When it comes to keeping smiles on the faces of Ohio’s medical industry leaders, Governor-elect John Kasich’s predecessor did him a big favor.
Current (and soon-to-be former) Gov. Ted Strickland led a successful get-out-the-vote campaign that culminated in May with the renewal of the state’s Third Frontier program, a $1.35 billion, 10-year initiative intended to energize Ohio’s economy by investing in technologies in five industry clusters, including biomedical.
Third Frontier may well be the single-most-important state government-related issue to Ohio’s burgeoning biomedical industry.
Advocates credit Third Frontier with creating 55,000 jobs, and generating a $6.6 billion economic impact in the state since 2002. While it may be tough to verify those figures, it’s safe to say that without Third Frontier, the state’s biomedical industry wouldn’t be nearly as strong.
Thanks in part to Strickland’s efforts, voters passed a four-year, $700 million Third Frontier bond issue by a two-to-one margin. The vote extended the program until 2016. Kasich can do his part by extending Third Frontier even farther into the future, said Bob Schmidt, chairman of Cleveland Medical Devices Inc.
Kasich has said he supports Third Frontier, but he’d like to privatize oversight of the program. That’s fine with Schmidt, as long Third Frontier keeps pumping cash into Ohio companies.
“It’s so big that it really sets Ohio apart from other states,” Schmidt said. “This is what really helps small businesses.”
Tony Dennis, CEO of biomedical trade group BioOhio, said Third Frontier could be even more effective through a greater emphasis on innovation and commercialization. He also shared a few other tips on how he thinks Kasich’s administration could boost the industry.
“Removing growth barriers such as low amounts of later-stage private capital, the lagging pace of technology commercialization, and lack of a coordinated workforce and education strategy should be considered by the new administration,” Dennis said.
Baiju Shah, CEO of Cleveland biomedical economic development group BioEnterprise, agreed that continuing to support Third Frontier is a must for Kasich. Shah said he’s confident Kasich will do just that.
But Shah has another concern that involves the problem that’ll likely keep Kasich up late on many nights — Ohio’s impending budget deficit that’s estimated to run as high as $8 billion over the next two years. Shah fears that ripples from the deficit could disrupt into medical innovation that’s funded by the state’s largest hospitals and institutions.
Here’s how the thinking goes: Faced with such a large deficit, Kasich and his allies could look to cut healthcare or education spending — the budget’s two biggest line items. “It’s a matter of how you do it, rather than if you do it,” Shah said.
Slicing the healthcare portion of the state budget likely equates to cutting spending on Medicaid, the fastest-growing and largest portion of state expenditures. Those Medicaid cuts could hit hospitals’ revenues, forcing them to look for savings, and potentially diverting money from research and innovation, Shah warned.
Such cuts to hospitals’ research budgets are a possibility in the face of declining Medicaid reimbursements, but far from a certainty, said Tiffany Himmelreich, spokeswoman for the Ohio Hospital Association (OHA). She acknowledged that “Medicaid cuts are always a big concern for hospitals.”
“If Medicaid dollars were cut, that could impact a lot of different functions for hospitals,” she said. “One of the possible impacts could be research, but there are many variables at play, so it’s hard to say how that would play out.”
Himmelreich said Kasich has shown a willingness to meet with and listen to suggestions from hospital representatives throughout the state, for which the OHA is grateful.