poverty 
levels and all the revenue funds, with the highest strongest correlation 
(.99) found between levels of poverty and grants (this is controlling for 
the difference between the municipal LHDs and county LHDs). This 
relationship is also expected given that poverty levels, like population, 
are key eligibility criteria in many competitive grants. 

 
Cost Drivers 

Act 315 and Act 12 funding require the recipient to provide a certain 
set of services and to maintain a certain personnel structure.  Using the 
general structures established by the legislation, Table 4 shows how the 

                                                 
10Pearson Correlations.  



Alberto J.F. Cardelle         111 
 
 
 

 

extant LHDs compare with regard to expenditure structures. 
Expenditures are grouped into four general and generic categories: 
administration, personal health services (immunizations, STD testing 
counseling, maternal and child health services, etc.), environmental 
health services (all of the Act 12 mandated services), and public health 
services (health education, public health laboratory, public health policy 
development, epidemiology, etc). On the average, existing LHDs spend 
an average of 18% on administration, 30% on personal health services, 
40% on environmental services, and 12% on public health services. 
 

Table 4 
 

LHD11, 12 Total Budget 
Administration 

(%) 
Personal 

Health (%) 
Environmental 

Health (%) 
Public 

Health (%) 

 Allegheny $18,405,300   20%  29% 40% 11% 

 Chester    8,426,541   13%  31% 48% 8% 

 Allentown    1,902,799   27%  15% 21% 37% 

 York    1,096,246   14%  54% 23% 9% 

 Average   7,457,722   18%  30% 40% 12% 

All of the LHDs interviewed indicated that the most important 
determinant of their expense structure is their revenue stream. In other 
words, what they spend is determined by their success in obtaining 
funds. In particular, their grant revenues are most influential. The 
existing LHDs report that the only significant revenue growth 
experienced by LHDs emerges from grant funds. The analysis of the 
expenditures shows that a LHD’s grant revenue is most influential on 
their personal health services. Table 3 (page 110) shows the correlation 
(Pearson correlation coefficients) between revenue sources and 
expenditure types. It also shows that as LHDs generate more grant 
revenue they are more likely to increase their personal health services 

                                                 
11The revenues reported in the previous section do not necessarily match the expenses 
because the budgets reported here are strictly for the expenses of activities considered to 
be core public health functions (for example, Allegheny County has $500,000 pass-
through grant to manage county jail health care) and because LHDs revenues streams 
have different fiscal years and therefore LHDs may carry a balance between fiscal years.    
12These are the only reported budgets because of either difficulty in obtaining budgets or 
in obtaining budgets in which expenditures are reported per program. 



112 FINANCIAL ANALYSIS AND STRUCTURAL CONSIDERATIONS TO 
THE PROBLEM OF RURAL PUBLIC HEALTH IN PENNSYLVANIA 

 
 

 

(0.54). This again is consistent with the objectives of these grant sources, 
which include maternal and child health, STD treatment, counseling, and 
screenings, etc. There is also a very strong relationship between user fee 
revenue and environmental services (0.91). This is also an expected 
outcome since a major source of the user fee revenues comes from 
LHD’s environmental services, and food handling facilities inspections. 
Finally, direct funds are most influential on public health services.  
While the reason for this is not completely clear, it is likely that these 
services are in part associated with LHD activities in policy development 
and consultation with government officials, not traditionally a 
reimbursable service. 

Personal health services are also a significant cost driver for existing 
LHDs. Not only in Pennsylvania, but also throughout the country, LHDs 
that serve as safety-net providers are forced to invest a significant 
amount of resources in their personal health programs. The tendency has 
been that LHDs in areas with few safety-net providers tended to fill this 
void. Based on the examples examined here, the York City Health 
Department has the highest percentage of their funds expended on 
personal health services. The trend observed with these four LHDs 
correlates negatively (-0.71) with the number of primary care physicians 
per 100,000 persons. LHDs in areas with a limited number of primary 
care physicians tend to fill the service void and provide a wider array of 
personal health services, which in other areas private practitioners 
provide. It is important to highlight that nationally the trend has been for 
LHDs to reduce their personal health services as Medicaid has moved 
toward a managed care model because reimbursements have declined. As 
mentioned in section two, this has been a major factor in the reduction of 
funding for LHDs nationally.  

Environmental services expenses are the largest expenditures of 
existing LHDs. While the reasons for this are not completely evident, 
there are four influencing factors. First is the size of the territory covered 
by the LHDs. Unlike the other types of services, environmental programs 
such as restaurant and pool inspections require periodic onsite visits 
increasing the need for staff and transportation. The percentage of overall 
expenditures that LHDs spend on environmental services correlates 
strongly with square miles covered by the LHD (0.97). Second, 
environmental services, compared to other services such as education 
and screening, for example, are more costly in that they involve testing 



Alberto J.F. Cardelle         113 
 
 
 

 

and laboratory  procedures. Third, environmental services are a revenue-
generating service for LHDs. Since LHDs charge an inspection fee from 
the sites that are inspected, LHDs have the incentive to provide extensive 
and continuous coverage so as to maximize their revenue-producing 
activities. In addition, administrators also report that environmental 
services are also the service that are most visible and most publicly and 
politically scrutinized. Since no local government, and more importantly 
no local elected official, wants to have an environmental incident in their 
jurisdiction (food poisoning or disease outbreak), local health officials 
feel compelled to provide thorough environmental services.  

In summary, total population covered, geographic area covered, and 
availability of primary care services will be the key cost and revenue 
drivers used to assemble new public health models. 

 

Rural LHD Models 

This section constructs three different viable models: the single 
county health department, the bi-county health department and the tri-
county health department for four regions of Pennsylvania. These models 
include a sample revenue structure, an expenditure budget, a personnel 
structure, and a program budget.    

The models’ budgets consist of creating a general revenue and 
expenditure budget using a basic forecasting method that uses the 
revenue and expenditure data of the existing county health departments 
in Allegheny and Chester Counties and municipal health bureaus in 
Allentown and York City, as a base. The models’ forecasted revenues 
and expenses were based on total population covered, area covered, 
poverty level, and primary care provider availability. Then, specific 
sample program budgets (using the Allentown Health Bureau budget 
structure because of Allentown’s resemblance in population), identify the 
costs of the specific services created for each of the models. In addition, 
potential match sources are approximated using the county budgets of the 
sample counties.  

Each model’s feasibility is discussed using the forecasted direct 
contributions required by the counties, on a per capita basis, as well as 
the potential match sources. The models constructed are exhibited on the 
following table and figure: 



114 FINANCIAL ANALYSIS AND STRUCTURAL CONSIDERATIONS TO 
THE PROBLEM OF RURAL PUBLIC HEALTH IN PENNSYLVANIA 

 
 

 

Table 7 

Model 
Land 

square 
miles 

Population
Percent of 

persons below 
poverty (1999)

Number of  
PCP13/100,000 Staff 

Tri-County Health Department Models  (bordered by # # # in Figure 1, following) 

Bradford-Tioga-Wyoming 2,682 132,072 11.83 121.66 137 

Mifflin-Juniata-Snyder 1,134 107,023 10.63 70.23 60 

Bi-County Health Department Models  (bordered by •  •  • in Figure 1, following) 

Susquehanna-Wyoming 1,220 69,883 11.25 90.15 56 

Clarion – Jefferson 1,258 87,134 13.6 93.85 70 

Single Health Department Models (bordered by          in Figure 1, following) 

McKean 982   44,884 13.1 74.0 35 

Monroe 607 148,839 9.0 65.6 73 

Fulton 438   14,365 10.8 49.1 23 

 
 

Figure 1 
 

 

 

 

 

 

 

 

 

 

 
                                                 
13Primary care provider. 



Alberto J.F. Cardelle         115 
 
 
 

 

Based on the characteristics exhibited in Table 7, a personnel 
structure for each model was developed. As the structures demonstrate, 
the models’ personnel structure differs significantly based on population 
covered and most importantly on area covered. The tri-county model 
designed for Bradford-Tioga-Wyoming would cover only 132,000 
persons but it would be spread over 2,500 square miles. The large 
geographic area covered by that model requires the largest personnel. 

The potential revenue streams of the different models were 
developed using the total population that was to be served as a multiplier 
for all the potential revenue sources. In addition, the percent of the 
population under poverty was used to determine categorical grant 
revenue since level of poverty is a significant driver of categorical grant 
revenue. The grant revenues were calculated by giving both factors 
(population and poverty level) equal weight. Table 8 shows the result of 
the revenue forecasting. The forecasts show that the two tri-county LHDs 
would have multi-million dollar revenue streams, as would Monroe 
County because of the county’s growing population (larger than any of 
the tri-county departments). All of the model LHDs show very high 
contributions from grants, over 40%. This is because of their relatively 
small populations, but relatively high level of poverty, in comparison to 
existing LHDs (almost twice the rate – 6.3 to 11.4). This means that 
these areas would be eligible for a greater amount of categorical grants 
relative to Act 315 and Act 12 formula grants. 

 

Table 8 

Local Health Department Models 

 Bradford-
Tioga-

Wyoming 

Mifflin-
Juniata-
Snyder 

Susquehanna- 
Wyoming 

Clarion- 
Jefferson 

McKean Monroe Fulton 

Forecasted Revenue 
Budget $ 2,571,363 2,028,745 1,312,304 1,718,374 842,004 2,775,084 330,312 

Act 315/12 29% 28% 24% 25% 18% 31% 22% 

Grants  45% 45% 48% 48% 54% 42% 55% 

User Fees    9%   9%   9%   9%   9%   9%   8% 

Direct Funds  18% 18% 18% 17% 18% 18% 15% 



116 FINANCIAL ANALYSIS AND STRUCTURAL CONSIDERATIONS TO 
THE PROBLEM OF RURAL PUBLIC HEALTH IN PENNSYLVANIA 

 
 

 

Local Health Department Models 

 Bradford-
Tioga-

Wyoming 

Mifflin-
Juniata-
Snyder 

Susquehanna- 
Wyoming 

Clarion- 
Jefferson 

McKean Monroe Fulton 

Forecasted Expenses 
Budget $ 7,809,675 3,259,014 2,321,767 2,906,886 1,362,989 2,991,986 431,135 

Administration 28% 27% 26% 27% 24% 27% 15% 

Personal Health 23% 26% 28% 27% 33% 27% 60% 

Environmental 
Health 40% 38% 37% 38% 34% 38% 21% 

Public Health   9%   9%   8%   9%   8%   9%   5% 

Reconciled Revenue Budget Based on Forecasted Expenses 
Budget $ 7,359,310 2,894,065 2,083,466 2,609,760 1,209,935 2,484,445 382,151 

Act 315/12  10% 20% 15% 17% 13% 34% 19% 

Grants  16% 31% 30% 32% 38% 47% 48% 

User Fees    3%   6%   6%   6%   6% 10%   7% 

Direct Funds 71% 43% 48% 46% 43% 9% 26% 

Some percentages do not add up to 100 due to rounding. 

 

Table 8 shows the forecasted expenses in broad categories. These 
figures were forecasted using population covered, land area to be 
covered, and underserved medical areas. Population covered and land 
area to be covered were used to forecast all of the expenses categories.  
Underserved areas were used to forecast personal health expenses since 
the availability of primary care was a significant cost driver of personal 
health expenses. The forecasts show the clear effect of having to cover 
large areas. The two tri-county LHDs have very large budgets relative to 
their populations. The Bradford-Tioga-Wyoming model would have a 
budget of over $7 million. For both tri-county LHDs, environmental 
health expenses are significantly high because of the area to be covered. 
On the other hand, personal health services are a significant expense in 
the Fulton, Monroe, and McKean models because of the relatively low 
numbers of primary care providers in those areas.  

Table 8 shows a reconciled revenue budget based on the expenses 
forecasted. As the table shows under the reconciled revenue budget, the 
local direct contributions increase dramatically so that local contributions 
now represent over 40% of the budget revenue in all but two of the 



Alberto J.F. Cardelle         117 
 
 
 

 

models. The shortfall occurs primarily because most of the models do not 
generate enough funds under Act 315 and Act 12 and from user fees, 
because of their small population size, to cover the expenses related to 
the large geographical coverage area. This assumption is made because 
the projections show it is not reasonable to assume that the locales will 
be able to cover the shortfall from grants or fees. In the largest of the 
models, the Bradford-Tioga-Wyoming model, the direct funds would 
now represent 71% of the revenue.  

These budgets show that the tri-county health departments have very 
high expenses relative to their Act 315 and Act 12 funding. For example, 
the Bradford-Tioga-Wyoming model has close to a $1 million deficit just 
as a result of the environmental services provided. In comparison, 
although the Mifflin-Juniata-Snyder model, the Monroe model, and the 
Fulton model still have a deficit, the deficits with regard to the 
environmental services are smallest. The reason for the small deficit in 
the Fulton model is because of its small size; however, the small deficits 
in both the Mifflin-Juniata-Snyder and Monroe models is a combination 
of the fact that they both have a substantial population within a 
manageable geographic area. This lowers expenses and maximizes 
funding. This is the trend throughout the budget calculations. In the 
models with small populations and large areas, the expenses are not 
offset by the revenue from grants and fees. The overall result is very high 
county contributions that make these structures unrealistic at the present 
funding levels.  

Table 9 on the following page summarizes the overall trends in the 
revenue and expense analysis of the viable models.  The table shows that 
with the exception of the single county health department models in 
Monroe and Fulton, all of the other models represent higher per capita 
investments than the existing LHDs. The large tri-county health 
departments with large geographical areas and small populations have 
the highest per capita investments. Of the two tri-county health 
departments, the Mifflin-Juniata-Snyder model is much more feasible 
because of its smaller geographic area and bigger population. However, 
even the two-county LHDs have relatively high per capita investments. 
This is again a result of the interaction between population and 
geography.  

 



118 FINANCIAL ANALYSIS AND STRUCTURAL CONSIDERATIONS TO 
THE PROBLEM OF RURAL PUBLIC HEALTH IN PENNSYLVANIA 

 
 

 

Table 9 

 Direct Funds per 
capita Forecasting 

Direct Funds per capita 
Program Budget 

ROI 

Bradford-Tioga-Wyoming $40 $60 144% 

Mifflin-Juniata-Snyder $11 $  9 341% 

Susquehanna-Wyoming  $14 $22 208% 

Clarion-Jefferson $14 $14 260% 

McKean $12 $  8 371% 

Monroe $  1 $  3 511% 

Fulton $  7 $  5 555% 

 

In summary, the analysis predicts that the barrier that most local 
governments face when initiating a LHD is new funding. Although the 
model budgets represented here are representative of the expenses of a 
fully functioning LHD that most local areas would not see developed for 
a few years after inception of a LHD, they demonstrate the need for a 
combination of significant new funding or significant restructuring of 
local government funding and budgets in order to make LHDs viable.   
The most critical cost driver for these models is area to be covered. The 
existing funding stream dependence on population as the sole criteria for 
the Act 315 formula grant signifies that areas that require extensive 
coverage are at a major disadvantage. In the models that had a critical 
population and not as an extensive geographic coverage, the models 
become more viable. The tri-county LHD model covering Mifflin-
Juniata-Snyder has local contribution amounts that are closer to the norm 
as are the single county LHDs in Monroe, Fulton, and McKean Counties.  
However, the other models highlight the problem of using population-
based formula grants for rural areas. 

 

Conclusions and Policy Implications 

The fundamental assumption guiding this research is that a strong 
local public health infrastructure is a critical component of the health 
care continuum. However, the national trend, as was demonstrated by the 
literature review, shows a slow erosion of the national public health 



Alberto J.F. Cardelle         119 
 
 
 

 

infrastructure. Funding for public health has steadily decreased since the 
1980s and this, in combination with the reliance on local funds, has 
created significant gaps in services and increased vulnerability to the 
spread of disease. The threat of bioterrorism and the preparedness that 
has followed since 2001 has highlighted these gaps. The research also 
showed that, relative to this national trend, the local public health 
infrastructure in Pennsylvania is very weak. With only five county health 
departments, five municipal health bureaus, and a network of state clinics 
in the remainder of the state, Pennsylvania has the lowest public health 
workforce in the country: 38 public health workers per 1,000,000 
persons. 

The state’s limited public health infrastructure is despite the 
existence of legislation (Act 315 and Act 12) that allows local 
government to draw down state funds for the operation of local public 
health infrastructure. The areas of the state with LHDs have 
demonstrated a very good capacity to use both state and federal funding 
to assemble vibrant health departments that provide an array of public 
health services. These existing LHDs have been able to grow their 
locales’ capacity to provide public health services by not only using the 
state formula grants, but also federal and other state categorical health 
grants. As a result of these grants, these LHDs have established LHDs 
that have an average of 420% return on investment. On average, the 
residents of the locales with LHDs contribute less than $5 per capita 
annually and receive services totaling over $2,000 per person. The 
existing LHDs have been very successful at expanding services without 
using local funds. Nonetheless, there are critical policy and financial 
issues that locales must satisfy in the process of establishing these LHDs.  
Among the most critical aspects faced by locales trying to establish 
LHDs are the need to identify local funds for initial start-up funds and 
for the financial match of state funds.  

The financial analysis of the different model LHDs open to rural 
counties of Pennsylvania demonstrate that the relatively high levels of 
local funds required to establish LHDs will be a major financial barrier.   
On average, the three different models analyzed for rural counties, a tri-
county health department, a bi-county health department, and a single 
county health department, require $16 per capita annually in local funds.  
The principal reason for this financial reality is that rural counties have 
relatively high levels of the factors that tend to drive expenses up and 



120 FINANCIAL ANALYSIS AND STRUCTURAL CONSIDERATIONS TO 
THE PROBLEM OF RURAL PUBLIC HEALTH IN PENNSYLVANIA 

 
 

 

relatively small populations, the major revenue driver for funding from 
Act 315 and Act 12. The analysis showed that primarily population 
covered, geographic area covered, and the availability of primary care 
services drive expenses. Although rural counties do not have very dense 
populations, they do cover broad geographic expanses and suffer from 
chronic lack of primary care services. This means that LHDs covering 
rural counties will have to cover a very large geographic area, a critical 
cost driver especially for environmental services, and will be pressured 
to provide personal health services in areas that have a limited number of 
primary care providers. This will result in very high expenses. This, 
coupled with the fact that these areas do not quality for high 
reimbursement rates from formula and categorical grants because of their 
small population and their relatively low levels of poverty (a major 
criteria for categorical grants), means that they will have to generate 
significant amounts of local funds to operate LHDs. This trend varies 
somewhat among the different models, and those models that are 
geographically large and have small populations have the highest levels 
of local contribution while those with smaller geographic areas and 
larger populations tend to rely less on local funding. In the models tested 
in this research, the tri-county model that included the Counties of 
Bradford, Tioga, and Wyoming, compared with the worst, and the 
models that included single counties, McKean, Monroe, and Fulton, 
demonstrated the most viable financial models. In general, the reality is 
that the existing funding mechanisms in place for local public health are 
not appropriate for the realities of rural counties in Pennsylvania.    

Although the barriers to a robust public health infrastructure are 
significant, many of the barriers have a policy basis; therefore, the 
recommendations below present policy projects that can be accomplished 
by the Commonwealth’s administrative and legislative entities and by 
local governments to improve the state’s public health infrastructure. 

1) Additional core funding for Act 12 would mean that these models 
would have additional financing for environmental services. As was 
demonstrated by the paper, most of the existing LHDs and all of the 
models analyzed have significant deficits as a result of their 
environmental services which then become part of their Act 315 
reimbursable expenses. So, in fact, in many respects the limited Act 
12 funding is resulting in counties having to limit the services they 



Alberto J.F. Cardelle         121 
 
 
 

 

can offer under Act 315. This additional funding would be critical 
for rural counties that would have to cover a wider geographic area.  

2) A second critical aspect would be the need for start-up funds to be 
available. The availability of start-up funds would go a long way in 
lowering the financial threshold that local governments must meet in 
establishing a structure for the first year of a LHD. The greatest 
barrier faced by local entities is the identification of funds for the 
initial establishment of LHD before they can begin to draw down 
state funds or before they can generate revenues from grants and 
fees. An initial one-time grant to help locales hire the personnel that 
Act 315 mandates (a director and a personal health and 
environmental health manager) would allow the local governments a 
one-year time period to establish the infrastructure and begin to 
generate revenue from other sources.     

3) The legislature should establish secondary formulas for calculating 
Act 315 and Act 12 funds for rural counties. Formulas that address 
the cost drivers faced by rural counties should be taken into account.    
These formulas would allow LHDs covering these areas to draw 
down the additional funds necessary to cover large geographic areas. 
The formulas could be revised to take into account population 
density, with an additional allotment for travel expenses as 
population density decreases.  There are many examples of formula 
grants that take population density into consideration. For example, 
transportation grants to cities with fewer than 200,000 persons 
receive a greater subsidy than cities with more than 200,000 persons 
to offset the lack of local revenue because of low usage (U.S. 
Department of Transportation 2003). In the area of bioterrorism, 
homeland security grants have “updated formulas that better take 
into account threats, population density, and the presence of critical 
infrastructure” (Ridge 2003). The existing legislation could then 
create an additional subsidy for countywide LHDs that fall below a 
specified population. 

Most of the counties in the Commonwealth have a State Health 
Improvement Plan (SHIP). SHIP is a statewide health plan that places 
emphasis on improving the health status of populations through planning 
that addresses the root or underlying causes of premature disease, death, 
and disability.  The plan calls for engaging with organized community-



122 FINANCIAL ANALYSIS AND STRUCTURAL CONSIDERATIONS TO 
THE PROBLEM OF RURAL PUBLIC HEALTH IN PENNSYLVANIA 

 
 

 

based health improvement partnerships to coordinate resources in 
meaningful ways and address local health improvement issues and 
priorities. These partnerships are made up of coalitions of local social 
service agencies, health providers, and other community-based 
organizations engaging in the delivery of health services (PADOH 2003).  
These organizations already have relationships with the state regional 
offices. A possible model for improving local public health infrastructure 
in areas that are expansive and lack the critical population levels would 
be to formalize the link between these partners and local government.   
Local public health services could be offered through community based 
organizations, but with a central public sector-based coordinating body.  
Therefore, a potential policy option would be a modification to Act 315 
that would allow local government to use Act 315 funds to provide 
services through community-based organizations and still retain the 
coordinating and planning responsibility. This would allow for 
decentralized services and more flexible expense structures.   

Another policy option that also entails a break from the Act 315 
structure would be the creation of decentralized regional offices of the 
State Department of Health. This option would be responding to the 
national trend of LHD consolidation. Baker and Koplan (2002), for 
example, estimate that as a result of a national level consolidation trend, 
the number of local public health entities across the nation could 
diminish from 3,000 to an estimated 500-1,000 entities. Therefore, under 
this policy scenario, the option would not be to create more LHDs but to 
use the existing six health regional offices that now cover an average of 
10 counties to cover areas that cannot be feasibly covered by a LHD. 
However, these regional offices would need to be restructured into a 
network of sub-regional offices that would cover three to four counties.  
This would allow the state offices to have greater access to these 
underserved areas, without the need to create new structures.   

The results show that it is clear on the need for a strengthened public 
health infrastructure in all of Pennsylvania, and in particular rural 
Pennsylvania; however, in areas where the political will exists to create 
these structures, local policymakers are stymied by the initial financial 
threshold set for their establishment. Policies that help counties attain 
this threshold would boost political will.  

 



Alberto J.F. Cardelle         123 
 
 
 

 

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