Here's what's wrong with Chicago's healthcare scene

While Chicago's healthcare sector is not immune to the access, cost and disparity challenges facing the national market, its rich talent and resource pools have the potential to drive transformation and growth for residents.

But it's not going to be easy, based on key insights and trends included in a report released today by the Health Care Council of Chicago, or HC3.

"The city has significant economic and health-related shortcomings to address," namely the vast differences in health outcomes by neighborhood, according to the group's second annual state of the industry report. Composed of 62 local healthcare businesses, HC3 seeks to address health-related issues and support growth in and around Chicago.

Chicago's "tale of two cities" narrative has changed little in the last year, despite a "groundswell of civic leaders and hospital leaders and others coming together to collaborate around solutions for underserved populations and vulnerable communities, said David Smith, co-founder of HC3 and founder of consultancy Third Horizon Strategies. "That surge of activity is a surprise and it's exciting."

Social factors drive a large percentage of what determines someone's health outcomes, Dr. Nirav Shah, director of the Illinois Department of Public Health, said today during HC3's state of the Chicago healthcare industry event.

"Chicago is not just a tale of two cities; its a tale of dozens of ZIP codes," Shah added. "We know that where you live will determine how long you live."

The report highlights organizations like West Side United and Healthy Chicago 2.0 that aim to break down health and wellness barriers by addressing socioeconomic factors like education and crime.

But as one door opens, another may close. Smith, 37, said he wasn't expecting life sciences and biotechnology companies to exit the city as quickly as they are, and that Chicago will need to make changes if it wants to compete in the space.

After previously moving some R&D resources from Chicago to the greater Boston area, Takeda Pharmaceuticals last month announced plans to close its U.S. headquarters in Deerfield.

"The trend concerns us," John Conrad, CEO of biotechnology company iBio, said during HC3's event. "Hopefully it won't continue, but, quite possibly, it will continue." Reason being, Chicago doesn't have the infrastructure needed to grow, Conrad said. Some organizations are starting to address the issue, "but the city is losing companies—not just to the coasts (but) to other Midwestern states" like Indiana, he added.

"It feels like we're missing an opportunity to . . . create the right economic conditions that would really drive a greater infusion of investment in R&D."

February's mayoral election has the potential to shape the future of life sciences in Chicago.

Business-friendly Mayor Rahm Emanuel, who has helped draw a series of technology companies to the city since he was elected in 2011, announced in September that he would not seek re-election.

"We need to maintain the vision Mayor (Rahm) Emanuel has led us down on being a business-friendly city and growing our economic base," Smith said. "But we've got to start creating more linkages between the city and (its more) vulnerable neighborhoods. . . .If the new mayor can maintain Rahm's vision and build on what we're seeing happen in these communities, it can be a really powerful combination."

Mass amounts of change—whether it's mergers and acquisitions or policies and regulations—have no doubt limited capacity for innovation in the sector, according to the report.

One such innovation, Smith said, is the transition to value-based reimbursements from the fee-for-service payment model.

But the rate at which things change around here could slow. Smith said he expects to see fewer mergers of large health systems moving forward.

"We don't have a lot of systems left to consolidate and, even if we did, would the (Federal Trade Commission) and (Department of Justice) allow it?" Smith said, adding, "We have seen the limits of what the Federal Trade Commission and the Department of Justice are going to allow in Chicago."

Advocate Health Care and NorthShore University HealthSystem dropped plans to merge after a federal judge last year ruled against their proposed union.

Smith called Advocate "a wonderful test case," noting that its merger with Aurora Health Care enabled it to achieve operational efficiencies and a wide geographic footprint.

Consolidation in the last several years has contributed to not only the erosion of stand-alone hospitals, but also for-profit players, according to the report. But Smith remains optimistic.

"There are such tremendous community needs, and that community alignment has to be top of mind," he said. "(We can be) sure that our institutions are not beholden to other financial interests as much as they might be beholden to the boards they respond to and the communities they serve and the patients they heal."

"Here's what's wrong with Chicago's health scene" originally appeared on Crain's Chicago Business.