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The
Next Big Thing
It
may be too late for Virginia to become a world
leader in biotech -- but leadership in the delivery
of medical services is still within our grasp.
When
policy wonks talk about health care, it’s usually
in the context of a problem. Medicaid is busting the
state budget. There aren’t enough nurses. A
million Virginians lack medical insurance -- and
premiums are rising too fast for the rest of us. Few
commentators regard Virginia’s
health care system, with its manifest flaws, as an
asset.
It’s
easy to forget that Virginia’s
health care system is the envy of many other states.
By national standards, our system is strong and,
relatively speaking, it’s getting stronger. Our
hospitals and other providers deliver a favorable
mix of better-than average care at
lower-than-average cost. If our political leaders
play their cards right, the health care sector could
become a significant contributor to the state’s
economic prosperity and quality of life.
Traditionally,
economic development strategists in the Commonwealth
have taken Virginia’s
health care sector for granted. Hospitals and other
players in the sector are regarded as a
“secondary” sector of the economy. That is, they
mainly serve local markets and grow as the local
population and economic base grows. Unlike
manufacturing and high-tech, hospitals don’t drive
the economy forward. Rather they
prosper or decline in tandem with the health of the
communities they serve.
But
earth-shaking changes in the health care sector may
create economic development opportunities for
regions that first understand and exploit them. Increasingly,
top medical institutions are looking beyond their
immediate communities for business. Technology and
globalization are opening up distant markets.
Top-tier hospitals and medical practices enjoy
unprecedented opportunities to grow their businesses.
Virginia
enjoys several competitive advantages that aren’t
commonly listed among the state’s economic
development assets:
·
Virginia
hospitals are among the best managed in the nation.
Hampton Roads’ Sentara, in particular, has won
kudos as one of the top health care systems in the
country.
·
Stressed
though they may be by stringent Medicaid and
Medicare reimbursement schedules, Virginia
hospitals are financially strong compared to their
counterparts in many other states.
·
The
Commonwealth is home to three medical schools that
teach and practice state-of-the-art medicine.
·
The
Old Dominion enjoys a favorable legal environment,
which keeps malpractice pay-outs under control. In
lawsuit-prone fields, Virginia
institutions
are recruiting physicians with national reputations.
As
evidenced by the governor's appointment of a special study
commission, some Virginians think the state should
focus on building its nascent biotechnology sector.
The Commonwealth unquestionably possesses strong
assets in this arena, including strong university R&D
programs, research parks, a
number of research institutes and the presence of the
American Type Culture Collection. But it's
debatable whether these assets, which are scattered
across the entire state, possess sufficient mass to ignite.
Nationally,
biotech
is almost as concentrated geographically as is the
semiconductor and electronics industry. According to
a February 2002 study by the Brookings Institution,
“Signs
of Life: Growth of Biotechnology Centers in the U.S.,”
a mere nine metro areas account for 75 percent of
all the biotech firms created in the last 20 years.
(Washington, D.C.,
is one of the nine, but most of the biotech assets
are located on the other side of the Potomac River.)
“Only a few of the nation’s 51 largest
metropolitan areas," the report stated, "have demonstrated the
entrepreneurial and financial capacity required for
consistently generating
significant numbers of biotechnology-related
businesses.”
Furthermore,
as Gov. Mark R. Warner recently observed during the
roll-out of the state’s economic development
strategic plan, many other states have targeted
biotech. States like
Pennsylvania
and Michigan
are
channeling millions of dollars from their tobacco
settlements into their biotech sectors. Virginia
has
dedicated
its tobacco-settlement funds to revitalizing the
economies of the tobacco-growing region.
Biotech is not a big part of the picture in
Southside and Southwest Virginia.
Where,
then, should the Commonwealth invest limited
economic development resources -- in the crowded biotech sector or
the mundane and overlooked medical field?
The
quotidian delivery
of health care services just doesn't get the
economic-development juices flowing. A
knack for administering cancer-fighting drugs
effectively, apparently, isn’t as glamorous as the
high-tech science used to develop them. But there’s big
money in cancer therapy, coronary bypass surgeries
and other medical procedures. And the potential
exists to “export” medical services by bringing
in patients from around the country to a Virginia facility
for treatment -- or, through telemedicine, to
diagnose and treat patients from a distance.
Wealthy inhabitants
of nations with socialized or semi-socialized
medicine, who either can’t tolerate the the long
waits for procedures or can’t find world-class
treatment of any kind at home, hunger for medical
services they can find only in the U.S. A number of
U.S. medical institutions already capitalize
on this market. The Mayo Clinic,
located in Rochester,
Minn.,
is set in a small community far from any technology
center, but it
draws patients from around the world. (The Mayo
website can be read in English, Spanish and Turkish.)
Here in Virginia,
the Jones Institute for Reproductive Medicine draws
foreign patients seeking treatment for
infertility.
On
a more mundane level,
Virginia
hospitals benefit from the malpractice crises of
nearby states. I’ve heard stories from
authoritative sources about obstetricians in West
Virginia
simply shutting down their practices and moving
across the state line to
Virginia.
If their old West
Virginia
patients want to be treated, they have to conduct
their business in the Old Dominion.
Traditionally,
patients have preferred to seek treatment at
hospitals near home, where friends and relatives can
visit. But some health care futurists foresee a
system in which “centers of excellence”
specialize in high-volume, big-bucks medical
procedures that draw patients from afar. There is a
significant learning curve in medicine; operating
teams get better at a procedure – whether it’s
replacing arteries or fixing knees – the more
often they perform it. Increasingly, hospitals seek
disciplines they can excel in, recruiting top
physicians, investing in expensive medical equipment
and hiring support staff with special skills. As a
rule, these centers perform procedures at lower cost
and with superior medical outcomes.
Depending
on how the health care system evolves, some Virginia
hospitals might find it advantageous to position
themselves as centers of excellence, marketing to a
customer base that extends far beyond their local
communities. Already home to a number of
high-caliber heart centers, Virginia
might find itself one day
exporting services around the country in the form of open
heart surgery. Incidentally, the surgeons,
anesthesiologists, nurses, pharmacists, radiologists
and other medical technicians who perform the
surgery are compensated handsomely.
The
rise of telemedicine and robotic surgery creates
another avenue for the export of medical services.
In September, Sentara opened its “operating room
of the future” which integrates robotics with video, audio, and tele-mentoring
equipment so a remotely located physician can
participate in the surgery. It’s not far-fetched
to envision Virginia hospitals delivering health
care to satellite facilities located in other states
and countries.
What
can Virginia
do to stimulate the development of its medical
services sector? A number of possibilities leap to
mind.
First,
encourage hospitals to invest in state-of-the-art
technology. Although physicians are the super stars
of the medical sector, they cannot work
independently of hospitals. Only financially stable
institutions can afford to invest in the most advanced
medical equipment and recruit skilled support staff.
Traditionally, government regulators have regarded
investment in the latest medical equipment as a
driver of health care inflation, a consideration not
to be dismissed lightly. However, the goal of
containing health care costs may be secondary if the
Commonwealth has made a strategic decision to build
a world-class medical sector.
Second,
promote medical R&D. Biotech
garners the glory for
good reason, but technological advances in many
fields, from information technology to advanced
materials, find medical applications. Of those, I
would conjecture that telemedicine would offers the greatest potential to
stimulate the growth of Virginia's economy. By enabling remote diagnosis and surgery,
telemedicine will allow Virginia
health care organizations to penetrate distant
markets.
Third,
maintain the favorable legal climate. As long as the
Old Dominion holds the line on
no-connection-to-reality malpractice awards,
Virginia
hospitals will enjoy a significant competitive
advantage in the recruitment of top medical talent.
Virginia
should be especially aggressive in recruiting
physicians who develop path-breaking new medical
procedures: They are the most likely to be sought out by
out-of-state patients seeking the very best health
care, irrespective of location.
Fourth,
use state marketing dollars to recruit human
capital, not just corporate investment. The Virginia
Economic Development Partnership could take the lead
in creating a medical marketing consortium to help
hospitals recruit world-class physicians to
Virginia. Selling points would include the state's
favorable malpractice environment, the vitality of
Virginia's health care systems and strong teaching
hospitals. Logical allies would include the Medical
Society of Virginia and the Virginia Hospital and
Health Care Association.
In
the past,
Virginia’s health care sector never promoted itself persuasively as an engine of economic development, but the world
is a different place today. The integration of the
world economy, the ease of travel, the spread of
telemedicine and the rise of “centers of
excellence” are dissolving the old geographic
boundaries that confined the delivery of medical
services. A new era is upon us. Incredible business
opportunities are opening up for health care
providers who move quickly to exploit them.
Health
care providers should start building ties to state
and regional economic developers. Policy makers know
what manufacturers and technology companies need to
thrive in Virginia, but they don't have a grasp of
what a growth-oriented health care industry might
require. In turn, Virginia’s
economic strategists would be well advised to take a
close look at the medical sector. Biotech may be all
the rage nationally, but the delivery of
health care may be a better bet to become Virginia’s
next big growth industry.
--
December
23, 2002
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