HOUSTON -- When the collapse of the global oil market in the mid-1980s left Houston's economy on its back, the fast-growing Texas Medical Center helped the city recover.
While tens of thousands of high-paying oil industry jobs vanished, the center, already the world's largest conglomeration of medical and research facilities, continued its half century of expansion.
"During the recovery it was an important source of construction expenditures," said Bill Gilmer, a senior economist with the Federal Reserve Bank of Dallas. "If you count it as one employer, it is the biggest employer in Houston."
Today, the center -- an umbrella for 41 institutions, including several hospitals, two medical schools and a number of medical research centers -- provides employment for more than 55,000 people, with an estimated impact on Houston's economy of $9 billion a year.
Even by Texas standards, the Texas Medical Center is big. Consider this: On an average Wednesday, the busiest day of the week, there are up to 120,000 workers, volunteers, students, and patients at the center, a population that would make it the 12th-largest city in the state.
Remarkably, though, its development may be far from over.
"Our growth has been continuous for 50 years," said Richard Wainerdi, director of the Texas Medical Center, the corporate structure that coordinates the institutions in the 800-acre medical complex. "Eight years ago we started a $1.8 billion capital plan, and that's just ending. Now we are starting a $1.2 billion program."
Analysts say the center's growth and size, unparalleled in the United States, illustrates the increasing economic importance of medical centers. Their development has helped make the $375 billion health-care industry one of the fastest growing sectors of the economy.
The economic impact is not reserved to mega complexes. "Your midsized medical facilities are in many cases the number one employment center for their towns," said Edward Merrigan, vice president at Fitch Investors Service.
No Longer Just Oil
For Houston, the center has been both a source of economic recovery since 1986 and a means of diversifying a local economy long dependent on the petroleum industry.
"I think it's one of the most important components of the Houston economy," said Robert Lanier, the city's mayor. "The medical center is a hospital's hospital. It's a quality asset that we want to nurture."
Ratings analysts have noted that.
"We have continuously cited over the last few years that the medical center has been a key ingredient in Houston's ability to diversify away from the oil and gas area," said Robert Stanley, vice president and assistant director for Southwest regional ratings at Moody's Investors Service.
It is an industry that used to stand out in an economy dominated by petroleum engineering.
"When I first got here, I sort of thought that NASA and the Texas Medical Center were really out of place in Houston," said Mr. Gilmer, the Federal Reserve economist. "Now I just think of it as another kind of engineering that goes on here."
A key to the center's success has been its emphasis on research and its ability to rapidly develop medical procedures and products that have helped spur the growth of new biotechnology companies in Houston.
The ability to apply research to the hospitals and teach it in the medical schools has been a catalyst for rapid growth at the Texas Medical Center.
"Although there are some major medical centers throughout the U.S. and world, the Texas Medical Center is unique because of the synergy there is with its research," said Elie Radinsky, associate director at Standard & Poor's Corp. "Nowhere else do you have the ability to search something in the lab and have a physician put it to use a short time later just a few buildings away."
That advantage has helped the center develop national reputations in areas such as microsurgery and the treatment of cancer and burn victims. Some of its hospitals have even gained international renown.
At the center's St. Luke's Episcopal Hospital, the first successful heart transplant was performed in 1968. Recently, the hospital marked its 80,000th open-heart surgery.
Analysts say that because such cutting-edge procedures are soon copied, it is critical that the center continue to lead the way in development of new technologies if it is to grow and sustain its $4 billion in annual operations.
"A lot of research is government-funded," said Ellen Gordon, assistant vice president at Moody's, adding that such money is tighter because of the federal budget situation.
Added Fitch's Mr. Merrigan: "Research dollars are a little more in jeopardy during these times. It requires a real long-term commitment."
Institutions at the center appear to have that kind of goal. Last year, research funding within the center totaled $429 million -- a near seven-fold increase from a decade ago.
Benefits of Competition
"I think we will keep our edge by continuing to attract good researchers," said Mr. Wainerdi, the center's director.
He believes the future lies in research into avoiding disease -- not curing it. "Researchers know that there are enormous clinical opportunities here," he said.
Such an emphasis on research and education often increases the medical costs to patients who use the center, but Standard & Poor's noted in a July 20 analysis that health care is cheaper in most areas at the Texas Medical Center. A recent national survey showed that among metropolitan areas with populations over 1.5 million, Houston offered the lowest cost in all but two of 20 areas cited.
The reason: competition.
"The center has not gotten to a maturation phase yet," said Mr. Radinsky. "In the medical area it is so competitive, not just in Houston but all around the country."
The analysts said the national reputation and linkages to hospitals outside the Houston area make institutions at the center less susceptible to changes in health care. The need to retain their competitive edge has also induced a number of Houston hospitals outside the medical center to consolidate their operations in recent years.
Surrounded by the nation's fourth largest metropolis, the Texas Medical Center is a city within a city. "We do most of the things that a city would do," Mr. Wainerdi said. "We have our own police and we manage 12 miles of roads."
But despite all that the hospitals, researchers, and medical schools may share, Mr. Wainerdi said the strength of the medical center is in the uniqueness of each of its members.
"The Texas Medical Center has largely been developed by the idea that the institutions within it are independent," he said. "You have all these institutions on an 800-acre tract that have a lot in common, but pursue excellence on their own terms."
Experts say it is the medical center's unity that makes its separate outstanding bond issues even stronger. Standard & Poor's rates an estimated $1.2 billion among the facilities within the center. The debt includes issues from such public institutions as Hermann Hospital and the Harris County Hospital District, and specialty hospitals such as the Texas Children's Hospital, the largest pediatric facility in the nation.
"When you have this many hospitals together, they help one another," said Mr. Wainerdi. "They can share things; they can share staff and facilities."
Analysts agree.
"For instance, a hospital may have teaching services available, but they have to pay very little for it," said Mr. Radinsky. "Each of the credits is much stronger than it is on its own because they share so much."
