Hauenstein Center Fuels Local Economy

November 18, 2006
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GRAND RAPIDS — Because of its "uniqueness," Saint Mary's future HauensteinCenter is likely to generate new economic activity in the Grand Rapids area beyond the direct hires and the size of its payroll.

In the medical services industry, the introduction of a new medical facility that offers the same set of primary services as existing medical facilities will have a small economic impact on the market, according to George Erickcek, senior regional analyst at the W.E. Upjohn Institute for Employment Research.

"On a per-employee basis, Saint Mary's HauensteinCenter will have a greater economic impact on its surrounding area than most other service-providing industries," Erickcek said. "A major reason for this is that the center will be offering medical services to the greater Grand Rapids area that are not currently available. In other words, it will be capturing medical expenditures that have been leaving the area."

Saint Mary's $60 million, 145,000-square-foot HauensteinCenter will offer a comprehensive array of neurosciences services under a single roof, and to Saint Mary's knowledge it will be the only medical center of its kind in the country. The center will house all the hospital's inpatient and outpatient neurological services, diagnostics and therapeutics associated with neuroscience-related diseases and disorders, such as Alzheimer's, Parkinson's, brain tumors, epilepsy, stroke, dementia and spine disorders. It also will provide an expanded emergency department and new critical care units.

"We included in our analysis the fact that these were new services, so the center's activities will not in any way compete with any other activity. That's key," Erickcek remarked. "So often what we see is that when a new medical center opens, more often than not it's competing against existing centers, so there isn't much of a multiplier impact. The HauensteinCenter will offer new services; therefore there won't be any displacement issue."

Saint Mary's commissioned Erickcek to do a study on the economic impact of the construction of the HauensteinCenter and the center's expanded neuroscience activities down the road. Saint Mary's Health Care broke ground on the HauensteinCenter earlier this month, and it's slated to open in summer 2008.

Saint Mary's spokeswoman Micki Benz said the hospital did a lot of research and worked with a consulting group before it put its neurosciences program together.

"What makes it unique, I think, is the combination of emergency trauma center, critical care unit and all the neurosciences services in one building, so patients don't have to drive all around the community or beyond to get diagnoses, therapy, surgery, rehabilitation or psychiatric evaluation," Benz said.

In 2011 when the center is in full swing operationally, Saint Mary's will increase the center's overall staff by 5 percent to 10 percent. The neurosciences team will include 65 doctors and nurses dedicated full time to the center, along with a full medical support staff that includes therapists and nutritionists.

Erickcek estimates that each job at the neuroscience center will create another 1.7 jobs in the greater Grand Rapids community in sectors such as retail, professional services, food products and printing. That's 108 new jobs, so the center will have actually generated 173 jobs and some $12.4 million in new wages and salaries for the metro area. Another way Erickcek put it is: For every $1 in wages earned at the expanded neuroscience center, another $1.40 in wages and salaries will be generated.

As he pointed out, a full economic impact analysis has to take into account the consumer expenditures of the center's employees and must include the impact of additional rounds of economic activity that occur in the area. A portion of wages and salaries that the HauensteinCenter will pay its staff will be spent on locally produced goods and services, and those dollars, in turn, will be re-spent in the community, sometimes more than once, Erickcek explained.

"With each round of expenditures, these monies generate additional employment opportunities and more income for area residents," Erickcek noted in his summary of the results. "The impact does not stop there, as workers who work to provide these goods and services spend their earnings, as well. In addition, the new economic activity will support more local governmental services, as well."

Construction of the HauensteinCenter will have a substantial impact on the local economy, too, but only over the construction's duration. According to Erickcek's estimates, the four-story center and its parking structure will create 315 jobs on site, and those workers will generate another $9.7 million in income across a wide range of industries, racking up a total of $22.1 million over the construction period.

However, Erickcek sees the economic impact of the HauensteinCenter as secondary, because for people needing neurosciences services, the value of the new center will mean more than the jobs and wages it generates.

"I see the center as improving the quality of life and attractiveness of the region," he said. "It's hard to quantify, but it's one of those extra factors that your community now has over others. I think health care and the availability of health care is only going to increase in value in terms of site locations of individuals."

As the community turns to a knowledge-based economy, one of the challenges Michigan faces is that the multiplier effect of most services is relatively small, he said. The state doesn't have the supplier base for knowledge-based services that it does with manufacturing, so when the state loses jobs in the automotive or office furniture industries, it really has a fairly big impact on the community, Erickcek explained.

"When we compared the center with other knowledge-based activities like banking, professional services and management of companies, we noticed that its multiplier is actually larger," he pointed out. "Every job at the center will create 1.7 jobs outside. That multiplier was higher than what we saw for other knowledge-based activities, and I think that's significant."

Because of its one-of-a-kind nature, it's possible that Saint Mary's HauensteinCenter could become a destination for "medical tourists." That would bring additional money to the area in terms of family members of patients lodging here overnight and eating in local restaurants, but that wasn't included in the analysis, so it makes the Upjohn analysis even more conservative, Erickcek acknowledged. Benz said Saint Mary's neurosciences services already draw patients from far beyond the hospital's primary, secondary and tertiary ZIP code areas.

"It may be the fact that the baby boomers are getting up there in age," Erickcek said, "but the scope and availability of health care services is important, and we are finding that metropolitan areas with very unique medical services are achieving good, solid growth."    

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