Saturday, September 22, 2012

Eds And Meds Pittsburgh

Pittsburgh has emerged from the last recession as an ironic boomtown. The Marcellus Shale deserves some credit, but not much. Eds and meds are at the heart of the regional economy. Energy is a welcome sideshow. Over at New Geography, Aaron Renn serves warning to Pittsburgh and other cities that are too reliant on the industry:

Regardless of how it plays out, when you look at spending in aggregate in America, it's clear increases in health care and higher education spending cannot keep increasing at current rates.  This means that it just isn't possible for all the cities out there dreaming of eds and meds glory to realize their dream. America simply can't afford it.

This bubble is going to pop. When it does, whither Pittsburgh? Perhaps, but I don't see that threat as the central concern. There are a bunch of metros, as Renn mentions, looking to pull a Pittsburgh:

One of the richest, most powerful people in Buffalo stood before a crowd of hundreds Thursday and said the region could be more like Pittsburgh, with its burgeoning health care sector that has made it one of America's most successful regional economies during the recession (for the sake of inclusion, he mentioned Cleveland, too).

Eds and meds Pittsburgh is unique. The local industry exports its expertise outside the market. Decades of a shrinking population have forced the adjustment. UPMC is well aware of the pitfalls:

Today, from his suite on the 62nd floor of downtown's tallest building, once owned by U.S. Steel Corp., UPMC Chief Executive Jeffrey A. Romoff has a wide view of the city's cleaner skies and rivers — and of much of his $10-billion empire.

The company has about 20 hospitals, 3,300 doctors and 1.8 million health plan enrollees. It employs about 55,000 people, more than any private employer in Pennsylvania, including No. 2 Wal-Mart Stores Inc. Over the last 15 years, UPMC's annual revenue has grown 13% on average, and its employment has increased 17% a year.

But Romoff, 66, readily acknowledged that was not a sustainable pace.

He knows his researchers can't count on continuing to win half a billion dollars in grants yearly from the National Institutes of Health, given federal budget constraints. And significant changes are likely in store to keep Medicare and other public health programs in check.

"What we will be doing is drastically investing and changing the way we do business," Romoff said, explaining that UPMC had opened hospitals in Italy and Ireland and joined withGeneral Electric make disease-detection gadgets for exports.

UPMC and other health firms in Pittsburgh and around the country also are merging or buying smaller enterprises to build scale and become more efficient, sometimes leaving patients caught in the middle.

Eds and meds Pittsburgh isn't sitting around getting drunk on good times. That will make it much tougher for the likes of Buffalo to horn in on the action. The looming constraints, the bubble popping, apply everywhere. UPMC is already eating your lunch. Again, Aaron Renn with the keen insight:

The vast bulk of cities are likely to be disappointed in their long term eds and meds growth. I strongly advocate cities to look at other sectors where they can grow and thrive unless you think you’ve got something very special going, as with Boston and biotech.

Concerning eds and meds, Pittsburgh has got something very special going. Which is to say, each city would be better off finding something else. For Cleveland, I recommend a talent recruitment cluster. Milwaukee is reaching for the brass ring, aiming for freshwater research and development. Albany has nanotech. Buffalo shouldn't try to be the next Pittsburgh. Other cities should be vying to be the next Buffalo.


BrianTH said...

Pittsburgh's recent job growth is much more diverse than many seem to realize. In fact, Pittsburgh's job count was up 12,700 in August year-over-year. Eds and Meds contribution? Zero! Mining and logging? Only 1200.

So where did it come from? Trade, Transportation, and Utilities: 2900. Financial Activities: 2100. Professional and Business Services: 3600. Leisure and Hospitality: 5700. Even Manufacturing: 2100.

Of course Eds and Meds won't get blanked every month. But there is certainly a lot more going on.

Jim Russell said...

Pittsburgh's recent job growth is much more diverse than many seem to realize.

That's a good and important point. We'll have to wait and see if the recent trend sticks. Playing around with the Pittsburgh Today numbers for 2008-2012, eds and meds is dominant. But it isn't the only game in town.