Healthcare, Education, and the New Normal in the Tri-Cities.

The long-awaited merger of Mountain States Health Alliance and Wellmont Health Systems is a cornerstone of this region’s new economy. The Tri-Cities’ economic glass is better than half-full and headed toward a yet undefined new normal.

Why just half full?

The local economy – especially in the Johnson City Metropolitan Statistical Area (MSA) - has been solid this year. Conditions in the four-county Kingsport-Bristol MSA aren’t as good. This larger portion of the seven-county region is still smarting from the continued contraction of the manufacturing sector and slow adaptation to the service economy. It’s also heavily burdened by a rapidly-aging population and stagnant in-migration – the region’s only source of population growth.

Half-full is also a necessary benchmark consideration after the disappointing 2016 annual economic reports from the Bureau of Economic Analysis (BEA).

The 2016 reports were disappointing because of a revision to the 2001-2015 data. In short, the revision showed that instead of small gains in 2014 and 2015, Johnson City’s total economic output was negative in 2014 and a bigger gain in 2015. It was down 0.5% in 2016.

That’s better than the Kingsport-Bristol situation. GDP has experienced year-over-year declines for the past four years in those areas. Last year it was down 1.7%, and down 10.8% from the last high point.

In some ways, the BEA’s analysis can be viewed as an academic exercise of where we’ve been. It’s not as predictive as it has been due to the dramatic restructuring in the wake of the Great Recession. That recovery has been slower and weaker than any other recovery, and it’s not over yet.

The merger of Mountain States and Wellmont is significant because Ballad Health will be a prime job generator and economic asset for the foreseeable future. In some ways, it could be as significant to the region’s future economic makeup and well-being as Eastman Chemical was during its heyday.

Healthcare jobs account for six out of the top 30 growth occupations through 2026, according to the Bureau of Labor Statistics.

The new regional healthcare network will also partner with ETSU, Milligan College, and other local education institutions. Ballad has already pledged $85 million to grow academics and research and to support post-graduate healthcare training at ETSU and Milligan. That’s critical because the growing demand for healthcare workers will be a major source of jobs for local college graduates. It gives them the option to stay here instead of moving to find jobs elsewhere. That goes straight to the heart of another of the region’s biggest job challenges – retaining the best and brightest of our local young people.

Health care is the region’s single largest private sector employer, and it accounts for just below 30% of the economy in Washington County alone. The more stable it is, the stronger its role in the region’s future. Ballad represents stability.

Of course, some pain will come with the merger. Shortly after Virginia officials gave their approval sealing the merger, Ballad Health Chairman Alan Levin said about 250 jobs would be cut in the short-term through “attrition and synergies.” Much of that will be the elimination of duplicative administrative jobs. That’s normal with any consolidation.

As important as it is, Ballad and the healthcare industry are not the end all to the new normal for the Johnson City or Tri-Cities economy. The secondary education system has a huge potential. The economic impact of East Tennessee State University, Milligan College, King University, and Northeast State have significant local and regional roles both as educational institutions, employers, and components of the economic engine. The relationship between education, innovation, and entrepreneurship is a prime example. It’s a first cousin to what’s happening in healthcare, but that story will have to wait for the next post.

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