Autos to Angioplasties in Detroit

From the New York Times

“Detroit: Motor City to Medical Mecca?” is the provocative title of a report released Thursday by the Center for Studying Health System Change, a nonpartisan research group.

Given the decline of the auto industry, Detroit appears to be hoping that health care will be able to fuel its otherwise stalled economy. Detroit has one of the highest metropolitan unemployment rates in the United States, according to the report, and the area lost more than 70,000 manufacturing jobs from 2002 to 2007.

And while health care may well be part of Detroit’s problem (think retiree health costs for automakers), some people are hopeful that it could turn out to be a solution as well. The area’s hospital systems say they plan to spend more than $1 billion on capital improvements over the next few years.

While the area has seen the usual flurry of activity in the suburbs, where the hospitals want to expand to try to attract as many high-paying and well-insured patients as they can, the researchers also point to a sizable amount of investment planned for Detroit proper.

Vanguard Health Systems, a for-profit hospital company based in Nashville, is in the process of buying Detroit Medical Center. While Detroit Medical, founded as a nonprofit system, has been making money, it needed capital, and Vanguard is promising to spend $850 million over five years, including $800 million in  Detroit. (Vanguard, a publicly held company, reported its earnings in a release on Wednesday.)

So will Detroit be another Pittsburgh, an ailing steel city that largely remade itself into a medical powerhouse?

Maybe, maybe not. The report, which is financed by the National Institute for Health Care Reform, a nonprofit created by the auto companies and their union, sounds a definitely cautionary note:

“Overlooked in the enthusiasm that health care can jump-start the metro Detroit area’s economy is the possibility that significant expansion in health care infrastructure may lead to increased use of high-tech services or additional costs from excess capacity, driving health spending higher.”

In other words, a booming health care sector may do more for the hospitals, doctors, drug and device makers involved than for those people who end up paying the bill. Paul B. Ginsburg, the president of the center and a health economist, says he plans to look more deeply into the issue of whether a growing health care sector is a plus for a local economy. “I suspect it often is not,” he said. “It definitely would not be for the country.”

While he concedes that an institution like the Mayo Clinic may be a positive for Rochester, Minn., because it attracts patients from elsewhere to the area, he warns that payers like the federal government are already overburdened by the high cost of medical care. “Unless we can slow the trend in health spending, we’re going to have a huge fiscal disaster,” Mr. Ginsburg said.

The report provides a nicely detailed look at the health care market in Detroit.

Can Detroit or any other troubled city, for that matter, be saved by the health industry? Feel free to assess the possibilities in the comments section below.

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