Did Someone Not Get the Diversification Memo?

From "The Street,"  "Five Places Where the Bubble May Burst".  "The Street took a look at five regions that lean heavily on one industry and at just how much they stand to lose should their bubble be the next to go."  One of those regions, they think, is Pittsburgh:

It's almost a shame a town so hard hit by the industrial decline of the late 1970s and early 1980s has become a perfect storm of bubbles. The University of Pittsburgh is still one of the town's largest employers, the empty manufacturing facilities are being populated by tech startups and arguably the biggest employer in town is the University of Pittsburgh Medical Center -- which is, yes, separate from the university from which it takes its name.

The last may be the most volatile of Pittsburgh's three rivers of revenue, as Pittsburgh and other health care heavy towns such as Augusta, Ga., and Boston may not have to wait for the baby boomers to blow through to see their bubble burst. According to health care consulting firm Millman, American families insured through their jobs are racking up an average of $19,393 in health care costs, up 7.3% from last year.

In fewer than nine years, the cost of health care has more than doubled. Hospital spending, which is only 48% of total health care spending, accounts for 60% of the increase. If you consider this kind of growth unsustainable, join the club.

The nation's still sharply divided over President Barack Obama's health care law and none of this posturing has cut so much as a cent from costs, and communities that lean heavily on their hospitals will bear the brunt of it. Pittsburgh knows this too well already; a University of Pittsburgh Medical Center hospital in its Braddock neighborhood was closed just last year.
There are just too many misleading things going on in that passage to know exactly where to begin.  How about this?  "Meds" in the Pittsburgh region provided around five percent of the region's jobs in 1980.  Today, "meds" account for around fifteen percent of Pittsburgh's jobs.  Bubblicious?  You decide.  At the least, Pittsburgh has achieved a certain kind of "renaissance" if some people now think that the region is a poster child for success built on eds-and-meds exuberance.

Comments

1 Response to "Did Someone Not Get the Diversification Memo?"

kejad said... 6/06/2011 12:41 PM

Probably worth noting that the knock-on economic impact of health care isn't that great: health care in most regions is generally providing a service internal to that region. Only for a few hospitals in the world is it bringing in dollars from outside the region (the Mayo Clinic and Baumrungrad in Bangkok are notable examples). UPMC is bringing in very few patients from outside the SW Pa, eastern Ohio, northern WV region, and its high growth relative to other medical providers is more a function of the disproportionately large number of old people in the region and not due to some unusual demand for healthcare from otherwise healthy people. As the older generation in Pittsburgh dies off and isn't replaced (all those 30-50 year olds who keep moving away), we'll likely see lower-than-average healthcare growth in the region.

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Pittsblog 2.0 is written by Mike Madison, a law professor at the University of Pittsburgh. Send email to michael.j.madison[at]gmail.com. Mike also blogs at Madisonian.net, on law and technology. Chris Briem of Null Space drops by from time to time.

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