While economists bemoan the nation's growing healthcare budget, cities and states are quietly battling for their shares of high-paying healthcare jobs. And according to a study released last week, the Northeast and mid-Atlantic regions have a leg up.
Healthcare has long been considered an important economic driver, and the report, released by the Milken Institute, could be the first attempt to quantify just how much of an impact the industry has on local economies.
Researchers at the independent economic think tank in Santa Monica, Calif., examined 317 metropolitan areas and all 50 states to quantify the economic importance of 13 healthcare sectors including hospitals, drugs, medical supplies, insurance and research. The institute's "health poles" are modeled after its "tech poles," introduced in 1999, which measure the "gravitational pull" of technology-driven metro areas.
Not surprisingly, Northeastern metropolitan areas, with their high concentrations of academic medical centers, topped the list of those that stand to benefit from the nation's rising healthcare spending. The Boston area was No. 1, followed by New York, Philadelphia and Chicago. Los Angeles, one of just two West Coast cities in the top 20, was a distant fifth (See chart).
The mid-Atlantic region, anchored by Washington and Baltimore, ranked a close second to New England in regional healthcare employment.
"The healthcare sector provides a huge economic base for some of these regions and it promises to be a major global economic force in the years ahead," said Ross DeVol, the institute's director of regional economics.
The 29-page study notes that healthcare doubled as a percentage of gross domestic product from 7% in 1970 to more than 14% in 2002; the CMS expects it to reach 17% by 2011. While the rankings grabbed headlines last week, co-author Rob Koepp said researchers hope the study will promote thoughtful consideration of how regions can nurture their healthcare economies.
"I think the point is, regions are already competing, whether they are aware of it or not," Koepp said. "People can use this as a starting point for moving forward with strategic responses to the reality of the healthcare economy."
Detroit (7), St. Louis (13) and Houston (15) are among many metro areas that have invested in grant programs and technology parks to attract biomedical companies, for example.
"I think in the past three to five years, a lot of states have woken up to the value of healthcare, in particular of life sciences," said Valerie Fleishman, vice president of the New England Healthcare Institute, a six-state consortium of various industry sectors. "States like North Carolina, Pennsylvania and others have been making great strides," she said.
The study released last week expands on one the Milken Institute conducted last year for the New England Healthcare Institute, measuring the importance of healthcare to the New England economy. The institute found healthcare directly employed at least 11%-about 800,000 people-of New England's workforce.
But Fleishman said other regions' healthcare economies are growing at a faster rate, and her organization is aiming to attract even more high-paying life sciences jobs, which she said each generate three non-healthcare jobs.
"The concern is if New England continues on a status quo path, other regions of the country could surpass us," she said.
Koepp said Boston and other areas with an existing "critical mass" of healthcare services, research and education are well-positioned for more growth, as are San Diego, San Antonio and Fresno, Calif., which have growing populations.
"If you look at the future of healthcare, it's research-focused," Koepp says.
Nashville (47), which is host to many healthcare service companies but isn't known for its research and education, stands to enjoy limited benefits of spending growth, Koepp said. An educated workforce also is a plus, he said, citing Seattle (27) as possibly ripe for growth.