On the bubble?

When Michigan's state government—responding to the steady hemorrhage of manufacturing jobs in the 2000s—launched its No Worker Left Behind program, it wanted to channel displaced workers into the knowledge economy.

The move, it turned out, is helping drive growth in Detroit's healthcare sector. Though the metro area's total population dropped by 10% between 2003 and 2011, jobs in its healthcare industry surged by 11,400. The number of such jobs per capita in the region soared 24%, to 62 per 1,000 residents, well above the national average of 54.

“We see applicants coming to us from virtually every industry, including manufacturing,” said Michael Woolsey, director of human resources for corporate and physician services at Beaumont Health System in Royal Oak.

Detroit's experience is typical of a national phenomenon: Aging, Rust Belt cities with declining or stagnant populations are continuing to add healthcare jobs at a rapid clip, suggesting to some analysts that they may be raising employment in the sector to what could turn out to be unsustainable levels. The job density in many of these regions—measured as the total number of healthcare jobs per 1,000 residents—has gone from around average to among the highest in the nation.

Faster-growing regions of the country are adding to healthcare employment, too. But with younger populations less prone to using the healthcare system, the job growth in most of those areas is more in line with the national average, or even a bit below.

The trends suggest regions betting on rebuilding their economies on the backs of resurgent healthcare sectors may be betting on horses that have already run their races. “Even as people migrate away from these Rust Belt cities and the Northeast, and toward the Sun Belt, the healthcare jobs seem to be more sticky,” said Chapin White, a senior researcher with the Center for Studying Health System Change, a policy not-for-profit in Washington. The jobs “seem to be staying in these cities where people are moving away from.”

The outsized healthcare job growth in areas such as Detroit takes place against a backdrop of rising healthcare jobs almost everywhere. Modern Healthcare's analysis found that, overall, healthcare provider jobs per capita in the U.S. grew nearly twice as fast as the population between 2003 and 2011. Healthcare providers have added 2.8 million new jobs—the equivalent of the entire federal government's workforce—since 2004.

For its analysis, Modern Healthcare compared healthcare job growth and population in 88 metropolitan areas with more than 500,000 residents. The magazine used U.S. Census Bureau data from 2003 and 2011 to compute a healthcare job-intensity number—defined as the number of jobs with healthcare providers per 1,000 people in the region.

Officials in Wayne County, which includes Detroit, do not see the rising number of healthcare jobs on top of a shrinking population—the surge in the area's job-intensity made it the second fastest-growing region in the nation—as a sign of rising healthcare inefficiency. Instead, like their peers in other stagnant-population cities, they see healthcare as a catalyst for wider economic growth.

Detroit is developing TechTown, a research and technology park adjacent to Henry Ford Hospital. It's also banking on economic development coming from spinoffs from Wayne State University's $100 million research building, which is expected to open in 2014.

“The university is a huge anchor for downtown Detroit,” said Dr. Valerie Parisi, dean of the Wayne State School of Medicine. Many believe the city's renaissance will come from higher education and healthcare, she said. “It's been dubbed 'eds and meds.' ”

Parisi noted that the medical school last month captured a National Institutes of Health contract worth $165 million to continue housing the NIH's perinatology research branch. An economic impact study found that the contract will allow the city to retain more than 130 knowledge-based jobs.

Detroit isn't the only stagnant area looking to healthcare to rejuvenate its economy. The punishing Great Recession left many areas grasping for stable, well-paying jobs after a decade in which healthcare surpassed retail and manufacturing in the size of its workforce.

But cities with fast-growing populations tend to be less reliant on healthcare jobs, Modern Healthcare's analysis found. “Cities that are growing quickly are most likely adding diversified industries,” said Dr. Sheldon Retchin, CEO of the Virginia Commonwealth University Health System in Richmond and vice chairman of the federal National Health Care Workforce Commission, created by the healthcare reform law but not yet funded by Congress. The growth requires services such as healthcare, he said.

Skeptics say the municipal strategy of building up the local healthcare industry in the hopes of creating jobs runs the risk of expanding the local medical infrastructure at a time when the nation is in cutback mode. These regions could be vulnerable to sharp job reversals as Medicare, Medicaid and private insurers escalate their efforts to ratchet down costs.

Indeed, the prospect of Medicare cutting 2% across-the-board through sequestration could lead to 766,000 fewer than expected jobs in healthcare and related industries by 2021, according to a study by the American Hospital Association.

Such dire talk doesn't persuade some analysts. Douglas Staiger, a healthcare economist and chairman of the economics department at Dartmouth College in Hanover, N.H., said healthcare seemed unlikely to waver from its quick and dependable growth. “The idea that healthcare employment will continue to gobble up a larger and larger fraction of employment is a pretty good bet, nationally,” he said. “That doesn't mean Detroit isn't going a little too deep. In the specific cities, some may … have to shrink their healthcare sectors at some point.”

Some argue poverty, chronic disease and higher median ages in economically stressed regions are the main factors behind rising demand for healthcare services. “There's no glut of healthcare jobs as I see it,” said Mary O'Shaughnessey, chair and associate professor in the department of healthcare education and services at the University of Detroit Mercy.

Not every metro area with excessive job growth was in decline. Richmond, Va.—which has grown its population since 2003 when its healthcare jobs per capita ranked well below the national average—added healthcare jobs on a per capita basis faster than any other region in the country, according to the Modern Healthcare analysis.

The analysis of Labor Department and census data shows that before the recession, the Richmond metropolitan area—composed of 16 counties and four cities—had an average healthcare job concentration of 46 per 1,000 residents, nearly equal to the national figure. By 2011, the area's intensity of healthcare provider jobs relative to its population had spiked 26.2% to 58, growing faster than the area's above-average 10% population growth.

Hospital executives in the region recognize something may be amiss. Executives with HCA's Capital Division, which is based in Richmond and includes Virginia and three other states, said they've gotten vigilant about not “overhiring” because it adds to the financial burdens on local employers already dealing with high healthcare costs.

Rather than quickly reacting to “outlier” situations by immediately adding staff, as has happened in the past, executives are now trying to make hospital processes more efficient while they evaluate the demands posed by emerging trends, said Jerry Venable, vice president of human resources for HCA's Capital Division. “In our industry and facilities in Virginia, we've seen some incremental growth in market share over the years, but it is tight and measured growth for us,” Venable said. “It's a tightly managed approach to adding labor.”

Three major hospital systems dominate Richmond: for-profit HCA and not-for-profits VCU Health System and Bon Secours Health System. VCU CEO Retchin said the region's sprawl may have contributed to its highest-in-the-land rate of job growth. The city of Richmond has seen a net outflow of about 750 hospital beds to replacement hospitals in surrounding communities, Retchin said. Those areas have fewer Medicaid patients, which means they can support a higher ratio of healthcare workers to patients. “It was just a flight of hospital beds to the suburbs in search of a better payer mix,” he said.

Some of the fastest-growing regions in the country were the slowest to add healthcare jobs on a per capita basis, the Modern Healthcare analysis showed. Austin, Texas, an arriviste in the high tech industry, clearly doesn't have to rely on healthcare jobs to bolster its economy.

Though its population grew nearly 26% between 2003 and 2011, its healthcare jobs-per-capita ratio grew just 4%. “One of the reasons that the numbers are relatively low is because we're strong in other areas,” said Jon Hockenyos, president of Austin-based TXP, an economic consulting firm. In addition, “Austin is relatively young, so our healthcare demands are lower.”

But even fast-growing cities such as Austin are trying to catch the healthcare jobs wave they believe will continue for the next decade. In November, Austin approved a 5-cent property-tax increase to help finance a new medical school in the city that it hopes will stop the “leakage” of healthcare jobs into nearby Houston, Hockenyos said.

Some areas are bucking the national trends, of course. Wichita, Kan., while retaining an above-average concentration in healthcare jobs, actually reduced its per capita job count over the decade. Jeremy Hill, director of the Center for Economic Development and Business Research at Wichita State University's Frank Barton School of Business, said the area benefits by drawing patients from remote rural areas to its west. “Western Kansas does consume here,” he said. “We pull from that market. … They'll come here for their shopping and their higher-end medical needs, but not their daily practitioner.”

TAKEAWAY: Cities with slow-growing and declining populations are relying heavily on healthcare for jobs, although the long-term sustainability of that solution is unclear.