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‘Anchors’ needed to lift medical district’s small businesses

Originally published in the New Orleans CityBusiness on November 13, 2014.

Justin Pitard and his wife, Christy, own Avery’s on Tulane, a po’ boy shop and lunch counter just down the avenue from the new hospital complex in Mid-City. Despite initial concerns about crime in the neighborhood, the couple invested in the business in 2012 and now anticipates a wave of development in the neighborhood once the University Medical Center and the VA Hospital open over the next two years.

Crime remains a problem on the stretch, particularly at night, but the restaurant owners have already seen changes in the neighborhood related to the new medical complex. Their lunchtime crowd has begun to diversify from mostly construction workers to include employees from nearby businesses. They have even begun opening at night on Thursday, Friday and Saturday and also offer catering services.

Although the couple had hoped the hospitals would open sooner to help drive business, they expect it to only get better once the medical complex is operational.

“The plan would be to eventually open 24 hours a day so that we can deliver at night,” Pitard said. “We are looking for whatever opportunity will present itself to work with the hospitals.”

Economic development leaders in New Orleans are now looking at ways businesses such as Avery’s could benefit from the growth of the biomedical corridor and the new hospitals.

At a meeting held last week in the New Orleans BioInnovation Center, Melissa Ehlinger, interim president of the New Orleans Business Alliance, discussed the importance of securing private and public funding and resources to engage in the development of businesses that could provide support services to the hospitals when they open.

The alliance and NOBIC were two of four local organizations awarded grants totaling $500,000 through JPMorgan Chase’s Small Business Forward program to spur economic development along the Tulane Avenue corridor.

Ehlinger said the alliance has been working with the city to leverage the purchasing power of the new hospitals and adjoining research institutions so they can work with local businesses to resolve some of their hiring and service needs.

“We want to make sure that we can connect small businesses to these anchor institutions,” Ehlinger said.

The business alliance also recently commissioned a 90-day study from the Democracy Collaborative to look at the types of service-oriented businesses that could be sourced locally. They include shuttle services, commercial laundries and contractors for energy or facility upgrades, inventory management and food services. It is envisioned that these small businesses would receive continuous work from anchor institutions in the city such as the universities and hospitals.

The Democracy Collaborative defines these facilities and schools as “anchor institutions” because they tend to stay in one place for the long term, unlike other major employers with more mobility.

An increasing number of cities are beginning to shift their economic centers around anchor institutions. The Democracy Collaborative highlighted five case studies in their report, “Hospitals Building Healthier Communities” to show how a collaboration of hospitals and academic institutions benefited economic development in surrounding neighborhoods.

The Mayo Clinic in Rochester, Minnesota, for example, has sought out local and diverse suppliers in its surrounding neighborhood to stimulate the local economy.

The Bon Secours Health System in Baltimore, Maryland, has adopted an approach to community and economic development since the 1990s that focuses on neighborhood revitalization. The system has helped create green spaces and rehabilitated housing in the surrounding neighborhood as well as providing family services, youth employment, workforce development and financial services to underserved populations.

Ted Howard, executive director of the Democracy Collective, said it is important for the health care industry in New Orleans to begin engaging small businesses as soon as possible in order to make sure that jobs and services are not being outsourced. The area around the medical corridor is home to approximately 50,000 people who make a household income of under $18,000 a year, according to a report the organization published in conjunction with the city of New Orleans earlier this year.

The group conducted a similar study looking at the economic impact of the Cleveland Clinic Health System and the University Hospitals System in Ohio.

Howard explained that before these health systems were able to hire local service providers, they had to establish means to more effectively work with small businesses. That included making internal changes to issue smaller contracts. The Democracy Collective also found ways for local service providers to partner with major companies on larger contracts.

“Sometimes large organizations wait to pay for the work until after it is done, and smaller businesses can’t afford to carry that load,” Howard said.

His group was able to find money to establish projects such as a greenhouse that grows vegetables for the Cleveland hospitals, local businesses and residents. Some 125 jobs have been created through that project alone, Howard said.

“These plans take time to come to fruition, but eventually you begin to see money going back into the city and not being outsourced to other regions,” Howard said. •