Healthcare's Impact on Baton Rouge Economy
Healthcare's Impact on Baton Rouge Economy | Baton Rouge Healthcare,Baton Rouge doctors,Louisiana hospitals,Louisiana health care,Our Lady of the Lake,Baton Rouge General,Ochsner Clinic Foundation,Ochsner Health System,Amedisys,Neuromedical Center,Woman's Hospital,Baton Rouge Clinic,North Oaks Livingston Parish Medical Complex

Baton Rouge’s Economic Giant

By Steve Clark, Baton Rouge Business Report

Monday, April 20, 2009
Who thinks about health care unless they need it?

Nobody, unless you’re a doctor or hospital CEO or someone otherwise plugged in to the industry. Worse than being ignored, however, health care is often vilified.

A lot of people think of health care as the bad guy—a drag on the economy, a money pit. Greedy insurance companies, overpriced pharmaceuticals, interminable waiting-room vigils while overpaid, underworked doctors tee it up. It’s all part of the popular mythos of everyday Americans being taken advantage of yet again—this time by the health-care sector.

The truth is, Baton Rouge wouldn’t be where it is without the health-care sector, which generates thousands of high-paying jobs, gives outsiders a reason to want to come here, fuels the fires of economic activity on several levels and floods the region with money. You’re talking billions in payroll and investment in capital projects, with additional indirect job creation and a trickle-down effect that’s more akin to a raging river.

Add the sector’s resilience in the face of recession. It’s a mistake to call it recession-proof, as many people assume, though health care is insulated to some extent from factors that dog other sectors during an economic downturn. People still get sick, for one thing.

Baton Rouge’s health-care sector received a huge boost after Hurricane Katrina swelled the local population and hospitals made major expenditures. Things have stabilized, though the sector post-Katrina isn’t the same as before the storm.

Among the biggest growth areas today are home care and senior living centers. It’s obviously tied to the aging of the U.S. population—12.6% of this country’s population is 65 and older, according to the U.S. Census Bureau. Managed health plans are another area slated for growth.

In contrast, the growth outlook for Capital Region hospitals and physicians, according to industry analysts, is neutral—still not a bad place to be considering the substantial bump from Katrina and relative strength of the sector.

As robust as that sector is, there are some people who dream of greater things. Those dreams tend to look toward Birmingham, Ala., and its accomplishments in building a health-care corridor that is important to that region’s economy.

Could Birmingham happen here? It’s been said numerous times that all of the pieces are here, and that it’s just a matter of doing it. Skeptics and optimists concur that any such undertaking—utilizing the clinical and research pieces of Baton Rouge’s fragmented sector into a productive, harmonious whole—would be no easy task.

Small is big

Economist Loren Scott says it’s typical for health care and education to be the largest employer in a metro area. Health care generates so much wealth because it’s largely a high-wage industry that, in the case of hospitals, never closes its doors.

“It’s a good-sized chunk,” he says. “It’s probably one of the most steady parts of the economy in terms of employment growth.”

Dipping into the archives back to 1974, Scott was unable to find a year when health care wasn’t growing in Louisiana—“even through the terrible recessionary years of 1982 through 1987.”

No overarching study has been done on the overall economic impact on health care in the region. Considering the thousands of individual entities, large and small, that comprise the sector, it would be a daunting task. Data does exist in a few areas, plus anecdotal evidence abounds.

Even small is big: Dr. Paul Perkowski, a vascular surgeon who is president-elect of the Capital Region Medical Society, maintains a small practice on Brittany Drive—just two doctors—though it employs 10-plus people.

At the opposite end is Baton Rouge Clinic, which has 550 employees plus another 90 physicians at its sprawling campus on Perkins Road between Essen Lane and Kenilworth Parkway. Ed Silvey, the clinic’s CEO, says each of those jobs indirectly creates another job somewhere else.

“I would suspect that health care has a major economic impact on this community just in jobs alone,” he says.

Silvey says job creation is Baton Rouge Clinic’s biggest contribution to the economy, though the clinic also has served as a catalyst to bring in physicians who might have strayed from the area.

He’s witnessed a degree of in-migration. Silvey has been surprised by the number of people who have relocated to Baton Rouge from other cities to fill clinical and technical jobs at the clinic, a trend that started around six months ago.

Doctor in the house

RULE OF THUMB: John Matessino, CEO of the Louisiana Hospital Association, says every job inside a hospital supports another job on the outside.

Photo by Marie Constantin

RULE OF THUMB: John Matessino, CEO of the Louisiana Hospital Association, says every job inside a hospital supports another job on the outside.

Half of the Baton Rouge region’s 20 highest-paying occupations are in health care, according to Louisiana Workforce Commission. Health care-related occupations comprise the seven top spots, with physicians and surgeons ranking first with an annual average wage of $189,554.

So what does a Mercedes-Benz dealer, for example, think of physicians? Joe Agresti, president of Mercedes-Benz of Baton Rouge, says his database doesn’t let him break customers down by their profession. Still, he has a good feel for his client base.

“Between doctors and nurses and other health care professionals—including, if you want to, pharmacy executives—I’m going to say that group in its entirety may be darn close to my biggest customers,” he says. “Lawyers are directly thereafter, then small-business owners, then public- and private-company executives. Doctors and other health care professionals are really important to my business.”

The Baton Rouge Metropolitan Statistical Area, which includes East and West Baton Rouge, East and West Feliciana, Ascension, Iberville, Livingston and Pointe Coupee parishes, has 2,513 network physicians, according to an estimate by industry analyst HealthLeaders.

It might be overly simplistic to assume every one of them drives a Mercedes, or that each of them supports five jobs apiece per the Perkowski model, but their impact is undeniable. Exactly how much is hard to tell, since Louisiana has no studies on the economic impact of its physicians. Medical societies in other locales have commissioned such studies, however, and it could shed some light to look at their results.

The Metropolitan Medical Society of Greater Kansas City released a study in October 2008 that concluded its physician practices are responsible for 21,000 full-time jobs, 3,200 part-time jobs, an annual payroll of $2.7 billion and billions of dollars in capital investments, operating expenses and taxes.

Kansas City’s MSA is estimated to have 4,328 doctors—or about 58% more than Baton Rouge. Assuming similarities between the markets, Baton Rouge area physicians are responsible for 12,180 full-time jobs, 1,856 part-time jobs and an annual payroll of about $1.5 billion.

HealthLeaders notes “there’s no shortage of doctors, particularly specialists” in the Baton Rouge market, which already was gearing up for growth when the post-Katrina population rush created new customers for doctors and hospitals.

The big guns

Hospitals, likewise, are massive job producers. A good rule of thumb, says Louisiana Hospital Association CEO John Matessino, is that every job inside a hospital supports another job on the outside. That’s profound, considering Our Lady of the Lake Regional Medical Center has 4,009 employees—making it the area’s fifth-largest employer, according to the Baton Rouge Area Chamber.

Baton Rouge General Medical Center ranks sixth with 3,000 employees, Ochsner Clinic Foundations seventh with 2,000 employees and Woman’s Hospital eighth with 1,982 employees. The combined number of almost 11,000 employees ranks more than Turner Industries, LSU, ExxonMobil and The Shaw Group.

STALLED: Because of the unfavorable credit market, Woman’s Hospital halted construction of its new campus at Airline Highway and Pecue Lane in January—six months after it started.

STALLED: Because of the unfavorable credit market, Woman’s Hospital halted construction of its new campus at Airline Highway and Pecue Lane in January—six months after it started.

“The health care jobs in Louisiana are some of the best jobs and most consistent that we have, and there’s still a demand capacity,” he says. “They still have a need for medical technicians.”

Every few years, LHA conducts a study of the hospital industry’s economic impact on the state and its regions. The most recent study, released in 2007, showed health care topping the list of economic drivers in terms of payroll and numbers of employees. Health care employs 260,000 people statewide—including 101,900 of them in hospitals—with a combined payroll of $3.6 billion a year.

James Richardson, the author of the LHA study and director of LSU’s Public Administration Institute, says health care is “a very important part of the economic fabric” of any city with a large concentration of units—a collective term that includes hospitals, specialty medical centers and physician practices.

“[Health care] is very labor-intensive,” he says. “If you look at the number of employers in the state with 1,000 employees or more, hospitals dominate that.”

Building the future

Woman’s Hospital CEO Teri Fontenot says too often people think of health care as a drain on the economy and don’t recognize the sector’s economic contribution.

“It’s something I think a lot of people take for granted,” she says. “It’s hard to quantify the value of that. We have been told that because there’s a hospital like Woman’s in our community, that is a very favorable asset people take into account when they think about moving their business here. It’s like schools. People care about it.”

One glittering example of sector growth mentioned in the HealthLeaders report refers to Woman’s plans for a new campus on Airline Highway and Pecue Lane—a $350 million project Fontenot estimates will create 750 construction jobs. Indeed, such major capital projects—including the new Woman’s campus and Baton Rouge General’s new Bluebonnet Boulevard campus—are a huge economic driver in addition to the sector’s employment capacity.

The Woman’s Hospital project was fast-tracked after the 2005 hurricanes in response to the sudden swell in population, which left area facilities bursting at the seams. Then the market collapsed, interest rates went through the stratosphere and Woman’s was forced to stop construction on the project in January—six months after it had started.

“What we like to say about the project is the construction has stopped, but the project has not,” Fontenot says.

The hospital also is considering other ways to finance the new campus other than the “very typical, very boring tax-exempt bonds,” she says. Woman’s already has been approached by a handful of firms regarding private financing. A couple of pitches were rejected because they were the variable rate, and Fontenot wants a fixed-rate, 30-year deal.

BIG DIG: Officials broke ground earlier this month on North Oaks Livingston Parish Medical Complex, a $32 million, two-story, 47,000-square-foot outpatient facility to be built off Interstate 12 at the Satsuma exit.

Courtesy North Oaks Health System

BIG DIG: Officials broke ground earlier this month on North Oaks Livingston Parish Medical Complex, a $32 million, two-story, 47,000-square-foot outpatient facility to be built off Interstate 12 at the Satsuma exit.

“We know there’s a lot of money that’s looking for a good place to invest—and there’s a lot of hospital deals that have been parked,” she says. “It’s encouraging that private money sees this as a viable project.”

The Woman’s situation is proof health care isn’t completely recession-proof, and neither is Baton Rouge. That said, the region hasn’t been roughed up as bad as a lot of other places.

Robert Newman, an LSU professor who specializes in health economics, says health care traditionally hasn’t been exposed to the same market vagaries as other parts of the economy.

“It is somewhat protected by the fact that we have health insurance, which pretty much pays for the consumption of health care,” he says. “It’s not as sensitive to household income as the purchase of a home or durable goods would be. You don’t have insurance that helps you purchase a new car, but you do have insurance that helps you purchase health care. To that extent, the sector is somewhat insulated.”

But not completely. Some local hospital CEOs report a decline in elective procedures, while administrations are tightening their belts and holding off on big-ticket purchases such as equipment.

Contested territory

Livingston Parish is one place in which health care is growing. Our Lady of the Lake’s plans to expand outpatient services and medical office space in Walker aren’t moving as fast as they would absent the recession. There are signs [literally a billboard along Interstate 12 just west of the Walker exit] that expansion will happen, since the market is too juicy to ignore and the hospital owns 250 highly desirable acres.

“That whole I-10/I-12 corridor is hot right now,” Matessino says. “That’s where the population moved to after the storm.”

Naturally, OLOL will have competition. Less than five miles to the east, Hammond-based North Oaks Health System broke ground earlier this month on a $32 million outpatient facility off Interstate 12 at the Satsuma exit.

“It’s a parish with 115,000 people without any major health care facilities such as a hospital,” Richardson says. “There is probably a number of people who would like to have something closer to them. Competition is a good thing, even in the health care field.”

What effect will OLOL and North Oaks outpatient facilities have on Ochsner Medical Center Baton Rouge, located seven miles west of Walker and 12 miles west of Satsuma off I-12 and O’Neal Lane? Mitch Wasden, the hospital’s CEO, concedes he could lose some business.

“Until you know what services they’re putting there, it’s really hard to know,” he says. “Like if they put radiation therapy out there, it wouldn’t impact us that much.”

It grows on you

Baton Rouge’s health-care sector has been transformed in recent years in two big ways with the rise of physician-owned specialty surgical hospitals and home health care—both of which have given consumers an expanded array of choices and energized competition inside the sector.

Advances in medical technology have dramatically shortened recovery times for many surgical procedures that once required a lengthy hospital stay, paving the way for specialty surgical hospitals, which proved extremely successful by luring away the least-risky, highest-profit procedures.

Our Lady of the Lake Regional Medical Center plans to build outpatient services and office space less than five miles to the west off I-12 in Walker.

Our Lady of the Lake Regional Medical Center plans to build outpatient services and office space less than five miles to the west off I-12 in Walker.

Traditional hospitals, which initially sensed a threat to their business model, have been forced to compete with specialty centers by creating similar facilities. Our Lady of the Lake took things a step further by buying an interest in the Surgical Specialty Center, one of the market’s biggest operations. Baton Rouge General is bolstering its physicians group, First Group Physicians, by adding surgeons and specialists.

In home health, Amedisys has been a Baton Rouge success story. Started by Bill Borne as a nurse staffing service in 1982, the company shifted to home health in the late 1990s, taking advantage of changes in government payment systems.

Amedisys survived some difficult years before emerging stronger than ever. Revenues for the fourth quarter of 2008 were nearly $1.2 billion, with projections for 2009 of more than $1.4 billion. The company has hundreds of locations in 37 states plus the District of Columbia and Puerto Rico and employs 14,800 people. Many of Amedisys’ 1,000 Louisiana employees work at its headquarters on South Sherwood Forest Boulevard, the former Schwegmann Giant Supermarket building it purchased in 2005.

Kevin LeBlanc, Amedisys’ director of investor relations, doesn’t know where home health care ranks compared to other industries, though he imagines “it’s probably near the top.”

“All of health care itself has risen,” he says. “Home health, looking at our stock price and our earnings and so forth over the last several years, we’ve had a very good growth rate going.”

Where to now?

For years, many advocates have sought to combine all the disparate, fragmented pieces of Baton Rouge’s health care “system”—from clinical to research—into a cohesive powerhouse that attracts highly paid professionals and sparks spin-off companies similar to Birmingham, Houston and Raleigh-Durham, N.C.

David Hood, a senior policy analyst for the Public Affairs Research Council and a former secretary of the Department of Health and Hospitals, says the challenge is to avoid the mind-set that more automatically is better. Baton Rouge already exceeds the national average for hospital and nursing home beds, he says, and creating more of them won’t help the economy.

But Hood believes the region’s assets could be used more productively. The country’s successful health-care corridors—UAB Medical Center in Birmingham, M.D. Anderson Cancer Center in Houston, St. Jude Children’s Research Hospital in Memphis, Tenn., and Research Triangle Park in Raleigh-Durham—all have extensive research components.

“The No. 1 thing is Pennington [Biomedical Research Center],” Hood says. “If we can continue to grow that, that can certainly be an economic engine. It already is in many respects. I just don’t think it’s been utilized sufficiently. It hasn’t been exploited the way it probably could be. If we could get a lot of cooperation going on there, that would probably be good.”

Mary Bird Perkins Cancer Center is another asset that’s grown sufficiently, garnered a great reputation and could be tapped as part of a coordinated whole.

“This is the kind of growth that we need and which will really pay dividends for us,” Hood says. “All kinds of ancillary activities and industries and so on can grow up alongside a research effort like that.

“Could we be Birmingham or Houston or North Carolina? I think that’s certainly possible. It’s not going to happen overnight. It takes a strategic plan that we stick to, and it takes leadership and, of course, it’s going to take dollars as well.”

It’s not easy

Fontenot believes Baton Rouge has the makings of a Birmingham, though what’s missing is something those other places have: an academic, public teaching hospital.

“The biggest thing we don’t have right now is a medical school,” she says. “We have teaching programs.”

Don’t expect that to change anytime soon. Ochsner’s Wasden says there might be ways for everyone to work together, though he’s skeptical about the capacity of research enterprises like Pennington to think in terms of commerce.

COPYING THEIR CORRIDOR: The University of Alabama at Birmingham’s medical facilities—including UAB Hospital, UAB Eye Care Center for routine exams, UAB Highlands for outpatient hospital services and Kirklin Center for routine doctor visits and outpatient services—contribute to that city’s health-care 
corridor.

Courtesy UAB Media Relations

COPYING THEIR CORRIDOR: The University of Alabama at Birmingham’s medical facilities—including UAB Hospital, UAB Eye Care Center for routine exams, UAB Highlands for outpatient hospital services and Kirklin Center for routine doctor visits and outpatient services—contribute to that city’s health-care 
corridor.

“It’s pretty typical of research institutions in universities to fall down when it comes to commercialization,” he says. “There are a lot of people with a lot of good ideas. It’s just a different mind-set when it comes to commercializing things.”

Richardson, who also conducted an economic-impact study for Pennington, says synchronizing the pieces of Baton Rouge’s health-care sector has been discussed for years but never acted upon. If it happens, it will be a 10- to 20-year process, he says.

Birmingham started with a single charity hospital in the 1950s and watered it with a steady stream of cash to grow a medical money tree. Today that city’s research institutions annually receive about $275 million in National Institute of Health grants.

Baton Rouge does not.

“They keep that going year in and year out,” Richardson says. “We aren’t quite that big, but it’s something that Pennington would like to shoot for. It would be a much larger contributor.”

What makes Birmingham work is basic research institutions and hospitals with interlocking missions in close proximity to each other.

“It’s easy to visualize,” Richardson says. “It’s much harder to implement. It’s potentially doable, but it’s not going to be a simple task. It’s going to take some hard work and effort on the part of everyone involved. It’s got to be a vision.”

AGE-OLD QUESTION

Percentage of residents age 65 and older in the United States, Louisiana and Capital Region in 2007:

Pointe Coupee Parish 14.7%

St. Helena Parish 13.1%

U.S. 12.6%

Louisiana 12.2%

East Feliciana Parish 12.1%

Iberville Parish 11.4%

East Baton Rouge Parish 10.5%

West Baton Rouge Parish 10.5%

Livingston Parish 9.1%

West Feliciana Parish 8.5%

Ascension Parish 8.1%

SHOW ME THE MONEY

The highest-reported paying occupations by annual average wage in the Baton Rouge regional labor market in 2004 and 2009:

Occupation—2004—2009

Physicians and surgeons, all other—$135,479—$189,554

Anesthesiologists—Not ranked—$178,084

Surgeons—$144,176—$177,744

Internists, general—Not ranked—$175,147

Pediatricians, general—Not ranked—$174,910

Obstetricians and gynecologists—Not ranked—$162,043

Family and general practitioners—$118,174—$158,848

Dentists, general—$130,234—$125,933

Dentists, all other specialists—Not ranked—$125,078

Pharmacists—$68,021—$92,338

###

 



Do you know someone else who would like to see this?
Your Email:
Their Email:
Comment:
(Will be included with e-mail)
Secret Code

In the box below, enter the Secret Code exactly as it appears above *