Home > About BNE > Press Room > 2010 Archive > March > Medicine as an Economic Engine

Medicine as an economic engine

Medical corridors are helping cities to financial rebirth

By George Pyle
News Business Reporter
March 06, 2010

The economists call them “Eds and Meds.”

They are universities and hospitals, institutions found in many cities, even those with otherwise decaying economies, that can be the basis for a financial rebirth that creates high- skilled, high-wage jobs not easily outsourced, offshored or otherwise made obsolete.

Merge the two, as in a medical school, and, analysts say, it creates the potential for the kind of economic growth that can ripple through a local economy. It is touted as a way for economic recovery to be partially channeled into urban centers, rather than only to the suburbs.
Academic medicine, as the blend of universities and medical centers is called, is coveted as the basis for much economic development in rust belt cities where, one analyst said, bell towers are replacing smokestacks as signs of economic health. Cities in that mold include Cleveland and Pittsburgh.

And Buffalo.

“The intersection of health care and health science education, that’s the basis for a new economy,” said David Dunn, vice president of health sciences at the University at Buffalo. “The return on investment is a home run.”

Across the state of New York, alliances of higher education and health care already provide a boost to the state’s economy worth $85.6 billion a year, according to a new study by a group representing the 15 public and private medical schools that operate in New York State. That’s $37.2 billion in direct impact, plus a multiplier factor of 2.3 that calculates another $48.4 billion in indirect activity from the academic health care dollars being spent throughout the economy.

According to the numbers put out last week by the Associated Medical Schools of New York, one dollar out of every $13 in the state’s overall economy, and one job out of every 11, comes from the state’s medical schools and their affiliated hospitals and research centers. It is, according to the organization’s leaders, a significant return on investment for a state that provides a relatively small amount of funding for medical schools, including the University at Buffalo’s School of Medicine and Biomedical Sciences.

From 1995 to 2008, the group says, the overall New York economy grew 186 percent, while the impact of academic medicine was up 270 percent.
Dr. Antonio M. Gotto, chairman of AMSNY’s board and dean of Cornell’s Weill Medical College, last week urged state lawmakers to resist any urge to balance the state’s deficit-heavy budget on the backs of the state’s medical schools.

“Every time they authorize cuts to stem cell funding, Medicaid or other health care-related programs, they are not only making it harder for our medical institutions to provide care and undertake critical research, they are also negatively impacting the state’s economy.”

The Buffalo Niagara Medical Campus in downtown Buffalo is the site of Buffalo General Hospital, UB’s Center of Excellence in Bioinformatics and Life Sciences, Roswell Park Cancer Institute and a handful of other health-related institutions and companies. Among them, institutions and businesses on the campus have more than 8,500 employees, with a $388 million payroll and a total economic impact to the region put at $1.5 billion.

While many of the jobs are high paying — more than 700 employees of campus institutions are either medical doctors or Ph.Ds — Dunn notes that the economic footprint expands to the surrounding area, creating demand for housing, retail stores and other businesses.
“Everybody’s got to get lunch somewhere,” he said.

Dunn said the budget of the UB medical school, headquartered on the university’s South Campus, and its many related functions approaches $500 million a year. New York taxpayers, he said, provide only about 15 percent of that, mostly for staff salaries, while the rest comes from research grants, tuition and other sources.

State support for the UB medical school, and similar institutions across the state, has been shrinking in recent years.

“That’s at a time when there is this huge opportunity for investment with this tremendous rate of return,” Dunn said.

Jaison Abel, a Buffalo-based economist for the Federal Reserve Bank of New York, says not all medical services are created economically equal. Some may simply help a region weather the storms of a down economy, while others may actually encourage a turnaround.

“The education and medical sectors of an economy can provide stability to an area because they tend not to fluctuate as much as other parts,” he said. He noted that some declining cities may see their medical care sector as important, not so much because that part of their economy is growing, but because everything else is shrinking.

To be an engine of economic growth, Abel said, hospitals and medical schools need to do the kinds of things Buffalo’s institutions say they are doing. One is to provide specialty care, as at the Roswell Park Cancer Institute, that attracts patients from other communities. Another is to spin off new products and services, as at the bioinformatics center, that attracts high-skill employees.

Statewide, AMSNY says, medical schools and their associated hospitals support the equivalent of some 649,000 full-time jobs. While the institutions themselves are tax-exempt, their employees, suppliers and customers — including those who travel from out of state for medical care — generate $4.2 billion a year in taxes.

In Buffalo, the study says, UB medical and its affiliated hospitals generate nearly 8 percent of all local tax receipts, 8.5 percent of local jobs and 8.5 percent of the area’s overall economic activity.

UB does not operate a hospital of its own, but places medical students in the hospitals of the Kaleida Health system, Erie County Medical Center, Roswell Park Cancer Institute and the Veterans Affairs Medical Center. That allows AMSNY to count the economic impact of all those institutions in its figures.

“There is just a small amount invested by the state in these institutions,” said AMSNY chief operating officer Crystal Mainiero. “But every bit counts.”