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UPMC: The New Steel in Pittsburgh


When leaders of the world's powerful nations gather in Pittsburgh on Sept. 24 for the G-20 meetings, they'll doubtless spot the 20-foot-tall letters on top of the rust-stained U.S. Steel Tower spelling out "UPMC"—for University of Pittsburgh Medical Center. But they might miss the underlying symbolism: Health care and higher education have replaced steel as the city's economic engine.

Pittsburgh was devastated by the loss of 100,000 manufacturing jobs in the 1980s. But what locals fondly call "eds and meds" have helped stabilize the city of 313,000. Now they're trying to build on that to make the city a center of high-tech innovation. Although the city still faces an uphill battle, it is hailed as a beacon for communities that seem to have been left behind by history. That's why the Obama Administration chose it to host the G-20. "Pittsburgh stands as a bold example of how to create new jobs and industries while transitioning to a 21st century economy," the President said on Sept. 8.

At the heart of the revitalization is UPMC. The nonprofit health-care giant, with an annual budget of $8 billion, operates 20 hospitals and employs 50,000 people. Along with the University of Pittsburgh and Carnegie Mellon University, UPMC has made local economic development one of its priorities. "The cities of the future, of which Pittsburgh will be one, will be driven by companies like UPMC and sophisticated universities that take intellectual property and translate it into services and commerce," predicts Jeffrey A. Romoff, chief executive of UPMC.

The jobs lost in heavy industry have been more than made up for by new ones created in health care, software, and green technologies.

Still, job growth is slow even in good times. The problem: The city has not yet produced a critical mass of high-tech startups that can grow to be major employers. To remedy that situation, UPMC in 2005 set up a commercial arm that has invested about $130 million in 20 medical technology, healthcare, and biotech companies—and partnerships with the likes of General Electric (GE) and IBM (IBM). UPMC's newest brainstorm is to set up a vaccine factory using cutting-edge technology it claims will slash in half the time and money it takes to set up a manufacturing plant. The potential payoff for the local economy: 6,000 construction jobs and 1,000 permanent positions.

UPMC is also determined to be a leader in the digitization of medical records. With that goal in mind, it joined with others to invest $35 million in dbMotion, an Israeli-based startup whose software melds medical data from disparate sources. DbMotion set up its U.S. headquarters in Pittsburgh, and in the past year boosted its staff there from 3 to 25. "The UPMC partnership put us on the map and gives us a place where we can test out our technology with a leading-edge partner," says Peter A. McClennen, president of dbMotion's North American operations.

Pittsburgh offers lessons for other communities. Its leaders didn't spend a lot of energy trying to save troubled steel companies, suggesting it may be more valuable to look at new opportunities than old standbys. The city's experience also shows that persistence with new ventures is critical. "Pittsburgh people take the long view," says Paul O. Umbach, president and CEO of strategy consultant Tripp Umbach. "They do economic development the way the Steelers play football. Not flashy. You win as a team. You get the job done."
Stephen_hamm
Hamm is a senior writer for BusinessWeek in New York and author of the Globespotting blog.

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