The Kalamazoo-Battle Creek region's health care cluster derives its competitiveness from providing quality care at low cost within the larger West Michigan area. The region's medical facilities are major local employers with a workforce of 21,200 in 1995, accounting for some 7 percent of total regional employment. The cluster supports the health needs of those residing outside the region as well as local customers. Approximately 23 percent of the region's health-care employment is dependent on providing medical services to individuals outside the region. The sector accounts for 3.8 percent of our region's export based employment.

Low prices in the local health care industry not only enhance export ability, but ensure the attractiveness of the region's affordable quality of life. Recent findings of the Southwest Michigan Healthcare Coalition show that the two hospitals in Kalamazoo County have effectively controlled prices by containing price increases to one-half of the price increases reported in Ann Arbor, Grand Rapids, and Lansing.

However, employment growth in the cluster has slowed to an annual rate of 0.7 percent during 1989 to 1995, trailing the national average of 3.7 percent, and in 1995, the region dropped to a much lower concentration of employment in healthcare industries relative to the nation. (This is indicated by its location quotient of 0.97 percent, below the national average of 1.00.) Although this slowdown can be explained in part by increased efficiencies and efforts to contain costs at local hospitals, it also signifies changing market trends that require new industry responses. For example, hospitals face less capacity utilization (hospital space per 1000 population) as outpatient care expands. The region's health care providers are currently attempting to meet the challenge of greater usage of outpatient care. Battle Creek Health Systems opened a 103,000 square-foot facility that consolidates 40 doctor offices with out-patient medical facilities. Bronson Methodist Hospital is currently constructing a major structure that will also link doctors with out-patient as well as in-patient facilities. These and other challenges will need to be further addressed to sustain the region's health care industry as a major player in Southwest Michigan.

Benchmarking: How Do We Compare?

It is difficult to benchmark the region's health care industry against similar communities. Unlike other industries, controlling earnings and employment growth in the healthcare industry is beneficial because it shows that medical providers are controlling costs. Borgess and Bronson have effectively controlled costs and maintained their quality of care, and inpatient care costs less in Kalamazoo than in Ann Arbor and Lansing. More importantly, from 1988 to 1996, Borgess and Bronson have kept their cost increases to no more than two-thirds of those at the other regional hospitals.