Awkward Questions for Roanoke’s Health Sciences Campus

The Virginia Tech Carilion health sciences campus is emerging as the new economic growth engine for Roanoke. The impact of the campus on the state’s economy will grow from $214 million today to $465.2 million within eight years, according to a study issued by the University of Virginia’s Weldon Cooper Center for Public Service.

The addition of a second building at the research institute will create 828 new jobs and generate $150 million in additional spending by 2026, reports the Roanoke Times. The figures measure only direct impact, not the effect of undergraduate students studying there or spin-off development in the surrounding area.

“I think that as a region we need to think big because this is an opportunity that comes our way once a century,” said Heywood Fralin, chairman of the VTC Academic Health Center Steering Committee. The last time anything this big happened in Roanoke was when the Norfolk & Western Railway moved its headquarters in 1882 to the area then known as Big Lick.

The Roanoke Times provides the history of the initiative:

Tech and Carilion formed a partnership a decade ago to build a medical school and research institute on the Riverside campus. The research institute is at capacity, and a new building is underway that will double its size and expand its reach in advancing medical discoveries through trials and to market. Tech intends to offer more undergraduate programs in Roanoke centered around its school of neuroscience, and the Virginia-Maryland College of Veterinary Medicine will move its cancer treatment center to Roanoke. Four companies have been spun off from research since 2010. At that pace, the economist expects 10 more companies will form by 2025.

Here’s the catch:

“Clearly, the more financial support we can give to this effort the better it will be,” Fralin said. “There is an enormous list of things that are needed. To date, the commonwealth of Virginia has funded the buildings. I don’t think it’s reasonable to assume that every building going forward will be built by the commonwealth.”

Bacon’s bottom line: Before I launch into a contrarian mode of thought, let me make it crystal clear that Roanoke desperately needs a new pillar to its economy. Its old industrial-era economy has been hollowed out. The region needs to look to a knowledge-economy model of development rather than vainly try to rehabilitate the old manufacturing model. The research-center initiative brings together two of western Virginia’s key players, Virginia Tech and the Carilion health system, who have the financial clout and know-how to make things happen.

But I do find myself compelled to ask, who’s paying for all this?

Clearly, the Commonwealth of Virginia will be paying for the buildings — through state-backed bond issues, I presume. That’s fine, the state pays for higher-ed buildings across the state, and it’s only fair that Roanoke get its piece of the action.

But who’s paying for all the faculty, researchers, graduate students, and support staff? Hopefully, some of the money will come from federal and private-sector research contracts. Great! But how much? How much is coming from Virginia Tech and how much from Carilion? Digging deeper, where does Virginia Tech get its money, and where does Carilion get its money? To what extent, if any, are these new programs being subsidized by undergraduate tuition payments? To what extent, if any, are they being underwritten by higher-than-needed profits generated by the “nonprofit” Carilion health system?

Another way of asking the question: To what extent are Virginia Tech students paying higher tuition and Carilion patients paying higher medical bills in order to build the campus? To what extent is wealth being extracted from taxpayers, students, patients, and even local philanthropists to fund this research complex? Perhaps most critically of all, to what extent will the health science campus require ongoing subsidies forever?

The buildings, contracts and jobs being created are highly visible, and their economic impact is easy to measure. The funding sources are highly dispersed and largely invisible. Their economic impact is impossible to measure. Does the health science campus represent the optimal investment of society’s resources? Who knows? Nobody is even asking the question.

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11 responses to “Awkward Questions for Roanoke’s Health Sciences Campus

  1. Jim of course raises some very important general questions here that need to be asked of all public universities that embark on costly and inherently speculative research ventures. These questions and issues raised are not meant to oppose blindly any such ventures but instead to consent and pay for such ventures with public monies only after insuring that they be done right.

    In that spirit I have copied in below an exchange between myself and Izzo here back on March 12, 2018.

    Reed Fawell 3rd says.

    “Very well said. There are great truths in what you say. I would register caution, however, in reducing admissions standards to the point of harming the quality of education in an institution for all concerned. As others here have pointed out, there are schools for every kid in Virginia, save for those on the lower half of the academic talent scale. The fact that one half of Virginia’s population is not only under-served, but is routinely ripped off, insulted, ignored and shamed is immoral and a disgrace.

    But so is reducing admissions standards to set quotas based on the color of someone’s skin. Sending kids to schools where they cannot succeed, or where the odds against success are stacked against them, is also immoral. Making them or others pay for that immorality doubles the crime. We see the harm done by these pernicious policies of social engineering played out every day. However unfortunate, SAT scores are highly predictive of success in particular institutions. This has been proven time and again. A swing of a 100 points far more often than not carries with it enormous irremediable consequence, as to the narrow bundle of qualities needed to succeed in the higher realms of pure academic achievement. Just like most every other demanding field of endeavor has its own bundle of specialized talents.

    Thirdly, research should not be allowed to impair education in the slightest. Now it impairs education grievously in most first tier universities. That too is an immoral disgrace. Not because research is bad. In fact it is critically important. But because our corrupt character as humans allow research to eat education of students alive in most of our elite universities today.

    Lets put some flesh on the bare bones of my above assertion.

    As well documented on this blog, today’s tragedy in elite higher education hangs between two central pillars of dysfunction – research and teaching. Today’s system of higher education forces research to war against teaching. As a result, the great bulk of money raised by, and spend on, our elite public universities fail to benefit the education of their students. Hence much of the vast sums of money ponied up by students, their parents, and taxpayers is wasted or at best spent in highly ineffective and unfair ways.

    As a direct consequence, Higher Education fails to educate the vast majority of elite students, whether it be in terms of any verifiable results, and/or in improving the quality of the teaching they receive in the classroom, and/or in the amount of time that highly competent teachers devote to teaching them, and/or to increasing the quality and substance of the subject matter being taught students.

    In short, what elite Virginia education needs is better teachers empowered and committed to spending vastly more of their time and resources to personally teaching great and rigorous courses to willing and able students under a teaching regime where excellence is demanded on the part of teachers and students. And where results are verified. And consequences are rendered for failure.

    Why these failures in educating the great majority of our elite students? And why is it that the more money we spend, the less education most our elite students get? Again it is the war between teaching and research.

    Research inflates the status of professors. It drives up their pay, reputation, security and tenure. Thanks to ill-conceived rankings based on false values, this research also drives up the status and prestige of their university. This drives professors and universities to do ever more research, irrespective of the quality of its outcome, and to do ever less teaching that drives down their status, power, and salary.

    These powerful forces, working in combination, also breed junk research that undermines good science. And it forces universities to subsidize out of its own pocket ever more research. Since the cost of most research far exceeds the revenues it generates, this drives up the cost of tuition, while it drives down the quality of the teaching of students as the university diverts their tuition monies from paying teachers to paying research costs for ever more equipment, labs or researchers salaries. This is a death spiral. It forces costs ever higher. Meanwhile it drains ever more funds away from teaching. And the adverse consequences are cumulative, spiraling outward. For example, the death spiral forces ever more students to saddle themselves with ever more debt to feed the beast they keep trying to ride to get a degree whose value declines year by year. These death spirals always end in the collapse of the system. Why? Because the system operates on a lie. It is a Ponzi scheme. The lie is the asserting that elite students are paying these high and ever rising tuition costs in return of their own world class education.

    While is this a lie? Where is the proof. Consider this contrast professors:

    Teaching deflates the status of professors. Teaching drives down their pay, reputation, security and tenure. And, as tenure and tenure track professors at elite institutions flee teaching for research, the elite universities are forced to hire more and more low wage and low benefit, short-term teachers to teach ever more students in ever fewer classrooms, for cost efficiencies at the expense of learning. This forces these low wage low security teachers into a nomadic existence, often traveling between universities weekly, to earn enough to live on.

    This also puts these teachers increasingly at the mercy of student evaluations. Grades inflate and junk courses spread as demands for study, testing and learning all plummet. And, as tenured and tenured track professors flee the elite classrooms, entertainment venues spread throughout the classrooms and campuses of elite universities to fill the vast gaps of empty time that open in the students’ day, given the lack of serious resources and energy and demands then devoted to teaching. Here we see binge drinking, partying and sex hook ups, and students plunging into virtual realities. This breeds bad lifestyles in students, causing them harms of all kinds, damage done to them at universities that can easily last a lifetime, as our universities strip their students of their culture, education and character.

    Thus, the harm spreads and compounds as research and teaching war with one another. And, all involved suffer, save for the few elite who run this system at the expense of everyone else as costs go through the roof to keep this Ponzi scheme running to enrich those few rulers.

    But why should we be surprised. Institutions and the people who run them without accountability can never be trusted. This is particularly true for people who act in secret while they refuse to be held accountable.

    SEE https://baconsrebellion.com/making-case-higher-ed-investment/

    To this comment IZZO replied:

    A lot of good comments here. I think public higher education should not have been instituted in the way it was in the U.S., with public universities being directly subsidized by the state. I think it should have been done more along the lines of a TAG system for public and private, perhaps similar to the way the UK system works, with the grant going to the individual. I don’t see the current system changing, though.

    I also agree that the role of non-profits needs to be looked at in healthcare and higher education. In healthcare, I think non-profit status is leading to reduced competition as these non-profit behemoths squelch competition in their regions with their preferred tax status. In higher education, endowments compound untaxed at institutions where it is a stretch to say the non-profit status actually serves the public good (think Princeton and its $22+B endowment for about 8K students).

    Healthcare and higher education come together in large universities. As an example, Jim cites UVA $8.6B endowment in the article. I’m sure many would like to think this all came from generous private sector donors, but my estimate would be at least 30% of it actually came from what were “quasi-endowments” originating on the health care side. (The percentage of VCU’s $1.6B endowment originating from the health care side is probably well over 50%. Ever wonder why VCU has a significantly larger endowment than Virginia Tech or why VT wanted to create a medical school/health system?) So a non-profit hospital has actually turned a profit based on patient fees (private insurance, medicare, medicaid, out of pocket), and the money is now controlled by the administration and the Board of Visitors. And as indicated before, a lot of it it accumulates through compounded tax-free growth.

    One more note. The public/private distinction is already a fallacy. Private schools receive public benefits from 1) tax exempt status 2) government grants for research, etc. and 3) subsidized student grants and loans. If you include all of this, Princeton receives 10X the public benefit of the average public school.

    To IZZO’s comment, I Reed Fawell 3rd replied:

    These are very insightful comments Izzo. For example:

    The hospital connection, the milking of “patient fees (private insurance, medicare, medicaid, out of pocket)” that you brought to light earlier, has not received the prominence and scrutiny that it has long deserved. It is yet another corruption hidden within a thoroughly corrupt system. Imagine, it is incredible, but also true that university health care is as corrupt in its our way and means as Division 1 university basketball that is riddled with corruption.

    Your other comments are also highly significant. They puncture the grand myth that the “Ivies” are private institutions when in fact their vast and ever growing wealth, bloated now to obscene proportions, more and more today give them monopolistic power and unassailable financial advantage, over the entire system of American higher education with ever more power and advantage built on the backs of taxpayers and thoroughly corrupt public policies enacted and maintained by their own elite graduates who pull the levers of power, hand out public monies of this nation, and exempt it from taxation for the benefit of their alma maters.

    Of course, as you point out, this also applies to non-profits such as Inova. Hence the joint venture of Inova / UVa medical center in Northern Virginia is designed to be a cash cow crony monopoly built out of crony capitalism of the worst sort, posing as a great savior working in the public interests. This sounds harsh. It is and it is well deserved. In life one can never separate ways and means from ends. All three, working in collusion, will inevitably corrupt the result, and end up corrupting that end absolutely. For example, the long term chronic problem of infections of patients at UVA hospital.

    To this comment, IZZO replied:
    Good comments from Reed. He’s been trying to light the kindling under this issue for a while and I do hope it gets the fact-based consideration it deserves.”

    End of earlier Quotes from comments made to Jim Bacon’s March 12, 2018 article titled WHAT’S WRONG WITH UVa, and WHAT’S NOT.

  2. I see what Va Tech doing as similar to what UVA did some time ago to become a major Medical Center.

    The kinds of questions being asked – could be asked about ANY economic initiative and the answers demanded if not provided…grounds to oppose or not support.

    But when you are a guy who blames all higher ed for tuition increases and UVA for “subsidizing” it’s Medical from tuition, etc, etc, … there are no projects that can be really supported unless they are 100% transparent and/or all private sector… … all the rest are to be viewed with deep suspicion and skepticism . Good LORD!

    I, once again, see the half-glass as having tremendous potential to help many people in Southwest Va medically as well as provide thousands of good paying jobs…. that will mesh nicely with the MedicAid Expansion and in general health care which is a substantial part of our existing economy with huge opportunities to be “disrupted” and experience the efficiencies technology has brought to other sectors.

    This is where you decide if the State is willing to invest in it’s own best interests or whether it’s going to be mindlessly niggardly without any real viable alternatives for that region.

    You say the “industrial” is over and “knowledge” is here. I agree and that’s exactly what health care and Medicine is about these days – “health infomatics”, portable medical records, managed care… all of these things rely on the knowledge economy.

    Health Informatics is a term describing the acquiring, storing, retrieving and using of healthcare information to foster better collaboration among a patient’s various healthcare providers. Health Informatics plays a critical role in the push toward healthcare reform.

    The perfect place for this to happen – is Roanoke. It’s good for the under-served people who live in the region. It’s good for Va Tech. And it’s good for the region and the state. Yes there are issues and questions but the way Jim characterized it – it’s like it should be a no-go until and unless “all” the questions are answered including why tuition is so high.

    Jeezy Peezy

  3. Forty years ago I was in the real estate records room in downtown Roanoke looking something up, and noted all of the deeds and liens on residential properties in and around the city that indicated Roanoke Memorial Hospital either owned them outright or had a lien that would be paid on the next transfer. These all grew out of disputes over unpaid bills. Then and there I coined the phrase “The Hospital That Ate Roanoke.” At about the same time my father, then city manager, had a famous feud with the then-administrator over an effort by the hospital to charge a parking fee on a lot that was owned by the city and loaned to the hospital for the purpose of free parking. They have always understood cash flow.

    My iconoclasm was inherited! Must be a gene.

    I suspect there is a good financial underpinning for what they are doing with the research effort and absent any evidence I don’t think it depends on undergraduate tuition dollars. I’m glad that is happening in Roanoke but I am not glad that it is the only Big Thing going on in the Valley.

  4. The thing that is going to revolutionize healthcare – and drive costs down is information technology. The thing that is going to improve health care to rural citizens and others who lack good health care is technology that allows portable medical records that any/all providers -even over time when medical providers change – that one electronic medical record that has all the stats on the person, all their treatments, drugs, etc…

    We need to reduce costs especially for those whose care is being paid for by Virginia taxpayers and so it is more than appropriate that Virginia invest in getting Universities and Hospital systems to partner to improve care and reduce costs – even if direct State money is involved! And we should be doing this in all regions of the State – not just the urban areas.

    We actually want Roanoke and region to economically prosper – in the knowledge economy and this is one part and I think a solid promising part.

  5. “But I do find myself compelled to ask, who’s paying for all this?”

    Me. I’m paying for it. Me and the other residents of NoVa. We ultimately pay for everything in this fleabag of a state. From the 4 lane beltway encircling tiny tiny Richmond to the tax breaks for failing coal companies in SouthWest Virginia.

    Having said that … this might actually be a good idea. However, Virginia has to … Put. The. Pieces. Together.

    Roanoke = Asheville. NC has a winning formula. Let’s copy it.

    Where is that medical school. Roanoke needs to build a medical center on the scale of UVA’s medical center. That draws well heeled retirees. Well heeled retirees pay taxes but don’t put their kids in public school. They contribute t charity. They don’t commit crime in any real way (other than driving 17 mph in the fast lane with their left turn signal on).

    If Medicaid expansion passes doesn’t that mean more money for hospitals rather than unreimbursed costs? Instead of doctors holding free clinics in SW Virginia couldn’t you bring people from SW Virginia on buses or Amtrak to Roanoke for regular health care treatment? Remember, now it’s reimbursed.

    Health care and retirement are industries … just like furniture manufacture and Savings & Loan. Time for Virginia to start using its scenic beauty and low cost of living (in some areas) as incentives for retirees.

    Next up – expanding Roanoke’s airport.

    • Great summary, all of it, not least “Roanoke = Asheville. NC has a winning formula. Let’s copy it.”

      And per Steve Haner, yes, build a new airport somewhere near, if it need be, its one of the missing parts to a sure success.

      PS – For those few of us here who don’t read – student tuition does not subsidize university hospitals. University hospitals are cash cows used to subsidize the wish lists of corpulent university administrators, this massive pork being generated thanks to patient and insured overcharges that Obama imposed on all of us so he could use our money (public money) to bribe the US health care industry (its special interests) into supporting Obama Care.

  6. I guess you count the financial contribution of the defense industries and defense bases in Hampton Roads as coming from Northern Virginia, too? Checks are cut up there….

    Oh, I used to hear that Roanoke airport location was constrained by those little things called mountains. I’ve been on some hairy IFR landings back in the day, flying around in small planes with politicos. (“Let me know if you see trees!” the pilot said.) Frankly somewhere up on the New River plateau might be better. Montvale had an airport, believe it or not, but now that lovely flat valley is covered with oil storage tanks.

    • Best I can guess Hampton Roads is pretty much self-sufficient.

      Virginia Beach …

      “The median income for a household in the city was $48,705, and the median income for a family was $53,242. The per capita income for the city was $22,365.”

      Arlington County …

      “According to a 2007 estimate, the median income for a household in the county was $94,876, and the median income for a family was $127,179. The per capita income for the county was $37,706.”

      And Arlington isn’t the wealthiest jurisdiction in NoVa.

      Take state income taxes as an example. Use 5% as a SWAG.

      Arlington: 230,050 * $37,706 *.05 = $433,713,265
      Virginia Beach: 452,602 * $22,365 *.05 = $506,122,186

      Roughly twice as many people in Virginia Beach contribute 16% more in state income taxes as is contributed by Arlington.

      While the real estate tax rates between Virginia Beach and Arlington are comparable (1.0025% vs 1.006%) the median home values are not ($258,100 vs. $689,100). Of course, some of that gets slurried out in education funding to areas outside of Arlington.

      While I’ve never seen official statistics for sources and uses of state government funds by geography in Virginia you can’t look at the numbers for long and fail to see NoVa as the great surplus generator in the state.

    • As far as the Roanoke Airport being hampered by mountains … all I can do is laugh. They have mountains in Denver too but somehow Colorado was able to build a huge airport that co-existed with the Rockies.

      • I’ve never flown into Denver, actually, so I don’t know the topography. Them’s really big mountains and the plateaus and valleys can be expansive as well. The Rockies can be 20 miles away and are still towering. I’ve flown into Bluefield and I’ve been to the Bath County airport and they are on TOP of mountains. The pilot can come in level! In fairness the Roanoke Valley is not the same as Denver, more constrained. But neither of us designs airports (but my Dad was a USAF base engineer before he was its city manager and he was the one who told me the problems with Roanoke.)

      • I flew into the Denver airport last year. My recollection is that Denver sits on a fairly flat plateau with the Rockies clearly visible on the horizon 10 or 15 miles away. The airport is located on the opposite site of the city — many miles from the mountains.

        I haven’t flown into the Roanoke airport recently, but I did fly into Blacksburg in a twin-engine plane — first time sitting in the cockpit. Low-lying mountains and cloud cover were very definitely an issue.

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