Eds And Meds Economic Geography

I understand the concern about an eds and meds bubble. The Rust Belt knows all about putting too many eggs in one basket. We can't afford the spiraling costs of education and healthcare. Something has to give. How soon before the boom busts? A look at how the medical industry is agglomerating:

While Rochester is already a destination city for tens of thousands of Mayo patients and visitors each year, competition among several well-funded, global medical centers is part of the reason the clinic needs to build for the future.

The Cleveland Clinic is one of those competitors. A big-ticket medical complex is under construction right now in downtown Cleveland. Called the Cleveland Medical Mart, the $465 million facility is scheduled to open in July.

The center, officially the Global Center for Health Innovation and Cleveland Convention Center, is publically financed through a quarter- cent local sales tax passed in 2007. The one-million-square-foot campus will house big-name health manufacturers and service providers like GE Healthcare and the Cleveland Clinic.

Mayo and Cleveland Clinic are in a regional economic development arms race. The stakes are high, sky high. Those two aren't the only players. The above article also highlights Johns Hopkins (Baltimore) and MD Anderson Cancer Center (Houston). I don't know if UPMC in Pittsburgh merits mention. We're talking about massive public investment in the top exporters of medical services. This economy is diverging.

To put a bird on it, consider this exposé on the surprising variance of MRI (among other services) costs:

Castlight has seen some health providers reduce their fees once the data became public. In one particularly extreme example, a Midwestern hospital cut their charge for outpatient radiation by 60 percent after Castlight made the price public.

But others don’t necessarily see the need to compete on price. The Castlight site also includes information on quality, with rankings of various doctors’ outcomes on given procedures. Some hospitals might feel emboldened to charge more if they can deliver better results.

“Cleveland Clinic is probably one of the most expensive providers in their state, if not the country,” Colella says. “But the CEO, who is a visionary, says that train has left the station, and that they’ll compete on quality.”

Emphasis added. The Cleveland Clinic is playing a different game. Patients will pay more to travel to Northeast Ohio in order to receive care. The small Midwestern hospital with a smaller market has to mind its charges. Mayo doesn't.

So other cities, particularly in the Rust Belt, look to get a piece of the action. Buffalo is one such place. Now imagine the task of competing for the best talent. The pitch:

Buffalo’s charms are helping UB attract promising scholars in all academic disciplines, including Justin Read, associate professor of romance languages and literatures. “Buffalo is a big city, but it’s also a small town,” Read says. “There’s an authentic sense of community here. And the arts scene in Buffalo is incredible. For a city of this size to have the artists that it does is simply amazing.” ...

... After new recruits get past stereotyped notions of snow and chicken wings, they warm to some of Buffalo’s best characteristics: It’s an extremely friendly and family-friendly city with nice homes, and it’s easy to get around, even during rush hour.

“Recruits not familiar with Buffalo see the lakes, the shores, skiing, boating, golfing, hiking, proximity to Toronto, flights to everywhere and great summers.  They see the perks that other cities don’t have—all in one location,” says Mark Lema, chair of the Department of Anesthesiology.

And:

“I enjoy Buffalo,” Wolfe said. “I’ve become a big booster for the city. I have to be, but I can do it in a sincere fashion. There are great recreational opportunities. The arts are excellent. The restaurant scene holds its own very well in comparison to even larger cities. And the cost of living, from a real-estate standpoint, is a big bonus.”

Barnabei and Tomaszewski were struck by the friendliness of the community. He recalled moving into his office – arms full, fumbling with his access card – when a woman saw him from the third floor of the building and came down to open the door for him.

“If you keep an open mind enough to give it a chance, it’s the kind of place that the more you look the more you find,” Martinez said. “If you just give it a chance, the more it gets under your skin and grabs you.”

I know this story. I march to the same tune. But most Rust Belt cities can count the same assets. Luckily for Buffalo, no one realizes this. I'd be more worried about a looming reckoning for eds and meds in Buffalo than in Cleveland. You have a handful of elite institutions at the top and then all the rest below fighting for a smaller slice of a shrinking pie.