Healing the State’s Ailing Job Market : Health Care Is Bright Spot Amid Gloom

Michael Williamson used to design cruise missile guidance systems for General Dynamics. Now he designs computerized drug-dispensing machines at a new, fast-growing San Diego firm called Pyxis.

Brenda McManigle once headed training programs for the B-2 bomber program at Northrop. Now she’s training people how to keep patients and doctors happy at Pacificare, a fast-growing HMO.

Anthony La Macchia, a certified public accountant, used to crunch numbers at a bank. He’s now executive director of operations at the Cedars-Sinai Comprehensive Cancer Center, a provider of outpatient radiation and chemotherapy treatments.

These three are just some of the refugees from California’s shrinking major industrieswho have found good salaries and challenging work in the state’s largest and fastest-growing business: health care.

While employment statewide declines, health care soars--up 12% in the last five years. In the Los Angeles area, aerospace and computer employment shrank by nearly a third in 1991, but jobs at hospitals and doctors offices grew by 10%. Hospitals and outpatient care providers employ 405,000 people in the region, compared to 339,000 in aerospace and high-tech. Kaiser Permanente employs more than 21,000 people in Los Angeles County, about as many as Lockheed, Atlantic Richfield Co. and Walt Disney combined.

And aside from the direct provision of medical care, the health care field also creates thousands of jobs in pharmaceuticals, biotechnology, health insurance and medical-device manufacturing.

While some experts worry that the new industries replacing heavy manufacturing create mostly hamburger-flipping, minimum-wage jobs, careers in the medical field tend to pay relatively well.

From makers of lab equipment and insurance software to outpatient surgery centers, health care firms provide an extraordinarily broad range of jobs for everyone from high-school graduates to MBAs and Ph.D.s. As medical technology advances, job creation is especially strong in the ranks of employees with two-year technical degrees--a ticket for many to a middle-class lifestyle.

“Why isn’t every kid in the inner city training in radiation technology?” demands medical entrepreneur Dr. Bernard Salick, who complains he scours the country to find specialists who run the machines that zap tumors--and still can’t fill the positions. “With two years of (post-high school) training they earn $60,000, $70,000 a year,” he says.

Salick got rich by healing sick people at an affordable price. Or at least more efficiently, not to mention more comfortably, than conventional hospitals could.

He runs nine outpatient cancer centers for leading hospitals across the country. At the center that Salick Health Care operates for Cedars-Sinai, patients are welcomed 24 hours a day and cared for by some of the country’s leading cancer specialists. The center, located in an airy structure filled with sculptures and paintings, provides valet parking. Instead of spending days or weeks in the hospital, patients walk in, get a few hours of intravenous infusions of lifesaving drugs, then go back to the comfort of home. That’s not only better for patient morale, but saves thousands of dollars in inpatient hospital costs.

Salick decided to start the firm in 1983 after his then 6-year-old daughter was diagnosed with bone cancer and the family experienced what Salick saw as a wasteful, excruciatingly slow bureaucracy surrounding the treatment of serious disease. He once had to wait six hours with the child to get a simple blood test. Not only was the system inefficient and costly, he says, it was insensitive to patients and their families.

With these insights, he recruited his daughter’s doctor from the prestigious Memorial Sloan-Kettering Cancer Center in New York to start an outpatient center--ultimately the source of 1,000 new jobs in Los Angeles. Salick recently started a program at Fremont High School in South-Central to help train the next generation for health care careers.

Salick has no doubts that health care, America’s biggest industry, will be an important local engine. “Entertainment, crasho,” muses Salick as he looks down on the languishing economy of the Westside from the window of his sleek office building just east of Beverly Hills. “Real estate, forget it. Where is it going in this town? Health care. We’re growing like crazy.”

Ironically, at a time when the state is fretting over ways to replace jobs lost in aerospace and other industries, critics say the vast employment possibilities of health care have been largely ignored--even thwarted--by politicians and economic planners. Budget cutbacks have reduced training programs for nurses and medical technologists at numerous state and community colleges. Cal State L.A. has had to halve the number of nursing students admitted in the last several years. Health care careers are being postponed or even canceled, as students can’t afford the six years it now takes to get a four-year degree because of overcrowding.

There are a few bright spots.

Blair High School in Pasadena works closely with Kaiser and Huntington Memorial Hospital to prepare students for health care careers. Los Angeles Trade-Technical College is retraining aerospace engineers to design systems to handle hazardous hospital waste, including radioactive materials, and is training single mothers on welfare to start up the health care job ladder. And the Hospital Council of Southern California runs a hotline to spread information on job opportunities and educational requirements.

Yet lacking information, most high school students and career changers--facing bleak job prospects in many industries--have little idea of the opportunities that exist in medical fields. For the most part, the region may be headed for a crisis because it appears to be failing to train the workers it will need in health care, concluded a recent study by Workforce L.A., a consortium of employers and educators.

To be sure, the recession is hitting health care companies (though less than many industries). And increasing political pressure to lower health care costs will squeeze profit margins. The older, less competitive parts of the industry--especially traditional hospitals--are shedding workers. But more efficient outpatient centers and home health providers are hiring them on.

Indeed, the cost pressures that hurt the slow movers are creating enormous opportunities for those who know how to deliver more for less. And President Clinton’s campaign promise to extend health coverage to all Americans promises to turn 37 million people who now lack insurance, 6 million of them in California, into new health care customers.

Southern California, with its plentiful supply of entrepreneurial-minded doctors and scientists and a tradition of managed health care--pioneered by Kaiser--is widely looked to by the rest of America’s health care industry as the birthplace of innovative health care ideas.

Orange County is known as a world capital of the $31-billion medical device industry, which is shifting emphasis from gee-whiz gadgets to cost-saving innovations.

There are 600 to 800 medical manufacturing firms in the area, according to David Anast, publisher of Biomedical Market News. The low-slung, eucalyptus-shaded industrial parks that cluster around John Wayne Airport house the headquarters or factories of myriad health manufacturers, from subsidiaries of giants like Baxter and Medtronics to many locally based enterprises.

Many hope they can follow the lead of local pioneer Beckman Instruments, based in Fullerton and founded by a Caltech scientist. The company now exports 57% of its production, and it employs 3,400 Southern Californians making advanced laboratory testing equipment that helps decode the human genome and develop treatments for cancer and AIDS.

The biggest boom in medical devices is in endoscopic surgery, which allows doctors to perform operations--sometimes on an outpatient basis--using tiny instruments inserted through small incisions, instead of large incisions that are more prone to infection and require longer, more expensive hospital stays.

Irvine-based Birtcher Medical has been riding the endoscopic wave, seeing its sales of surgical devices grow from $5.7 million to $52.4 million since 1987, a quarter of that overseas. Its staff, meanwhile, has swelled from 47 to 220.

“Medical is the right place to be, one of the safer places to be,” says CEO William Maya, who has started and sold two other highly successful medical device firms. Birtcher’s headquarters, surrounded by lawns and artificial waterfalls in a sprawling new industrial park, are on Technology Way, a street lined with numerous other medical manufacturers.

Birtcher makes a pencil-shaped device with the Buck Rodgerish name of “argon beam coagulator” that facilitates both endoscopic and conventional surgery by cauterizing wounds with a tiny beam of argon gas. Maya now has 41 positions he needs to fill--including design and manufacturing engineers, technicians, software designers and purchasing managers--and he expects to increase his staff by 20% or more a year for the next several years.

Just up Interstate 405 from Birtcher, at a company called FMH Corp., the office walls are covered with pictures of F-16 fighters and other defense projects to which the small firm contributes parts.

“We’re going to have to take some of these down and put up pictures of hearts and lungs,” says Ramon Zentis, with a smile. As general manager, Zentis is helping direct the firm into the untapped field of medical manufacturing.

The exacting quality demands of the medical industry match those of aerospace, Zentis says. He holds up a ribbed stainless steel widget about the size of a golf ball. “This is a drive coupling for the General Dynamics Atlas rocket. About $5,000.” He figures that the auto industry, for example, doesn’t need and wouldn’t pay for the precision, the advanced engineering--and the detailed paper trail--embodied in this part. But the medical industry does need both extraordinary quality control and traceable parts. FMH is now working on designing parts to be used in machines that processing blood.

If Orange County is a mecca for makers of pacemakers and electronic scalpels, San Diego County is rapidly becoming the world’s leading center of biotech enterprise. The tawny hills north of the city center boasted just 44 biotech firms in 1985; today there are more than 100, and the number is increasing.

About 7,000 people work in biotech today in San Diego, looking for new treatments for cancer, AIDS and other diseases, and about 1,500 jobs are likely to be added in the next 12 months, according to accounting firm Ernst & Young. By the end of the decade, as more firms move from research to manufacturing, the local industry could employ five times that number, industry analysts say.

Quidel is one San Diego firm that has already moved from the in-the-red research stage, which typifies most biotech firms, into manufacturing, where large-scale job creation begins. The company sells rapid diagnostic tests for doctors’ offices or home use to detect strep, Lyme disease, female ovulation and other conditions.

Quidel’s chief executive officer, Scott Glenn, figures that efforts to cut costs will push more health care from hospitals into doctors’ offices, especially into the offices of non-specialist physicians--and even into the hands of consumers.

San Diego’s biotech firms have a way of replicating themselves. For example, Hybritech, founded in 1978, has spun off a raft of other firms as its executives took off to start new ventures, forming a “Hybritech mafia.” Idec, Amylin, and Ligand are just some of its offspring. Ted Greene, former president of Hybritech, has helped start seven other companies in San Diego.

Can this pace of business creation keep up? The big question, say experts, is whether biotech research firms will stick around Southern California to do their manufacturing once they’ve perfected their inventions.

Many are located in San Diego not only because of the proximity of leading biotech research institutions such as UC San Diego and the Scripps Research Institute, but because of the area’s quality of life. Unlike heavy manufacturing--or even the computer industry, which depends on the availability of an array of components--biotech firms, particularly in their research stage, don’t need to be near railways, ports, or raw materials. The best place to put a biotech company, say its leaders, is wherever the nicest place to live is. Affordable housing, clean air and reasonable traffic are key to attracting scientific talent.

But when it comes to manufacturing, California’s reputation for having an unfriendly nest of regulations, along with high workers’ compensation and insurance costs, is as distasteful to biotech companies as to any other firms.

The same problems plague medical device makers, some of which have moved part of their manufacturing out of state. Birtcher has located some instrument sterilization plants in Texas because environmental regulations make it expensive to operate here. Birtcher manufactures in Juarez, Mexico, ships from El Paso, and has operations in Boston. Although headquarters will stay put in Irvine, Maya says he would move manufacturing out of California “in a heartbeat,” if regulations became overwhelming.

Southern California medical high-tech companies are deluged with invitations to be wined and dined by state governments that promise tax breaks and low-cost labor forces. The governor of Iowa paid a personal call to San Diego. The governor of Texas has been on the phone wooing local CEOs. While biotech executives are flattered, other local business people are worried.

A year and a half ago, San Diego architects, lawyers, and other service firms, concerned that their fastest-growing customers would pack up and leave, formed a lobbying group called BioCom. The group acts “as water carriers and cheerleaders” for the biotech industry, according to Jim McGraw, an architect who says two-thirds of his business is building labs and offices for biotech firms. The group has worked to raise San Diego politicians’ awareness of the industry’s growth potential and lobbied to make water and waste disposal sites available to biotech firms.

BioCom is only one of a number of groups trying to nurture the industry. Seven years ago, foreseeing the decline of defense employment and the fragility of tourism, San Diego business people asked the University of San Diego to help create a network to connect scientists, entrepreneurs, and venture capitalists in order to attract more firms and jobs to the area. The result was Connect, billed as “the University of San Diego Program in Technology and Entrepreneurship.”

Bryna Kranzler, associate director of Connect, says part of her mission is to simply let companies know how important they are to the region. What she says about the problems of the biotech industry in San Diego echoes the lament of many leaders in other health care enterprises across Southern California: “California and San Diego have not made companies feel welcomed and valued. Nobody is telling the companies here we love them, we value what they want to do, we want to talk so they’ll stay in California.”

In California, Health Care Employment is Rising...

Even while employment statewide was dropping about 1.6% over the last five years, jobs in the health-care industry were growing--up almost 12% since 1988.

Projected health-care job openings in California--due either to new job creation or vacancies in existing jobs--are expected to exceed 375,000 through the year 2000. Below are job categories in order of the anticipated number of job openings.

Job Openings by 2000 Registered Nurse 142,480 Nursing Assistant 72,430 Licensed Vocational Nurse 49,430 Home Health Aide 22,890 Medical Assistant 21,630 Respiratory Therapist 18,530 Pharmacist 11,140 Medical Technologist 7,400 Physical Therapist 7,200 Medical Records Technician 7,000 Radiologic Technologist 5,540 Psychiatric Aide/Technician 5,430 Physical Therapist Assistant 4,340

Seven of the 10 fastest growing occupations in the United States are in health care. Below is the projected rate of job growth, 1988-2000. Paralegal: 75.3% Medical Assistant: 70% Home Health Aide: 67.9% Radiologic Technologist: 66% Data Processing Equipment Repairer: 61.2% Medical Records Technician: 59.9% Medical Secretary: 58% Physical Therapist: 56.4% Surgical Technologist: 55.4% Operations Research Analyst: 54.8% Source: State Employment Development Department, U.S. Labor Department