Posted: October 01, 2011
Filling a prescription for prosperity
Anschutz Medical Campus is pumping billions into the state economy, but can it last?By Lisa Marshall
Outside Lilly Marks' window on the University of Colorado Anschutz Medical Campus, tractors rumble and towering cranes jockey for position, as the university and neighboring hospitals forge ahead with roughly 1 million square feet of new construction, totaling $820 million in capital investment.
Among the additions to the already-goliath complex: a 171,000-square-foot pharmaceutical sciences building; a 94,000-square-foot health and wellness center; a 40,000-square-foot cancer center addition; and lofty new patient towers at CU Hospital and Children's Hospital.
All this at a time when commercial building elsewhere is still at a crawl and construction jobs are painfully hard to come by. But as AMC executive vice chancellor, Marks is hardly boastful.
"I don't sleep at night," she says, only half joking. "We redefine the term ‘house poor' - when you are leveraged up to your eyeballs."
Nearly 13 years after the university broke ground at the shuttered Fitzsimons Army base in Aurora, the glistening, state-of-the-art complex has emerged as a beacon of economic prosperity on an otherwise bleak landscape. In FY 2010, according to a report by Sammons/Dutton LLC, AMC alone contributed $2 billion in economic activity to the state - nearly as much as the tourism industry - and employed more than 8,000 people (not including construction workers), making it one of the largest employers in the state. Throw in the contributions of Children's Hospital and CU Hospital - technically separate entities that share the 578-acre Fitzsimons Life Sciences District - and those numbers more than double.
But with the bulk of its revenue coming from government sources like federal research grants, Medicare and Medicaid, and lawmakers wielding the budget ax, the future of the campus teeters on uncertainty. Meanwhile, efforts to spark private enterprise on its perimeter have been disappointing.
"It's easy to drive by and revel in what has been built here without realizing that, while it is one of the biggest economies in the state, it is also the most fragile," Marks says.
From shuttered army base to ‘Mayo Clinic of the West'
By 1995, the 578-acre Fitzsimons Army Base had withered to roughly 3,000 jobs and $328 million in economic activity, prompting the Department of Defense to peg it for closure. Across town, the CU Medical School and Hospital on Ninth Avenue and Colorado Boulevard were running out of room.
Two years later, the federal government gifted 228 acres on the Fitzsimons site to the university, with the rest going to the Fitzsimons Redevelopment Authority for a bio-park and other commerce on surrounding land.
Some in Aurora grumbled about the economic losses sure to come from the base closure. Some in Denver feared that moving their beloved hospital 6 miles east would turn patients away. And most predicted it would be 30 to 50 years before the project was complete. They all had it wrong.
"There was a constant struggle trying to get them not to close Fitzsimons because it was going to have such a terrible impact on the city," recalls Aurora City Councilman Bob Broom, who has lived there since 1972. "Ironically, it was the best thing that ever happened to Aurora. It has wildly exceeded our expectations."
CU - with its schools of medicine, nursing, dentistry and pharmacy, and research "centers of excellence" around everything from diabetes to lung cancer to Down Syndrome - completed its move in December 2008. Children's Hospital soon followed. Together, they already boast 6.4 million square feet. "Nobody in their wildest imagination dreamed that you could build 6 million square feet in 10 years and we would outgrow it almost immediately," Marks says. Construction of a 1.1 million-square- foot Veterans Administration Hospital is slated for completion in 2013, drawing another 1,800 employees. At full build-out, the district could boast a whopping 18 million square feet and 45,000 jobs.
As the nation's only full-fledged medical school/research complex/clinical care campus built brand new from the ground up, it has already garnered a national reputation as a sort of "Mayo Clinic of the West," luring coveted researchers and clinicians who have brought with them generous salaries they can spend on restaurants, shops and state coffers (AMC contributes $46 million annually in state sales and income taxes.)
"I would argue that it is the biggest single economic engine that has been created in this state since DIA," says Don Elliman, the state's former economic development chief, who now works for AMC and serves on the FRA Board.
Private sector disappointments
But step onto the 184-acre property to the north, unveiled with great fanfare in 2008 as "The Colorado Science and Technology Park at Fitzsimons," and the picture is less rosy. "It has totally under-exceeded everyone's expectations," Elliman says.
By now, developer Forest City Science and Technology Group, tasked with luring new tenants to the park, had envisioned it would be bustling with a new 163-room hotel and conference facility, and office buildings full of young biotech companies. Instead, it is home to one physician building, one incubator building, a daycare, and a golf course.
"You won't find anyone who says they are happy with what has happened out there, but you have to put it in context of the past three years," says Jim Chrisman, senior vice president with Forest City. "We continue to work with the same hotel developer we were talking with three years ago, but they are struggling to find a lender. We were also anticipating starting a spec building out there, but the concept of building on spec just doesn't exist today."
To compound the problem, he says, the life sciences industry took a hit, making it hard to find anchor tenants to provide seed money for future development. "The industry stagnated and didn't have demands for space," Chrisman says.
The ‘Anschutz Paradox'
As far as AMC goes, Marks points out that roughly one-third of its $1.1 billion annual budget comes from grants - which are becoming increasingly cutthroat as National Institutes of Health budgets level out. Instead of a 30 percent success rate, biomedical researchers vying for NIH money now have a one in 10 chance. Already, grants have been lost at CU, taking jobs along with them.
"There is a big concern nationally that there will be cuts in NIH funding," Marks says. "It has made it very difficult for research institutions across the country to sustain what they have built - let alone grow."
Another 35 percent of the AMC's revenue comes from services provided by its physicians, and that money is also poised to dip, as lawmakers grapple with cuts in Medicaid and Medicare reimbursement, and private insurers put the screws to physicians, driving down their rates.
The state contributes about 5 percent of AMC's budget (down from 13 percent a decade ago, and ranking it near the bottom in terms of state contributions to medical schools). It comes mostly via education funding, which is also on the chopping block. But unlike other institutes of higher education, AMC, with roughly 3,000 students across the campus, can't make up much via tuition increases.
"We are not only losing state money, we cannot mitigate that loss through tuition revenue, so we are forced more and more to build this enterprise on this house of cards - external funding," Marks says. "We have a $1.1 billion budget that is leveraged on 10 percent hard money."
A hopeful future
Financial worries aside, AMC and the Fitzsimons Life Science District have a lot to be proud of. Within these walls, researchers are developing an artificial pancreas for diabetics, exploring an earlier biomarker for colon cancer, and identifying the genes that cause lung cancer and the drugs to target them - to name a few projects.
According to the not-for-profit Colorado Bioscience Association, the state's bioscience industry actually grew 1.8 percent from 2009 to 2010, compared to a 2.4 percent decline nationwide - and many attribute that growth to the activity at AMC.
"It is one of the biggest economic drivers we have in the state and one of the anchors for our biotech, life sciences and health-care industries," says Ken Lund, the new executive director of the state Office of Economic Development, noting that greater collaboration with AMC is part of its "strategic blueprint." "We are always open to and looking for new ways to collaborate and support the innovation and research occurring there."
Meanwhile, development firm Corporex recently opened a 153-room Spring Hill Suites Hotel and office complex south of campus - a possible sign that money for commercial development may be loosening up. Nearly $200 million in federal dollars have been approved for road improvements, and RTD recently received funding to help bring light rail to the region, further sweetening the pot for companies wanting to locate here.
"The area was deteriorating before," Broom says. "If you go up there now on the half-mile area around the campus, a lot of 100-year-old motels and trailer parks have been torn down, and new buildings are going up."
The FRA is also making a renewed effort to work with Forest City to recruit companies to the biopark. "The biotech park is a largely blank campus on which we have the unique opportunity to paint some beautiful things," says Elliman, who sees it as a place where ideas born on campus can be developed into successful businesses.
Along with working with the state to re-evaluate its funding structure for AMC, Marks is looking at ways to enable the university to sustain more equity in such biotech companies. But most importantly, she says, she wants Colorado to realize what's in its own backyard.
"Oddly, I think we are nationally recognized and appreciated in a way that we are not locally," Marks says. "Do I think we are going to go away? Of course not. Do I think we will fail to realize our promise? There is a risk of that. What happens to the state economy then?"