In yesterday’s posting, I talked about the role that universities play in a local economy — and the trend to globalization. This week’s Economist had a similar story about another local institution: heath care. According to the piece (Cities and hospitals | Mayo with everything), large institutions such as the Mayo Clinic in Rochester Minnesota and the Cleveland Clinic are major players in economic development:
The size of the health giants ensures that their reach extends far beyond the examination room. Each, for example, has made its city something of a destination for “health tourists” (people who come for operations or check-ups) and conferees. Rochester received 2.5m visitors in 2007; about 70% of these came to visit Mayo. At the last count, Rochester had the same number of hotel rooms as nearby Minneapolis, which is about four times as large.
The Cleveland Clinic has taken on many of the traits of a hospitality group. Its main campus served almost 3m patients in 2006, bending over backwards for them. A posh international centre offers translators, coffee and foreign newspapers. The clinic owns three hotels and lets the InterContinental hotel group manage them. The most expensive hotel, built in 2003, has space for conferences and plush suites, popular among royal patients from the Middle East.
In addition to importing visitors, each hospital has turned its city into an exporter of sorts. Each is spinning off technologies and start-ups. Mayo has hospitals in Florida and Arizona. The Cleveland Clinic has begun to offer management expertise, for a fee, to a handful of hospitals around the country. It already has facilities in Florida, a “wellness centre” in Toronto and projects under way in Abu Dhabi and Vienna. Cleveland’s manufacturing base may have declined, but its main commodity in future may be cardiac expertise.
That can give rise to a different form of town/gown conflict:
For all this activity, community relations remain a work in progress. Mayo has dominated Rochester for so long, donating to a host of local programmes, that the mayor—himself a former Mayo employee—calls the clinic “a gorilla, but…a very nice gorilla”. The Cleveland Clinic’s relationship with its city is more complex. Cleveland is much larger than Rochester and much more racially diverse; the city has an industrial hangover and the attendant headaches of poverty and urban decay. The clinic itself sits in a poor neighbourhood where few employees live, preferring to drive in from the suburbs.
. . .
Much energy is directed towards education, through gifts to local schools and programmes to teach students about careers in health care. The premise is that the hospital cannot succeed without a successful city. “Our future”, Dr Cosgrove [head of Cleveland Clinic] has said, “is intimately tied with the future of Cleveland.” And, increasingly, vice versa.
Of course, this last quote brings immediate comparisons to the universities. This is especially true given the fact that these health institutions are also branching out into other geographical regions. Then add in the rising trend toward a reverse medical tourism. In the past, rich foreigners (and others) came to places like the Mayo Clinic for health care. Now, middle class American’s are going overseas (see earlier posting.)
There is yet another wrinkle in the “health institution as economic driver” story. A few years ago, I had a conversation with someone who was involved in city finances. He was very interested in what I thought about the trend to telemedicine. I told him I thought it was great. It could cut health care costs and provide care in underserved areas because people wouldn’t have to travel to a centralized health care facility. That was exactly what worried him. If telemedicine reduced the need for large centralized health care facilities, many urban areas might suffer — since these institutions are often the largest employer and the economic base for many cities now days.
So, as much as I agree with the description of the current situation in the Economist’s piece, I can’t help but think it may be a story about the past not the future. Mayo Clinic is to Rochester MN what US Steel was to my small home town in northern Michigan, or what the auto industry was to Detroit. As the I-Cubed Economy evolves, are these large institutions still as relevant as they once were? Granted, economies of scale and scope will still be important in some areas. But the nature of production is changing. We still don’t understand very well the role of agglomeration in this new system. Large institutions could decline, but geographical economic clustering could continue – ala Marshall’s “something in the air” comment. Or the “death of distance” decentralization could be the rule. More likely, both will happen as we mix and match the organizational structures to the specific economic production situation and business model.
That is one of the things that will keep the evolution of the I-Cubed Economy interesting.