Category Archives: Labor & workforce

The Center-City Job Resurgence

job_shift

by James A. Bacon

After decades of losing jobs to the metropolitan periphery, the nation’s downtown employment centers have been recording faster job growth since the recession than areas located further from the city center, according to a new report, “Surging Center Job Growth,” by Joe Cortright, president and principal economist of Impresa, a consulting firm specializing in regional economic analysis.

Cortright compared job growth between city centers (defined as within three miles of the center of a metropolitan region’s central business district) and outlying areas. During the go-go years of the 2000s-era real estate boom (2002-2007), the periphery enjoyed rapid job growth while city centers stagnated. Since the recession (2007-2011), city centers have gained jobs while the periphery has lost them.

Those  numbers represent a composite of 41 of the nation’s largest metropolitan regions for which Cortright could find comparable data. The national trend does not apply to all metropolitan regions. Indeed in two of Virginia’s largest metro areas — Hampton Roads and Richmond — the periphery continued to out-perform the city centers.

richmond_hr

What’s going on? The big-picture story is that the industry mix of the national economy is changing, and that shift increasingly favors central business districts.

In general, knowledge-oriented industries that require considerable face-to-face interaction are clustered in city centers, while goods producing and moving industries are more decentralized. Knowledge-oriented industries tend to use land much more intensively than goods producing and distribution centers.

The biggest construction declines occurred in the construction and manufacturing sectors, which tend to be located on the periphery. Those sectors have been slow to rebound during the recession, but if and when they do, Cortright said, the compositional disadvantage of the periphery might diminish. (By “compositional,” he means the advantage of disadvantage conferred by industry mix.) However, he argues that center cities will continue to enjoy generalized “competitive” advantage.

These factors — the growing preference of well-educated  young adults for urban living, the shift of companies to city centers to tap this labor pool, the growing pull of the “consumer city,” the growth of “eds and meds,” the continuing relative decline of manufacturing and distribution, and the waning of major investments in new highway infrastructure — all give us reason to believe that the shift toward city center growth is not a temporary anomaly.

A closer look at Virginia metros. How do we explain the departure of Hampton Roads and Richmond from the larger, national trend? Remember that the “national” trend is derived from composite numbers that include a lot of variability. The trend does not apply equally everywhere.

Hampton Roads is a special case because its economy is so dominated by military spending, and military employment is concentrated in military bases. The military makes its decisions where to grow and contract based on different factors than the civilian economy.

As for Richmond, my sense is that downtown living and employment has surged since 2011, the most recent years cited by Cortright. The competitive advantages of central business districts apply to the Richmond region as well, and we’ll see the proof in more recent numbers. Another possibility is that the three-mile definition of “center city” does not fit Richmond, one of the smaller metros surveyed. The economic vitality of central districts like Shockoe Bottom and Manchester may be offset by declining employment in the 2- to 3-mile band, which are really aging suburbs.

Closely Watched Trains?

wva oil trainBy Peter Galuszka

The small town of Pembroke in southwest Virginia is used to seeing endlessly long unit trains of coal cars rumbling past. But last week, it got an unexpected surprise – trains of similar length hauling crude oil from North Dakota’s Bakken fields started going by.

According to Reuters, Pembroke is one of many Virginia towns that are being affected by CSX’s derailment and explosion of oil tank cars filled with Bakken oil a few miles east of Montgomery, W.Va.  on Feb. 16. The massive blast sent fireballs hundreds of feet in the air and forced the evacuation of nearby residents including a college. It also stopped all rail traffic on a major, east-west CSX line for days.

A similar derailment involving a CSX oil train happened last April in Lynchburg on the same rail mainline. Several tank cars caught fire down causing a fire and a spill into the James River.

So, after the West Virginia incident, CSX got in touch with rival Norfolk Southern to see if it could reroute oil trains on some of its lines.

This brings up another issue – who should be informed when new railroad trains hauling potentially explosive or otherwise hazardous cargoes suddenly show up in your backyard? Do they have to tell you so you can get the flashlight, thermos and sleeping bag ready for your immediate evacuation if necessary?

CSX says it has informed appropriate public safety officials of such route changes, but is loath to let the general public in where it is sending unusual trains. Security and proprietary information, you understand.

CSX needs to keep its tank cars rolling to big oil terminal in Yorktown near the Chesapeake Bay. That site had been an Amoco refinery for years but the refinery shut down and was switched to an oil water terminal now owned by Houston-based Plains All-American.

The facility receives Bakken shale oil cars and loads the crude on barges that are then pushed or towed to East Coast refineries, notably in the Philadelphia area. Presumably, if petroleum exports from the U.S. start again, the Yorktown site would be excellent embarkation point.

So, instead of having tank cars with Bakken crude trundling from Charleston, W.Va. through the New River Gorge and on to Lynchburg, they will go on more southerly NS lines through places like Pembroke and Roanoke. Then they will be switched at Petersburg to CSX lines and go north to Richmond and east to Yorktown.

It looks like Richmond could potentially get it either way. On the usual route, oil trains pass by downtown on an elevated bridge which would be quite a mess if a derailment happened there. According to the Forest Ethics Website, all of downtown Richmond to about one half of a mile on either side would have to be evacuated if a major derailment with fires and explosions came.

With the temporary rerouting, Richmond would still be in serious jeopardy in case of a derailment. If I’m reading the map correctly, trains would still pass through the city.

So, you have to ask yourself – why does CSX get away with keeping all this secret? They claim they let “appropriate” public safety officials know, but the Richmond Times Dispatch last year quoted a Richmond fire officer in charge of hazardous situations as saying he had a hard time learning from CSX what a “worse case” scenario would be in the event of a Richmond derailment.

Part of the problem is PR. Bakken shale oil comes from controversial hydraulic fracturing. The uptick in production has turned America’s energy picture on its head. It has also made for big jumps in oil rail traffic. Another problem is that Bakken oil tends to be more explosive than other types.

According to the Association of American Railroads, oil shipments by rail jumped by 9,500 carloads in 2008 to 500,000 shipments last year. Accidents are way up. In 2013, tank cars carrying Bakken crude somehow got loose in Lac-Megantic, Quebec. They rolled through the small town, derailed and exploded. The blast killed 47 and wiped out half of downtown.

According to a recent probe by the Associated Press, a federal study predicts that oil shipments will rise to 900,000 shipments this year. The study predicts that trains hauling petroleum will derail 10 times a year over the next two decades. They could possibly cause $4 billion in damages and kill hundreds of people, the AP reports.

What to do? Build pipelines, I guess, but that’s been highly controversial as well as the experience with Dominion Transportation’s efforts with a $5 billion gas pipeline through the state and the controversy over the Keystone XL show.

Better, newer, safer tank cars? Maybe, but the West Virginia and Lynchburg derailments both involved new “1232” models. The same type also caught fire recently in Timmins, Ontario.

Federal rules require railroads to tell local officials where they are carrying Bakken crude, which is more explosive than other types. Railroads like CSX claim the information is proprietary, according to Reuters. That’s rather pointless. If the goal is to keep “proprietary” information from competitors, Norfolk Southern, CSX’s biggest competitor, already knows about it because it has agreed to let CSX use its rail lines.

And don’t ask some public officials. West Virginia officials have gone along with keeping much of the information secret. Mountain State officials responded to an Freedom of Information Act request by redacting much of the data they finally gave out.

Not only do the railroads need to clean up their act, they should be forced to be more forthcoming about where the next evacuation might be.

Propping Up Coal at the Taxpayers’ Expense

W._Va._coal_mine_1908By Peter Galuszka

It’s always curious when big business and their bankrolled politicians complain about how the government and its regulations stymie the “magic of the free market.”

Then they turn around and keep protectionist policies that give certain industries big favors such as tax credits.

That’s what the General Assembly has done with a bill that would have reduced tax credits doled out to utilities that burn coal mined in Virginia. The original proposal backed by Gov. Terry McAuliffe was intended to help fill a $2.4 billion gap in the state’s biennial budget.

The idea quickly ran afoul of Dominion Virginia Power and the Virginia Coal & Energy Alliance. The original idea was to scale back tax credits but cap coal tax deductions at $500,000 in any given year. But after the utility and the coal industry lobbyists got involved, a bill to retain the tax credits was quickly approved setting caps at a more generous $7.5 million in a given year.

The credits stem from a law passed in 1999. Its purpose is to make it easier for big utilities like Dominion to choose thermal coal mined in Virginia over product mined elsewhere.

Coal production peaked in the state at 46 million tons. It’s now about 22 million tons or less. Coal employment has likewise dropped sharply over the years.

Much of the coal mined in Southwest Virginia is of high quality and some can be used either to generate electricity or make steel. The problem is its cost. Many of the seams in the state have played out and coal is increasingly thinner and is in  harder to reach areas. The cost of mining it has gone up.

For years coal maintained a price advantage over alternatives such as natural gas but thanks to hydraulic fracturing, that is no longer the case. Utilities like Dominion have been converted facilities to gas or are building new plants that use gas. Its last coal-related plant is a hybrid near St. Paul.

What’s causing this shift away from coal? High production costs and cheaper alternatives. Out West, in the Powder River Basin of Wyoming and Montana, coal is cheap and easy to mine. It does well. In other words, the free market is affecting  the declining Virginia coal industry  yet the General Assembly wants to prop it up at the expense of taxpayers and the budget.

By the way, Dominion and coal giant Alpha Natural Resources in Bristol are among the biggest political donors in the state.

Yes, Virginia, the Millennials’ Shift from Burbs to Downtowns is Real

washington

by James A. Bacon

The debate still rages over the extent to which young Americans, especially members of the Millennial generation, are moving back to the urban core. Data published by Luke Juday on the StatChat blog should settle that question once and for all. The only questions worth pondering is why they are moving, and how many will move back to the burbs.

The chart above shows the proportion of Millennials living at varying distances from downtown Washington, D.C. In 1990, there was a weak tendency for young adults (defined as 22- to 34-year-olds) to live in the urban core but it was not pronounced. By 2012, however, the next generation of post-college young people had shifted markedly to the urban core.

The chart below shows Richmond.

richmond

In Norfolk, where the distribution of young military-age people in military facilities is determined largely by the location of military bases, the shift is less evident.

Norfolk

While the change is preference is dramatic, it is important to note that a large number of young people still resided miles from the city center in 2012. It’s not as if the suburbs are emptying of young adults. But even a modest shift in locational preference can drive the demand for new construction.

Juday, a Millenial himself, suggests a couple of reasons for the shift. Millennials have worse job prospects than previous generations at the same age and are saddled with greater student loan debt. As a consequence, they are less likely to take on mortgages for single-family dwellings in the suburbs. They’re also postponing marriage and child-bearing, which diminishes the incentives to move to suburban school jurisdictions with better schools. In keeping with their more modest economic prospects, Millennials place less emphasis on home ownership, automobile ownership and driving; they prefer walkable urban neighborhoods.

Dominion Resources Is on a Tear

acl pipeline map By Peter Galuszka

Dominion Resources has been on a tear recently.

It’s been muscling through a dubious law in the General Assembly that would allow it to avoid State Corporation Commission rate audits for six years.

And, it has been throwing its weight around in less populated sections of the state. It is suing to force its way on the land of private property owners to survey its $5 billion Atlantic Coast Pipeline project that would take fracked natural gas from the Marcellus Shale formation in West Virginia and Pennsylvania on new routes to the southeast.

Property owners, particularly those in Nelson and Augusta Counties, are fighting in federal court in Harrisonburg.

What’s most interesting about this case is how the Commonwealth of Virginia, which swaddles itself in the ideals of the American Revolution of individual rights , somehow ignores the rights of small property owners when a big utility with deep pockets for political donations is involved. One wonders where all the conservatives are who were huffing and puffing over the Kelo case a few years back

And (bonus question) what do the two situations have in common? Republican State Sen. Frank Wagner of Virginia Beach, that’s who. He introduced the bill for Dominion to sidestep SCC oversight with the excuse that Dominion has deal with the impacts of a yet-to-be-finalized set of new federal carbon emission rules.

In 2004, Wagner also carried water for Dominion and other power companies by getting a law passed that would allow a “public service company” to survey private property without getting permission.

This is the basis of several hundred lawsuits Dominion has filed against small landowners. In the pipeline case, it will be interesting to see whether the natural gas is used for the common good of American customers or will end up being exported to foreign countries. Dominion insists it won’t,  but time will tell.

Another oddity is that Dominion is demanding access to survey a pipeline route when it hasn’t formally applied for  the project with the Federal Energy Energy Commission. Imagine if some private landowners showed up at the front door of Dominion’s downtown Richmond headquarters and demanded access to the building because they were thinking about building a natural gas pipeline? (Somebody call security!)

Here’s an opinion piece I wrote for this morning’s Washington Post.

Let Richmond Be Richmond

Virginia Museum of Fine Arts gallery. Artsy fartsy, it's who we are. Get over it. Embrace it.

Virginia Museum of Fine Arts gallery. Artsy fartsy, it’s who we are. Get over it. Embrace it.

I delivered this speech last night to a gathering at the Branch House in an event hosted by the Virginia Center for Architecture. — JAB

Buffalo, N.Y., a metropolitan region about the size of Richmond, is debating how to pay for a new $1 billion stadium complex for the Buffalo Bills National Football League team. The City of Richmond is debating how to pay for a $56 million stadium for the Richmond Squirrels AA baseball team. I don’t know if Buffalo will ever find the money, but it really doesn’t matter. If professional sports is your yardstick of metropolitan prestige, Buffalo is running – maybe I should say stampeding — Richmond into the dirt.

But, objectively speaking – assuming this audience can be objective – where would you rather live? Let’s look at some commonly used metrics:

  • The Richmond metropolitan region has a lower unemployment rate than the Buffalo metro – 4.8% compared to 5.8%.
  • Richmond has a lower poverty rate – 11.6% compared to 14.4%.
  • Richmond has a higher median household income — $55,300 compared to $46,400.

I think we can safely and objectively say that big league sports is no guarantee of metropolitan prosperity.

While Richmond can’t seem to get a minor league baseball stadium off the ground, consider VCU’s Institute for Contemporary Art. The community managed to raise $33 million through private philanthropy with no angst whatsoever.

Pro football or contemporary art. What do our choices tell us about the Richmond region? Richmond is an artsy fartsy kind of town. And that’s OK. In fact, I’m going to argue that artsy fartsy is a good thing as we reinvent ourselves for the 21st-century Knowledge Economy.

It is commonplace today to observe that the biggest challenge for any metropolitan region is recruiting and retaining the highly skilled, highly creative citizens – scientists, artists, educators, entrepreneurs – who drive innovation and contribute disproportionately to economic growth. Somewhat more controversially, I would argue, those desirable citizens are more likely to want to live and build a career in a region that has vibrant arts & culture than one that has big league athletics.

If you accept that proposition, then it tells you a lot how we ought to be investing our civic capital. For the billion dollars it would take Buffalo, N.Y., to build a bigger, better stadium for the Buffalo Bills, we could make Richmond the arts capital of the Southeastern U.S.!

The urban geographer Richard Florida made a big splash thirteen years ago when he published the book, “The Rise of the Creative Class.” His argument, boiled down to its essence, is that Americans, young Americans especially, were increasingly likely to choose where to live based on the attributes of the region rather than because that’s where they could find a job. He turned economic development on its head. Instead of recruiting corporations, we should be recruiting the creative class. Corporations will follow the creative in order to gain access to employees with the higher-order skills and aptitudes that are in short supply.

If we embrace that perspective, we need to ask two fundamental questions: (1) What does it take to attract young professionals to RVA? and (2) What does it take to keep them here? In other words, how do we do a better job with recruitment and retention?

Richmond has a relatively stable population. We don’t get a huge flux of people moving in or moving out. Fortunately, we do seem to attract more people than we lose — we experience net in-migration. Between 2013 and 2014, the Internal Revenue Service recorded the influx of nearly 32,000 new “tax returns” into the core Richmond region – by which I mean Richmond, Henrico, Chesterfield and Hanover. During the same period, those four localities experienced an out-migration of 29,000 tax returns. That represented a net gain of about 2,800 tax-paying households in a region with about 300,000 tax returns – or a gain of not quite one percent. That’s not bad. But it could be better: We’re not in the same league as national talent magnets like Austin or Raleigh, much less Silicon Valley.

Interestingly, two-thirds of the in-migration came from other locales in Virginia, only one-third from outside the state. Pending closer analysis of the numbers, I would conjecture that that RVA functions as a regional magnet for talent, as opposed to a national magnet, drawing mainly upon the hinterland of smaller Virginia cities and towns. Many could come from the many fine colleges and universities in the state. But we really don’t know. There’s a lot we still need to learn. Continue reading

Back to Big Lick

The old Norfolk & Western Railway headquarters complex, with Hotel Roanoke in the background.

The old Norfolk & Western Railway headquarters complex, with Hotel Roanoke in the background.

by James A. Bacon

In the early 1880s, Gilded Era industrialists created a railroad junction at the town of Big Lick in the Roanoke Valley, opening up the western Virginia coalfields to development. The community renamed itself Roanoke after the river running through it, and the newly formed Norfolk & Western Railway set up its headquarters there. In the late 19th century, Roanoke was a boom town: a hub of railroad traffic and manufacturing and a gateway to the burgeoning Central Appalachia coal industry.

Eventually, the boom subsided, but Roanoke continued to fare well. Besides hosting a number of corporate headquarters, the Star City of the South, so named for the giant star on Mill Mountain, served as the retail and administrative center for much of western Virginia. When I lived there in the early 1980s — covering the coal and railroad beat for the Roanoke Times — Roanoke was a delightful community surrounded by natural beauty. I enjoyed living there and was sad to leave.

But my personal journey mirrored the intractable economics that Roanoke, and other cities its size, is struggling against. As a young reporter, I didn’t see much of a career path upward. To get ahead, I had to move. Ambitious young professionals in other fields faced the same dilemma. No matter how much they liked living there, many had to relocate to rise in the world. As the United States evolved into a Knowledge Economy, large metropolitan regions enjoyed tremendous advantages over Roanoke-sized cities by virtue of larger labor markets.

Roanoke has stagnated since I lived there. The writing on the wall appeared as early as 1982 when the Norfolk & Western Railway merged with the Southern Railway and located the new corporate headquarters in Norfolk. The top jobs left the city but, as part of the deal, the combined Norfolk Southern Railway did keep a major administrative presence in Roanoke. Now, three decades later, comes news that 500 employees working in marketing, accounting, information technology and other departments — desirable white-collar jobs — will be moved to Norfolk and Atlanta.

The company said it is closing the Roanoke office building to achieve departmental synergies, to make better use of its real estate assets and to support its goal of streamlining its management workforce. According to the Roanoke Times, Norfolk Southern President James A. Squires described the action as a consolidation having nothing to do with work force or business issues peculiar to Roanoke. The Roanoke office was less utilized than the offices in Norfolk and Atlanta, he said.

But that’s disingenuous. Of course the move had everything to do with Roanoke — or, more precisely, the size of its labor market. If Norfolk Southern had excess space in Norfolk, Atlanta and Roanoke, in theory, it could have shut down a Norfolk or Atlanta office and consolidated employees to the other two. Office space in Roanoke, I’m willing to wager, has the added advantage of costing less. But, the fact is, Norfolk and Atlanta are much larger labor markets, making it significantly easier for the railroad to recruit employees with white-collar skills.

The migration of corporate operations and white collar employees in the United States goes one way — from smaller cities and towns to bigger ones. The process does not work in reverse.

Looking back, Roanoke had one shot at bucking the trend — hitching up with the scientific and engineering brainpower at Virginia Tech. In theory, Blacksburg and Roanoke could have supported one another, with Virginia Tech spinning off high-tech start-ups and Roanoke providing financial, legal and other professional services. Despite the efforts of the Roanoke-Blacksburg Technology Council to bridge the 42-mile gap, the hoped-for synergies never really materialized. The Roanoke and New River valleys are divided by rugged mountains and connected by a single thread, Interstate 81. The 45-minute travel time created a psychological divide that has been hard to overcome.

It’s tremendously sad. The people of Roanoke are good people. In my personal experience, they are friendly, community-minded and egalitarian in spirit. It doesn’t seem fair that their economic prospects are leaking away because of forces beyond their control. But the world isn’t fair.

Update: I have to modify my categorical statement that the migration of corporate operations from small cities to big cities is a one-way flow. The very day I published this post, Edelman Technology, a German manufacturer of industrial equipment, announced its intention to locate its North American headquarters in Rocky Mount, roughly 30 miles south of Roanoke. The company will hire five to 10 employees including  software specialists, electricians and industrial equipment maintenance staff. So, there are exceptions to the rule. They are few and they are minor, but there are exceptions.

The Many Problems of Offshore Drilling

deepwaterBy Peter Galuszka

Almost five years after the infamous Deepwater Horizon disaster in the Gulf of Mexico, President Barack Obama has again proposed opening tracts offshore of Virginia and the southeastern U.S. coast to oil and natural gas drilling.

The plan poses big risks for what may be little gain. Federal surveys show there could be 3.3 billion barrels of crude oil and 31.3 trillion cubic feet of natural gas in the potential lease area stretching from Virginia to Georgia.

Energy industry officials praised the plan while complaining it doesn’t go far enough. Environmental groups including the Sierra Club and the Chesapeake Bay Foundation condemned it. Besides the ecological risk, the move is a step away from refocusing energy on renewables that do not lead to more carbon emissions and climate change.

Obama’s plan would restrict drilling to areas more than 50 miles off the coast. This is a sop to the Navy and other military which conduct regular exercises offshore and to the commercial and sports fishing industries.

Is the restriction worthwhile? It is generally easier for oil rigs to be placed in shallow water and much of the areas off of Virginia and northeastern North Carolina and off of South Carolina and Georgia are in plateaus that aren’t very deep – maybe just a few hundred feet. Yet the Atlantic takes a huge plunge not far off of Cape Hatteras, descending as much as two miles down.

Drilling in deep water presents special problems for oil companies involving high pressure and high temperatures. That was the case with the Deepwater Horizon tragedy on April 20, 1010 that killed 11 workers. One big factor that a blowout preventer, designed to shut down the rig if drilling hits abnormally high levels of pressure, didn’t work completely. The rig was in 5,000 feet of water and crude spewed uncontrolled. Winds from the south washed the oil towards land and polluted nearly 500 miles of coastline in Florida, Alabama, Mississippi and Louisiana. An estimated 4.9 million barrels of crude were released.

oil-drilling-mapAlthough it isn’t certain if energy firms would drill in the very deep waters off of North Carolina, there is cold comfort in the fact that the Deepwater rig was only 48 miles from shore. In other words, it would have been too close in for the latest plan involving the southeastern coast. Supposedly, blowout preventers have been upgraded but there were still spills involving them off of Brazil and China post-Deepwater.

If something like that happened closer to home, it is not exactly certain where the oil would go. Winds can blow from the ocean and currents are very fickle. The Labrador Current might tend to push spilled oil back onto environmentally sensitive shoreline while the Gulf Stream might tend to take the spilled oil out to sea.

There is no question that drilling off any of the southeastern coast would be of some benefit to the now-struggling Tidewater economy since it has plenty of steel-bending industries, an able workforce and no significant bridges to pass under to reach deep water. It might help since the defense sector is winding down, but who knows what world conflicts will be like in 2025. Hampton Roads would be a more logical staging area than other ports such as Wilmington, N.C., Charleston or Savannah.

There’s a rub, however. The 3.3 billion barrels of estimated reserves isn’t that much. It is a fraction of the total estimated reserves in the country. Energy sector officials claim there is probably much more. Okay, fine, but no one knows for sure. The natural gas reserves involved are also somewhat small – just a fraction of the estimated reserves in the U.S.

It’s not the first time offshore drilling has come up locally. There was a big push for it in the late 1970s, prompting oil rig giant Brown & Root to buy up land near Cape Charles for fabricating rigs. Nothing happened and much of the land now is used for a luxury golf community. Obama was supposed to back lease sales in 2010 but then Deepwater happened. This begs the question – if the offshore petroleum is so valuable, why has it taken so long?

Yet another issue is what cut Virginia would actually get from offshore drilling. There was a flap a few years ago when offshore drilling was being pitched. Some revenues to states from offshore petroleum production are computed by how much shoreline a state has. In Virginia’s case, it is not much, at least when compared to North Carolina. Virginia politicians have pointed this out and hope for some adjustment.

No one can predict energy markets a decade from now. For instance, no one knew that hydraulic fracturing would increase petroleum production by 64 percent and possibly make the U.S. a petroleum exporter for the first time since the 1970s. Granted it is a rock and a hard place kind of choice. Fracking is fraught with pollution problems just as offshore drilling is.

There are certain to be plenty of lawsuits over the offshore plan and economics will likely determine its future. An important choice is whether it is worth risking Virginia’s military, resort and fishing businesses for Big Oil whose promise is uncertain when it comes to offshore drilling.

The Strange Story of Health Diagnostic Laboratory

HDL's Mallory before her fall.

HDL’s Mallory before her fall.

By Peter Galuszka

The biggest problem facing the health care industry in Virginia and the rest of the country isn’t Obamacare or the lack of new medical discoveries. It the lack of transparency that hides what is really going on with pricing tests, drugs and hospital and doctors’ fees. Big Insurance and Big and Small Pharma cut secret deals. We are all affected.

I’ve been wanting to blog about this – especially after Jim Bacon’s recent post on the supposed tech trend in health care – but I wanted to wait until a story I’ve been working on for a few weeks was posted at Style Weekly, where I am a contributing editor.

In it, I explore the strange story of Health Diagnostic Laboratory, a famed Richmond start-up that went from zero to $383 million in revenues and 800 employees in a few short years. The firm said it was developing advanced bio-marker tests that could predict heart disease and diabetes long before they took root. HDL’s officials thought it would transform the $1.6 trillion health care industry.

Richmond’s business elite applauded HDL founder Tonya Mallory, a woman who grew up just north of the city and had the strong personality and drive to create the HDL behemoth. Badly wanting a high tech champion in a not-so high tech town, the city’s boosters did much to publicize HDL and Mallory, believing they could draw in more startups.

The story was too good to be true. It start to deflate last summer when the federal government noted that HDL was one of several testing labs being probed for paying doctors $17 for using HDL tests for Medicare patients when Medicare authorized $3 per test. Mallory resigned Dept. 23. Several lawsuits by Mallory’s former employer, Cigna health insurance and another have accused HDL of fraud. HDL has responded in court.

One legal picture suggests that HDL wasn’t a true tech startup but a new firm that stole intellectual property and sales staff. HDL says no, but its new leader Joe McConnell has taken steps to reform sales and marketing and is said to be working with the U.S. Department of Justice to settle a federal investigation.

The HDL affair raises issues about the inside marketing and apparent payoffs that are the biggest problem the health care industry faces. It doesn’t matter what kind of “market magic” combined with new technology comes up if something like this keeps happening.

This is all the more reason for a universal payer system. That may be “socialized” medicine but in my opinion it is the only logical way to go.

The Real “War on Coal”

Blankenship at 2009 Labor Day rally

Blankenship at 2009 Labor Day rally

By Peter Galuszka

Over in West Virginia, some things never seem to change.

Families of the 29 miners killed on April 5, 2010 at Massey Energy’s Upper Big Branch are asking a federal judge to lift her gag order so they can testify before West Virginia legislators considering tougher rules that would make it easier for workers to sue employers over job-related injuries and deaths.

U.S. District Judge Irene Berger issued the gag order last year after Donald L. Blankenship, the former chief of Richmond-based Massey Energy, was indicted on four criminal charges for his role in the disaster – the worst one in 40 years. He is scheduled to go on trial in Beckley on April 20.

The question seems to be that the judge is protecting Blankenship’s rights over those of the people hurt by his management. It is not really news in the Mountain State that has always supported Coal Barons over workers. It’s a weird, neo-colonialist thing that never seems to change.

This month, Berger denied a move by several news agencies, including the Charleston Gazette and The Wall Street Journal, to lift the gag order.

As head of Massey Energy, which has since been taken over by Bristol-based Alpha Natural Resources, Blankenship was a true publicity hog. He was never shy about pushing his arch-conservative, pro-business views or bankrolling politicians and judges. Worrying about protecting his legal rights at the expense of free speech is a real travesty.

Yes, there is a “War on Coal” – but the other way around. The conflict is how coal bosses wage war on their employees and their families.