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A medical mecca rises in suburban Detroit

A look at the Clarkston Medical building, which is part of the McLaren Health Care Village in Clarkston, Mich. The McLaren Health Care Corporationhopes to build a hospital at this site.

KAI RYSSDAL: We've been talking bad jobs number for what seems like forever. So let's try to change that.

Last month, when net job growth in this economy was zero, one industry actually added 30,000 jobs. Over the past 12 months: 300,000. During the worst two or three years of the recession: 800,000 jobs.

So in this next story, we're going to ask what seems like a really silly question: Is all that job growth a good thing? From the suburbs of Detroit, and the Marketplace Health Desk at WHYY, Gregory Warner explains it kinda depends.


GREGORY WARNER: Oakland County Michigan rose up with the automotive industry, but today in the lobby of the county seat there's no nostalgia for old Pontiacs or DeSotos.

WARNER: Um, you're going to show me this?

BROOKS PATTERSON: Yeah.

Brooks Patterson, county executive, shows me his plan for new jobs. Etched in aluminum plates, under track lights -- 10 non-automotive industries that he's trying to attract.

PATTERSON: And then we post, every company that we attract on this wall.

WARNER: So this is like a scoreboard?

PATTERSON: Yeah, exactly!

And there's one sector outscoring all the others: that's health care. For the past two years, Brooks has been on a mission: to rescue Oakland County by creating a medical mecca. Glad-handing at medical conferences, dangling incentives to lure health care companies and hospitals, here.

PATTERSON: what that represents is an opportunity for me to put people back to work in good, clean, quality high-paying jobs.

DENNIS MCCAFFERTY: If the goal is to create jobs? There's some vacant space in downtown Detroit. Why don't we build some pyramids? We can employ tens of thousands of people for 40 or 50 years. And they would make as much sense as building redundant hospital capacity.

Dennis McCafferty represents a coalition of Michigan businesses and labor unions -- they're the ones who pay for health insurance premiums. He drives me to the place where the county's latest new hospital may be built.

MCCAFFERTY: McLaren Health Care Village.

The hospital chain McLaren, from Flint, hopes to build a $600 million hospital complex here -- promising maybe 3,000 jobs. But Dennis says this region doesn't need another hospital.

MCCAFFERTY: Uh, where we're sitting right now there are already six existing hospitals within a 30-minute drive time that average occupancy is 55 percent. So it isn't a hospital that's needed by the community, it's a hospital needed by one health system to capture market share from its competitors.

And the market they're competing for? Well-insured suburban patients. That means building new hospitals, with the latest expensive medical technology, and of course, more staff.

MCCAFFERTY: Then we've got all these additional people getting paid for treating the same population, which is dramatically driving up the cost of insurance, which is driving business out of the state. Because those workers are a drain on the rest of the economy!

So here were two men, both from Oakland County, with opposite feelings about a new hospital. Both arguing their positions on economic grounds. So, I called an economist.

CHAPIN WHITE: This is Chapin White.

Chapin is a senior researcher at the nonpartisan Center for Studying Health System Change in Washington D.C.

WHITE: Yeah.

So who's right?

WHITE: Well that's the thing -- they're both right.

Brooks is right -- a new hospital creates jobs.

WHITE: And they tend to be relatively recession proof.

But Dennis is right -- redundant hospital capacity increases costs.

WHITE: Yes. If you have a bunch of empty hospital beds, you're gonna be paying for the equipment in those rooms and for the heating and the lighting -- that's all just money that's wasted.

But who pays for those extra costs? Well, Chapin says about a third is paid by large employers in the form of insurance premiums. But the biggest chunk comes out of Medicare, and that costs us all because it's funded by our taxes.

WHITE: Medicare is the biggest single payer. And most of that is coming from the federal government.

But Medicare's costs increase every time a local community builds an additional hospital in the name of jobs.

WHITE: So there is a price to these new jobs being created, but that price is spread broadly across the entire nation. If you're just the local city or county, that's like outside money to you.

Now when you think of a new hospital as a product of this tension -- between the local desire to create jobs and businesses need to control costs -- it suddenly seems very important to understand who sets the rules about where a hospital can build.

The answer, in Michigan, is these people:

Crowd noise

This is the -- big breath here -- Hospital Bed Standard Advisory Committee to the Certificate of Need Commission. These are the experts sitting at a U-shaped table in Lansing who set the rules about when a new hospital is needed, like a building permit for hospitals. It's been this way for 40 years.

Recently the politicians have been getting their way. In 2002, the state legislature overturned the commission. It allowed two new hospitals that the commission had deemed unnecessary. In 2009, the politicians trumped the CON commission again. Again, in Oakland County, Brooks Patterson's district.

PATTERSON: We're prepared to do that in the McLaren case. Ignore the CON and go directly to the legislature and say, look there's an opportunity for desperately needed jobs in the state of Michigan, which led the nation for almost four years in unemployment.

Now keep in mind, the Certificate of Need commission is endorsed by all the state's top employers. In fact, General Motors did a study that found that the commission kept down health costs and might free up the company to hire more workers. But here's what happened when I just brought that up to Brooks.

WARNER: They showed me a study that said that Michigan had kept costs lower than other states, and they attributed that to the strong CON process because once a hosp--

PATTERSON: Is that the company that just went bankrupt? And you're taking advice from those yahoos about health care costs?! That's what bankrupted their company to begin with was the health care costs and now they're experts in how to keep costs down?!

WARNER: Do you feel disappointed by GM?

PATTERSON: I just feel they're butting into something they know nothing about!

Which, to be fair, is the same thing that Dennis McCafferty, the guy who represents Michigan business and labor, says about Brooks.

MCCAFFERTY: Well, we would hope that the politicians would leave the process to the Certificate of Need.

No chance. Whatever the commission decides about this hospital being necessary, Brooks is ready to muscle it in, legislatively.

PATTERSON: We're working on it as we speak. Oh yeah!

Even though business leaders in Michigan see excess capacity as driving up health care costs.

PATTERSON: You know, they do until they're clutching their chests. And wanting to get the fastest health care that's available.

And as it happens, Brooks Patterson lives just two minutes from where the new hospital would go. This came up rather suddenly at the end of our interview. We were talking about a hospital near the McLaren site, a hospital called Genesys.

PATTERSON: Um, I lost my son in an accident. They took him to Genesys. Not that he would have lived if the hospital in McLaren was available. But he would have gotten there a hell of a lot sooner than going up to Genesys. So you know, I think people have a right to put in their community the things that to add to their quality of life. I don't want anybody to be more than 7-10 minutes away, but pretty much at that point...

WARNER: Seven to 10 minutes away from?

PATTERSON: Away from a hospital, from where you live.

MCAFFERTY: Wait a minute. If you go down that line that says that everyone in the state of Michigan should be within 10 minutes of a hospital? We'd be having a hospital every 10 minutes down the road. As a society, how could we possibly afford that?

But as a county, can they afford not to?

In Michigan, I'm Gregory Warner for Marketplace.


RYSSDAL: Right about here's where I usually say something like check out our website for more on Gregory's story. But believe me when I tell you that you really should this time: Think health care spending explained, Dr. Seuss-style. Watch the video.

And check out some interesting numbers in The Health Care Economy Index.

About the author

Gregory Warner is a senior reporter covering the economics and business of healthcare for the entire Marketplace portfolio.
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One thing that the article has missed is that Michigan is not a high cost state for healthcare, overall, it ranks around 30th in cost per capita.

There are two primary reasons for this. First, as mentioned in this piece, the CON law which has had a significant impact on controlling cost. The second is due to the market power of the largest insurer in the state - Blue Cross Blue Shield of Michigan.

A third factor, but not as signifant factor can also be considered. There has been an almost total absence (until recently) of for-profit hospitals and surgical center in the state.

I'm pleased to hear that Michigan still has comprehensive health planning law in place and that it has helped to reign in costs. I think this is the missing link in healthcare reform legislation - the supply side. How many CT scanners does a community need? If there are more than necessary, costs of CT scans go up because of the cost of the equipment sitting idle. Mr. Patterson is pursuing a foolish and unsound economic policy by creating excess supply where there is inadequate demand. He single handedly may be driving up the costs of healthcare in Michigan by pursuing this policy and doing an end run around the CON process. We need to go back to the example set in the late 70's and early 80's when comprehensive health planning was national policy.

This is a wonderful video. I work in healthcare finance for an integrated healthcare system, integrated means that we provide both healthcare and insurance so I get to see both sides of the financial story. I would like to add another vicious healthcare cost cycle. First off, health care providers lose money on medicaid and medicare patients. So they recover their costs by charging insured patients even more. Which drives premiums up, which induces more people to go without insurance, which means when a major illness hits they inevitably end up on medicaid or medicare, which means that we must charge more to recover costs, insurance premiums increase, more people go uninsured and so on.

Hey! How could a show that focuses on numbers and costs let this one slip by?:

"MCAFFERTY: Wait a minute. If you go down that line that says that everyone in the state of Michigan should be within 10 minutes of a hospital? We'd be having a hospital every 10 minutes down the road. As a society, how could we possibly afford that?"

If everyone had to be w/in 10 minutes of a hospital, you'd build one every 20 minutes, not every 10. The difference is HUGE!
If you let a minute equal a mile, draw a square 60 miles by 60 miles. Plotting a hospital every 10 miles within that grid would be 25 hospitals. What's the difference if the distance is every 20 miles, still leaving everyone no more than 10 miles away? It drops the number of hospitals required from 25 down to 9.
Even a non-numbers, non-economics person like myself knows that 9 hospitals will be a lot cheaper to build than 25!

This story and Mr. McCafferty fail to see the big picture. Medical Main Street is more than just about hospital emergency rooms. It is also about drawing world-class medical research to Oakland County; it is about working with a new medical school that is forecast to have a $3 billion impact on the region; and it is about attracting medical-related job providers such as those in the pharmaceutical industry and many others.

Healthcare and Life Sciences is actually one of 10 Emerging Sectors in which Oakland County is fostering job growth. Others include alternative energy, IT, advanced manufacturing, nanotechnology, homeland security, among others.

Since 2004, 191 companies in these 10 sectors have invested more than $1.7 billion in Oakland County creating 25,000 jobs and retaining 10,000 jobs, even through the economic downturn.

We expect to hit that $2 billion mark soon.

The numbers are real. And they were created through a recession. Imagine what they will be as we begin to see brighter days ahead. The University of Michigan forecasts job growth for Oakland County because of its Emerging Sectors initiatives.

Maybe Mr. McCafferty would like to ask the experts at UofM the prospects for pyramid building.

-Bill Mullan
Media and Communications Officer for Oakland County

The study showing that Michigan's CON rules saved employers many millions, was conducted by all three domestic auto companies (GM, Ford & Chrysler) and the UAW. They pooled there data to improve the statistical accuracy.

I guess the construction of new and expansion of existing healthcare facilities is the new housing boom of the 2010s. The only difference is that everybody will be paying to keep the industry afloat, be in the form of insurance premiums or Medicare taxes. Einstein-Montgomery is building a new facility in Montgomery Co., PA, even though there are plenty of hospitals in the county and in nearby Philadelphia. The boondoggles have a way of recurring again and again.

Great story. Please do a follow up on colleges and universities. Campuses across the country are in continual construction and tuition is rising at record pace. Why? I bet you'll find it is the same story, different industry.

So why is Michigan Gov. Snyder so gutless on this issue? He presented himself as a fearless budget cutter, but he endorses this malignant growth of unnecessary inpatient medical facilities. Like McCafferty and White stated, related costs get spread out over the rest of the country, via Medicare. Where are the Michigan's congressional Senators and Representatives?

When all those Michigan companies can no longer afford the fixed costs they've given themselves, we be glad to have them set up shop in North Carolina.

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