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SPECIAL REPORT A DOSE OF REALITY: Is all this health care building good for us? PAGES 13-19
Market’s volatility leads to buybacks
IN SEARCH OF RESEARCH RECOGNITION Kent State’s new hire has tough task: Boost coffers amid budgetary upheaval
Firms see their shares as value investments
By TIMOTHY MAGAW tmagaw@crain.com
A
s the point man for filling marching orders by Kent State University president Lester Lefton to build in a big way the school’s stash of research dollars, Grant McGimpsey knows he faces an uphill battle — but one he intends to take on at full speed. Though he has been on the job as Kent State’s vice president for research for just a few weeks, Dr. McGimpsey already is kneedeep in discussions about how to inject more research money into the university’s coffers, an amount often perceived as a metric that gauges a school’s prestige. “Kent State needs to be recognized as a research university, and that’s why I’m here,” Dr. McGimpsey said. “I want to work at an institution that recognizes the value of what research can do for a society, and I’m not being corny here.”
By MICHELLE PARK mpark@crain.com
A number of public companies in Northeast Ohio aren’t sitting on the sidelines as insiders and investors pocket their shares at reduced prices in a yo-yo stock market. They, too, are buying or are poised to do so. The boards of both Cliffs Natural Resources Inc. and Invacare Corp. just last week authorized new stock repurchase plans that allow both companies to buy back millions more of their own shares. The Cliffs board last Monday, Aug. 15, authorized a new repurchase plan allowing the iron ore producer to buy up to 4 million shares of its common stock outstanding. Citing “recent volatility in the global equity markets,” Cliffs chief financial officer Laurie Brlas said last week’s buyback authorization “will allow Cliffs to opportunistically acquire shares at attractive valuations.” And Invacare, based in Elyria, announced last Friday, Aug. 19, that its board had authorized the company to repurchase more common stock, boosting its overall authorization to 2.5 million shares. Asked why Invacare executives sought a new authorization, Gerald B. Blouch, president and CEO, cited widespread uncertainty over equities and the general economy, as well as
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See BUYBACKS Page 21
MARC GOLUB
Dr. Grant McGimpsey, Kent State University’s new vice president for research, stands next to a confocal microscope in the biology department at KSU.
See RESEARCH Page 11
New convention home luring industrial groups back By DAN SHINGLER dshingler@crain.com
Cleveland is the place to be — at least if you are holding a big industrial trade show. That’s the word from Positively Cleveland, the group that markets Cleveland as a tourism and convention destination, along with those who hold the shows themselves.
Even two years before the city’s new convention center is finished, big industrial organizations already are signing up to use it. And when they do, some shows will bring thousands of people to town, Positively Cleveland says. It wasn’t that the industrial groups ever had a beef with this shrunken old manufacturing giant; there just weren’t good places to hold con-
ventions here, Positively Cleveland leaders say. Their audience — those in rubber, plastic and steel-related manufacturing businesses — never left town. “The shows are returning because this is their market. Their wheelhouse is right here,” said Eric Julian, national sales manager for Positively Cleveland. Mr. Julian said his organization
so far has been encouraged to see not just medical device companies drawn to the city as it prepares to build and unveil the Cleveland Medical Mart and Convention Center in late 2013, but basic industrial groups as well. For some, it will be déjà vu all over again, as many of those groups used to hold their meetings here See SHOWS Page 21
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NEWSPAPER
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INSIDE
Growth in road racing, Corporate Challenge give sports management outfit Hermes Cos. boost ■ Page 3 PLUS: ALUMNI STEP UP GIVING ■ TEAM NEO DATA ■ & MORE
Entire contents © 2011 by Crain Communications Inc. Vol. 32, No. 34
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CORRECTION An Aug. 1, Page One story on the possible sale of land at Lakewood Country Club to American Greetings incorrectly indicated that land in South Euclid at Oakwood Country Club already is undergoing redevelopment as a big-box shopping center. The redevelopment of that land only is proposed at this stage.
REGULAR FEATURES Classified ....................22 Editorial ........................8 Going Places ...............12 Letter............................9 List: Largest nursing homes ......................20 Personal View ...............8
COMING NEXT WEEK Philanthropic duties We explore in our philanthropy, fundraising and nonprofit section a partnership between the Cleveland Sight Center and InfoCision aimed at training blind and visually impaired individuals to work for InfoCision’s call center operations. Plus, we look at workplace fundraising.
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THE RIGHT DIRECTION In the second quarter of 2011, private-sector U.S. employers initiated 1,624 “mass layoff events” that resulted in the separation of workers from their jobs for at least 31 days, down 19% from 2,008 mass layoffs in the 2010 second quarter. The federal government says the number of extended mass layoffs declined in 16 of the 18 major private nonfarm industry sectors over the year that ended in the second quarter of 2011. Such layoffs now are at less than half their recession peak, which ran from late 2008 through the first two quarters of 2009. Here are data for the past three years:
Quarter
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Number of mass layoffs
Quarter
Number of mass layoffs
April-June 2011
1,624
Oct.-Dec. 2009
2,416
Jan.-March 2011
1,490
July-Sept. 2009
2,034
Oct.-Dec. 2010
1,999
April-June 2009
3,395
July-Sept. 2010
1,370
Jan.-March 2009
3,979
April-June 2010
2,008
Oct.-Dec. 2008
3,582
Jan.-March 2010
1,870
July-Sept. 2008
1,581
SOURCE: U.S. BUREAU OF LABOR STATISTICS
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East Side manufacturers on the move Work orders hum along, prompt expansion plans for Lake County’s Fredon and Astro By DAN SHINGLER dshingler@crain.com
Two of Lake County’s homegrown manufacturers are on the move, as Fredon Corp. of Mentor
prepares to move into new digs while Eastlake’s Astro Manufacturing and Design mulls a purchase of Fredon’s existing factory space for its own expansion. Fredon CEO Roger Sustar said he
hopes to move into his new building on Tyler Boulevard by spring 2012, but how soon his company completes the move depends to some extent on how quickly he can sell his existing operation down the street on Enterprise Drive. He’s already moving ahead, though. “To do the work we’re getting — we don’t have enough room,” Mr. Sustar said, walking amid a few
machines he already installed and has up and running in the new plant. Mr. Sustar said his company, which is a contract specialty machine shop, has been busy, especially with orders from defense contractors and medical device makers. He has gone from 70 employees a year ago to 85 today. Those workers include members
of a six-person Mentor grinding company, CR Grinding, that Fredon bought last month and now operates as Fredon Grinding Division. The company’s new building, formerly home to a printing company and a sports equipment retailer, encompassed 32,000 square feet when Mr. Sustar bought it for $900,000 at a sheriff’s auction at the See EXPAND Page 21
INSIGHT
HERMES RACES TO THE TOP
Some colleges’ alumni outreach begins to pay off Schools remain wary, however, as markets continue to stumble By TIMOTHY MAGAW tmagaw@crain.com
PHOTOS PROVIDED
TOP: Participants compete in the 2011 Cleveland Corporate Challenge’s final day, which included a tug-of-war, 10K relay and other events. Hermes Cos., which runs the summer-long challenge, said participation continues to rise. ABOVE: Runners start the Cleveland 10-miler, held in May at Edgewater Park. It is one of the many races managed by Hermes.
Road race, Corporate Challenge participation rises as event manager plans to take its operation to the next level By JOEL HAMMOND jmhammond@crain.com
W
ellness efforts have become increasingly prevalent in Northeast Ohio and elsewhere, as employers preach healthier habits to cut down on health care costs and people generally are becoming more aware of their health. If you’re looking to join the craze, Hermes
Cos. likely has a way for you to do it. The event management business continues to grow in each of its three facets: road racing, sport and social events, and Cleveland Corporate Challenge, a summer-long athletic competition pitting area companies against each other in 14 events. The latter ended earlier this month. On the road racing side, Hermes wholly
Alumni giving appears to be reviving from its recessionary doldrums at a number of Northeast Ohio colleges and universities, though squirrely financial markets could impact donations going forward. While multimillion-dollar mega-gifts always are welcome, development officials say the strength of their fundraising operations can be measured by the success of their annual drives targeting alumni, who are counted on for a consistent stream of money that typically comes without strings attached. “It represents your rank and file,” said William Spiker, Baldwin-Wallace’s vice president for advancement. “It penetrates so many sectors of a college. I think the annual fund is a good barometer of whether your alumni are sticking with you.” Officials at local universities hope the turbulent economic waters that threw their fundraising efforts for a loop in 2008 and 2009 have calmed. And although recent turmoil in the financial markets has many concerned, they’re somewhat optimistic about the road ahead considering the increase in giving over the last year. “Once people are back to the habit of giving, they’re likely to continue giving,” said Rae Goldsmith, vice president for advancement services at the Council for Advancement and Support of Education, a Washington, D.C.-based professional organization representing fundraising professionals in education. “What we saw was that a lot of donors just paused because the future was so uncertain,” Ms. Goldsmith said. “There’s greater confidence now. People always planned to give, but they just took a deep breath.” Baldwin-Wallace saw a 3% increase both in the number of donors and the amount of money that came in through its annual fund drive that ended See ALUMNI Page 6
See HERMES Page 10
THE WEEK IN QUOTES “There are always a lot (of universities) who raise their hands in the air and say they have a billion dollars in research funding. But the question is ... how well were those dollars used?” — Grant McGimpsey, Kent State University’s new vice president for research. Page One
“We try to do what everybody else does — buy on downticks. There’s a good probability that we may use our remaining authorization.” — Mark O. Eisele, vice president, chief financial officer and treasurer, Applied Industrial Technologies Inc. Page One
“I think what’s ... valuable about health care systems is that unlike a lot of industry in this town, they’re constantly looking at their infrastructure and what they need to do to upgrade in order to be competitive.” — Bill Ryan, president of the Center for Health Affairs. Page 13
“Everybody is attached to their community hospital. … This is not like closing a paint factory. … These are emotionally charged issues.” — Cleveland Clinic CEO Toby Cosgrove. Page 13
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Optimism lags despite report on positive economic output Team NEO’s latest data on employment, GRP show growth
2000s and never really recovered to 1990s levels. So, if today there is a modest rebound from three or four years ago, no one is impressed. “It probably didn’t feel that great in 2007,” Ms. Bradley said. “(People) remember a time when there were more jobs, more growth.” By JAY MILLER Tom Waltermire, Team NEO’s jmiller@crain.com CEO, doesn’t disagree with that The latest quarterly economic assessment. “There is no question people are report from Team NEO suggests Northeast Ohio’s economy is still suffering,” he said in an interimproving. Employers are doing view earlier this month during more hiring and the region’s which he talked about his organizaeconomic output, or gross regional tion’s review of regional economic indicators for the second quarter of product, is tracking upward. 2011. “People do not feel So, why aren’t people in like that chart.” the region more optimistic Team NEO is a regional about its economic future? organization that markets The answer, or rather Northeast Ohio to expanding answers, from economists businesses. Its economic and economic developreview covers 16 counties ment officials focus on the from Mansfield in the psychological impact of south and Lorain in the the long-term struggles of west to Ashtabula and the regional economy and Waltermire the difficulty of seeing the bright Youngstown in the east. The chart Mr. Waltermire spots emerging in a sea of gloom. “What you have in (Northeast referred to is in Team NEO’s Ohio) and a lot of the metropolitan second-quarter economic review, areas of the Great Lakes is a layering and it tracked ups and downs of of recessions,” said Jennifer Bradley, Northeast Ohio’s gross regional co-director of the Great Lakes Eco- product since 1994. That chart nomic Initiative at the Brookings projects that the region’s economy Institution, a think tank based in in 2011 will grow 2.5% over the Washington, D.C. “The recovery in level of 2010, which was up 1.9% this recession comes on top of a long over 2009. period of job declines in Cleveland, Ohio, Michigan and the (Great Working data It’s that growth in the market Lakes) region.” Ms. Bradley said people remember value of goods and services probetter times in the 1980s and 1990s duced in the region that makes Mr. before hard times hit in the early Waltermire optimistic about Northeast Ohio’s economic health. Team NEO uses this economic data when it promotes the region to site selectors, who favor growing CUT YOU regions when they make site recomENE mendations to their clients. Their RGYR COM clients are businesses looking to SPE PAN NDI Y’S relocate or expand into a new NG region. Gross regional product, or GRP, is considered a valuable measure of TO CHOOSING A NATURAL GAS PROVIDER the size of an economy, and the size of its growth over time is a sign that As a partner dedicated to developing customized solutions for non-residential energy users, Delta Energy has creatan area is a vibrant, attractive region ed a series of six tips designed to help you choose the natural gas program that’s best for you and your business. for new businesses. Team NEO also charts employby ment, and for the second quarter of 2011, its report shows a 2% increase in employment with 1.95 million people employed, an increase of 41,000 this quarter over the first One size does not fit all. Your natural gas supplier should take the time to understand (or even help you define) quarter of 2011. your objectives for the contract term. You should not choose a fixed price in an attempt to “beat the market”. Because some of that growth is The true benefit of a fixed-price contract is price certainty. Although the market might dip below your fixed typical seasonal growth in employprice at some point during your contract, you’ll never be surprised when you open your gas bill because the ment, Team NEO also measures the increase from year to year. only factor that impacts the total due is how much you use. Be leery of a supplier that pushes a specific Those data show the 41,000 increase pricing option. An energy partner like Delta Energy will offer several options and recommend the product that in jobs is higher than the increase best helps you meet the goals of your business. from the first quarter of 2010 to Phil Norcom has been developing and maintaining customized energy strategies with successful business people like you for 7 years. the second quarter of 2010, when As one of Delta’s dedicated account managers, Phil uses a personal, proactive approach to deliver peace of mind to Cleveland area 25,000 jobs were added. businesses. Contact him for a custom quote and let him put the "Delta Promise" to work for you. With employment up, measured unemployment was down, according to Team NEO. The unemployment rate in its Northeast Ohio region for the second quarter of 2011 was 8.5%, below the national unemploy-
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ment rate of 8.9% for the same period. That’s also an improvement from a year ago, when unemployment in Northeast Ohio stood at 10.1%. The gains in employment came in three of the four market sectors Team NEO tracks. Construction employment was up 17% over the first quarter of the year. That increase reflects what at least can be described as a boomlet in commercial and public building, with projects such as the Eaton Corp. headquarters in Beachwood, the convention center and medical mart in downtown Cleveland and the $650 million V&M Star steel mill expansion in Youngstown. Manufacturing employment also was up in the second quarter by 2.1%, while service sector employment gained 2.3%. Government employment was flat. Team NEO also tracks how the current recovery is faring against the 1981 recession that Team NEO considers most comparable to the current downtown. It graphs how well the regional economy fared against the rest of the country in both recessions. That chart shows that Northeast Ohio is recovering as well this time around as the national economy.
Self-esteem issues That’s a sign of a significantly stronger regional economy than existed in Northeast Ohio at the time of the early 1980s recession, when the recovery in employment levels in Northeast Ohio lagged 7% beyond the nation. “We’ve been performing at a lower rate (in Northeast Ohio) than the whole of the United States for 20 years,” said Ziona Austrian, director of the Center for Economic Development at Cleveland State University. “It’s very early, but if we continue at the same average growth rate as the U.S., it would be great.” Mr. Waltermire said one reason for the lack of confidence in the recovery of the Northeast Ohio economy is that many people still gauge the region’s vitality by the strength of what had been its industrial giants — the steel and automobile industries, in particular. Those industries have been declining for years and are not likely to make a full recovery. But he said other new job-creating businesses, in manufacturing and in other industries that don’t have the dramatic presence of steel and automakers, are beginning to assert themselves. That growth, he said, is not being noticed. “We have had a massive shift in what we’re making here, and people don’t think of that because they see the legitimate stories about the declines” in the legacy industries, Mr. Waltermire said. “That’s what stands out to people, and that’s what they remember because declines happen cataclysmically and increases occur gradually.” ■
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Volume 32, Number 34 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly, except for combined issues on the fourth week of May and fifth week of May, the fourth week of June and first week of July, the third week of December and fourth week of December at 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113-1230. Copyright © 2011 by Crain Communications Inc. Periodicals postage paid at Cleveland, Ohio, and at additional mailing offices. Price per copy: $2.00. POSTMASTER: Send address changes to Crain’s Cleveland Business, Circulation Department, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. 1-877824-9373. REPRINT INFORMATION: 800-290-5460 Ext. 136
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Merger allows financial advisers to offer broader services Deal gives combined firm $11B in assets, staff of about 50 By MICHELLE PARK mpark@crain.com
Two Northeast Ohio financial advisory firms have agreed to merge in what one executive calls the perfect matchup. Chess Financial Corp. in Beachwood will become a subsidiary of Hartland & Co. in Cleveland via the merger, which is expected to close Oct. 1. Terms of the deal were not disclosed.
Employers anticipate rise in health care costs By RICH DALY Modern Healthcare
Many of the nation’s largest employers expect their health care costs to rise by an average of 7.2% next year, despite their increasing use of a variety of cost-control measures, according to a survey by the National Business Group on Health. Next year’s expected increase is slightly less than the mean rise of 7.4% in health care costs that those companies reported for this year, although the expected increase in 2012 would be greater in absolute dollars, according to Helen Darling, president and CEO of the National Business Group on Health. The annual survey by the group, a nonprofit alliance of 83 of nation’s largest companies that together employ more than 4 million workers, found they expect health care costs to continue rising significantly faster than inflation because of medical inflation and provisions of the new Patient Protection and Affordable Care Act. “This is an unsustainable model for our country,” Ms. Darling said at news conference last Thursday, Aug. 18, about the financial strain of the ongoing increases. The rising health care costs found in the annual summer survey stemmed from components of the 2010 federal health care law; those components include its mandate to cover the offspring of workers up to age 26 and its coming bans on caps for annual benefit limits. Employers reported a variety of cost-saving moves to counter the rising cost of their health coverage, including encouraging employees to use centers of excellence for transplants and other procedures. “Even if they spend more on the initial admission, they spend less overall due to less need for readmission or re-treatments,” Ms. Darling said about incentivizing employees to seek treatment at highly rated hospitals. ■ Rich Daly is a reporter with Modern Healthcare, a sister publication of Crain’s Cleveland Business.
The merger will create a combined firm of nearly 50 professionals, 300 institutional and private clients and more than $11 billion in assets under advisement. The deal combines the institutional investment capabilities of Hartland — which for decades has served clients such as hospitals, nonprofits and retirement funds — with the tax, estate and financial planning expertise of Chess, a wealth advisory firm serving families and entrepreneurs. “It’s really a perfect matchup because we provide the investment side, and they provide the wealth advisory side,” said Dave Fulton Jr., president and chief operating officer
of Hartland, who will retain his title after the merger. In the long term, the move will mean the combined firm provides broader services for its clients. The firm also should experience enhanced revenue growth because it’s offering both types of services and has an expanded group of clients, or “touch points,” Mr. Fulton said. “Together, we’re going to be able to accelerate our growth faster than either firm has grown in the past,” he said. Hartland, which was founded in 1989, has roughly $10 billion of institutional and private client assets under advisement, Mr. Fulton said. Chess, which serves more than
150 family and individual clients, provides investment management and tax, estate and financial planning. It was founded in 1986. Both firms are fee-only, meaning their advisers don’t earn money by recommending and/or selling specific products. This was the third time the firms talked about a combination, said F. Carl Walter, who is chairman of Chess and will become vice chairman of the combined company. The timing was right this time, in part, because Hartland drove efforts about 18 months ago to serve more private clients and found there would be benefits to building its tax and estate capabilities to better
serve them, Mr. Fulton said. Added Mr. Walter: “There are professionals all over the place that do different parts of the pie. Very few have expertise, experience, in all parts of the pie. That’s something that’s very, very attractive to high-net-worth families.” Mr. Fulton said he believes the firms’ merger is reflective of an emerging trend of companies that want to provide both investment advisory services and comprehensive wealth advice. The firms’ respective offices will be maintained, though in time, the aim is to combine the offices. Chess Financial Corp. will retain its name, Mr. Fulton said. ■
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Garfield Hts. data center expanding What do you look for in a law firm?
By CHUCK SODER csoder@crain.com
Supplying uninterrupted computing power has led to uninterrupted growth for the Garfield Heights data centers owned by Expedient Communications Inc. The Pittsburgh-based company plans to spend about $5 million to double the amount of data processing space at the newer of its two data centers on NEO Parkway, said Bryan Smith, regional vice president for Expedient. The newer center, which opened in 2008, is located next to the older one, which opened in 2006. In the process, Expedient likely will add about a dozen employees to its staff of 40 in Garfield Heights
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June 30 compared to levels of fiscal 2010. Those increases were “not a small accomplishment,” Mr. Spiker said, given the still-sluggish economy. “I don’t think we’re out of the woods yet,” he said. “People are still guarded about what’s going to happen next. It continues to be something we work at day in and day out, but we’re just grateful for the support we receive.”
Rally the troops
If this doesn’t sound like your current law firm, perhaps it’s time to start
So far, Oberlin College’s alumni fundraising efforts appear to be working. The college’s alumni participation rate — now at 42% — has increased by five percentage points over the last two years. This year, the college brought in about $6 million through its annual fund drive. “It’s not one thing we’ve done,”
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local companies have been strained for resources, which makes them more open to letting other companies manage their computer systems. “Internal IT departments are being asked to do more and more without additional personnel,” he said. Expedient plans to start expanding its newer data center later this year, Mr. Smith said. The new space — now a 7,000-square-foot, indoor dirt floor — should be a functioning part of the data center by the end of the first quarter of 2012, he noted. The expansion would bring the size of the building to about 21,000 square feet, 14,000 of which would be data center space. The new center then would be the same size as the older data center. ■
Alumni: Colleges enlist creative efforts
their business opportunities.
looking for a new one.
over the next several months, Mr. Smith said. Though the older data center hasn’t grown physically, it has gained customers over the years, too, Mr. Smith said. To accommodate them, Expedient earlier this month turned on $2 million of new power generation equipment. The Garfield Heights data centers have grown significantly faster than Expedient’s other facilities in Pittsburgh, Boston, Columbus, Indianapolis and Baltimore, Mr. Smith said, declining to give revenue figures. “Cleveland is actually leading the way,” he said. The reason, Mr. Smith said, might be because there are fewer competitors in the region, or because
said Bill Barlow, Oberlin’s vice president of development and alumni affairs. “It’s a lot of things we’ve done that have helped us in the last two years.” For example, Oberlin College hired more staff, invested in new technology and recruited more alumni to make pitches to their classmates. Kent State University is taking a longer-term approach toward cultivating more alumni donors, according to Gene Finn, the university’s vice president for advancement. Shortly after Mr. Finn joined the university in 2007, Kent State launched a fundraising campaign, dubbed the Campaign for Change, geared toward asking current students to donate. “You have to start to instill that sense of philanthropy when the students get here, which is something Kent State hadn’t done before,” Mr. Finn. “It could take years.” Kent State, which achieved an all-time fundraising high of $42.1 million in the fiscal year that ended June 30, saw a decline in alumni giving around 2008. Although alumni participation has started to trend upward, Mr. Finn noted, it hasn’t returned to pre-recession levels. The size of the gifts coming into the university’s coffers, however, has grown considerably. The average alumni gift in 2007 was about $750, while in 2011 that average climbed to $1,250.
Notre Dame adjusts The revival of alumni giving isn’t universal, however. The annual fund at Notre Dame College in South Euclid hasn’t been the same cash cow as that of other schools. For the fiscal year that ended June 30, the college saw a 7% decline in its annual giving program, which brought in about $230,000, according to Al DiFranco, the school’s director of development. Because Notre Dame’s alumni base hovers at only about 5,200, the college is moving toward other forms of fundraising, such as events, to reach out to a broader constituency. As such, the college saw a 30% total boost in unrestricted giving — a number that includes the totals from the annual giving program. Also, the college plans to hire a handful of people to ramp up its development efforts, especially considering the explosive growth in enrollment the college has seen over the last decade. “These positions in the past were
all kind of done by one person,” said David Armstrong, who recently took over as the college’s vice president of development and general counsel. “We’re now making a clear investment to bring people in because we need to strengthen this department and seek higher goals.”
Fingers crossed Despite lingering uncertainty about the economy, University of Akron officials anticipate overall fundraising is going to continue to increase. For the fiscal year that ended June 30, the University of Akron raised $46.7 million — a new record for the school. Alumni collections had dropped markedly for the university, from $6.5 million in 2008 to $3.8 million in 2009. However, that figure has risen over the last two years and hit $4.9 million for the last fiscal year. “Obviously, we believe that there is a very strong and bright future ahead,” said Tim DuFore, the University of Akron’s associate vice president of development and chief development officer. “That’s what we’re looking toward.” If the stock market continues to plummet, fundraisers are worried that donors, particularly alumni, once again might hold tightly onto their cash. “If you talked to me a month ago, I might have a different answer (about whether the worst was over), but the last couple weeks have been a roller coaster,” Kent State’s Mr. Finn said. “It’s our responsibility in our operation at Kent State to communicate with the alumni and stress things happening here and stress our kids still need support.” Cleveland State’s alumni giving was anchored by two wealthy alums over the last two fiscal years, with a $10 million pledge from industrialist Monte Ahuja in 2011 and a $6 million gift in 2010 from Bill Julka, founder of Smart Solutions Inc. in Beachwood. But given the uncertainty of the last few years — and particularly the last few weeks — what could happen with future alumni giving is anyone’s guess, according to Rob Spademan, Cleveland State’s assistant vice president university marketing and admissions. “Some of the larger donors that we’re talking to and working with still seem to be on track ... but it’s hard for us to honestly know what’s going to happen,” he said. ■
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PUBLISHER/EDITORIAL DIRECTOR:
Brian D. Tucker (btucker@crain.com) EDITOR:
Mark Dodosh (mdodosh@crain.com) MANAGING EDITOR:
Scott Suttell (ssuttell@crain.com)
OPINION
Big dose
I
n this week’s issue, we call your attention to an industry that has grown like no other in Northeast Ohio over the last quarter century. It is the health care industry, and it has been hailed as a savior of our local economy because of the tens of thousands of jobs it supports both directly and indirectly. But is it a sector that, like the auto industry, eventually may grow too big for its own good? We don’t answer that question in our special report, “A Dose of Reality,” that begins on page 13. However, we do address the subject of the massive amount of investment in hospitals and health centers undertaken during the last decade by our local health care providers as they look to meet the medical needs of area residents where they live. Anyone who regularly travels the interstate highways that run through the Cleveland and Akron areas would be hard-pressed to miss the significant suburban medical campuses that have been established in recent years by the Cleveland Clinic, Summa Health System and University Hospitals. However, these health care providers and others also have built an array of smaller medical centers that have popped up in small, outlying communities such as LaGrange and Chesterland, even as they’ve continued to invest heavily in new bricks and mortar on their main campuses. Some of these investments are big, such as the $298 million spent for the Ahuja Medical Center in Beachwood that University Hospitals opened last February. Others, such as a $1 million stroke center at Mercy Regional Medical Center in Lorain, barely register a blip on the construction radar. Viewed in total, though, the financial commitment of these health care providers is enormous. The scope of their expenditures since 2000 can be seen in a spread on pages 18 and 19. In the aggregate, they account for nearly $3 billion in construction spending. That’s a ton of investment in a market where the population is stagnant. It’s also a level of spending that wouldn’t have been possible two decades ago, when the state still required hospitals to file certificate-of-need applications to gain approval for the expansion of their operations. The idea behind the certificate of need was to safeguard the marketplace from an excess of duplicative services. It isn’t a coincidence that the building boom kicked in shortly after hospitals were unfettered in the mid-1990s from certificate-ofneed rules. The competition that has ensued among hospitals to establish beachheads in prime suburban locations has created an abundance of choices for consumers. But we wonder whether some of the shiny new investments of today will be the underused capacity of tomorrow. Back in 1995, when the certificate-of-need law was changing, the then-president of Southwest General Health Center, L. Jon Schurmeier, told Crain’s, “I’m afraid there will be a spending spree, fortunate or unfortunate, where he who has the most money will win.” We hope the losers in the end won’t be patients, who eventually foot the bill for much of this empire building.
FROM THE PUBLISHER
Circus surrounding SB 5 continues
W
hy, oh why, do we never Board hold hearings for all charges of seem to learn in Ohio? unfair labor practices (and gives that Just a scant few months same board the authority to remove after the Republicans used employee classification groups from a their resurgent power in Columbus to bargaining unit). declare war on public employee unions, Of course, such a broadside enraged those representing labor now refuse any — and engaged — the unions, which are discussion of a deal to find a middle the most powerful in Columbus. They ground good for all Ohioans. organized a repeal petition effort, “These politicians who BRIAN titled “We Are Ohio,” and went passed Senate Bill 5 have the TUCKER about gathering nearly four ability to come back and repeal times (915,000) the amount of the law,” said Melissa Fazekas, valid petition signatures needed. spokeswoman for We Are Ohio, So, SB 5 never took effect in which is poised to campaign July, and awaits the state’s voters against the bill. “And that is in the form of Issue 2. Gov. Kasich what they should do — repeal and other key Republicans the entire law. know they face an expensive “Or they can join us and vote fight and also that polls showed ‘no’ in November on Issue 2.” that most Ohioans didn’t much For those without a scorecard, SB 5 approve of SB 5 in its broadest attack on was the sweeping legislation that tore public unions. into the power of public employee unions. Thus the strident refusal of the anti-SB 5 Among other things, SB 5 prohibits folks to come to the table now and reach “public employees” from striking, bans any sort of compromise. They’re pleased payroll deductions for political action with their success and feel they’re in the committees and removes a requirement driver’s seat. That’s easy to understand. that the State Employment Relations However, polls also showed during the
petition process that there were aspects of SB 5 that a majority of Ohioans wanted to see enacted, and the Republicans seem poised to try to attack these by individual legislation if they were to lose on the November ballot. For example, most people I talk to hate the fact that union regulations tie the hands of school administrators when it comes to underperforming teachers. Cleveland Mayor Frank Jackson knows that the traditional “last hired, first fired” union protection of teachers threatens the promising, high-performing schools in his district that are staffed by the youngest and most innovative teachers. There is no more perfect example of how rotten politics has become. Conservative Republicans sweep into power and try to decimate public unions. Laborbacked Democrats scramble to overturn the legislation, ignoring any evidence that voters want some of the changes. Both sides continue to work their bases and ignore the powerful moderate bloc of voters, wasting energy, time and money. They fiddle while Rome burns, enthralled by their own music. ■
PERSONAL VIEW
U.S. ushers in effective immigration policy By MARGARET W. WONG
I
n light of the recent debt woes facing our country, it is refreshing to see that U.S. Citizenship and Immigration Services (USCIS) is taking action to help make it simpler for prospective immigrants to apply to invest and build businesses in our great country. Immigration policy can have a profound effect on our nation’s economy and job growth. It is essential that we attract the best and the brightest from abroad. The announcement by USCIS director Alejandro Mayorkas of a series of initiatives to make it more efficient for USCIS to adjudicate certain business-related immigrant petitions is a welcome development for those of us in the field of
Ms. Wong heads an immigration law firm in Cleveland that bears her name. immigration law. It should be viewed as a welcome development by all Americans, because it will promote employment and increase investment. The new initiative by USCIS will cover H-1B temporary work visas, EB-2 National Interest Waivers and EB-5 investor green card petitions. H-1B visas are for foreign employees in “specialty occupations.” According to the new clarifications, foreign entrepreneurs will qualify to receive H-1B visas. This generally was not possible previously, because entrepreneurs did not have the requisite employeremployee relationship. The new clarification allows entrepreneurs to apply for H-1B visas, where pre-
viously they would have been required to apply for an E-2 visa or to seek EB-5 permanent residence, which requires an investment. This will allow more immigrants to create jobs here. EB-2 National Interest Waivers are granted to foreign workers seeking employment in an area of intrinsic merit to our national interest. These waivers are vitally important to our country’s progress in the arts, sciences and business. USCIS’s plan aims to make the application process smoother and more efficient. Enhancements to the EB-5 Immigrant Investor green card program will allow those who are able to invest $500,000 to $1 million and create at least 10 jobs in the United States to take advantage of accelerated processing of their applications See VIEW Page 9
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THE BIG ISSUE Warren Buffett says the rich, including himself, should be taxed more heavily. Is it time to change that part of our tax laws?
9
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I don’t look at it as a soakthe-rich idea. In fairness, we need to close tax loopholes. We need a balanced approach, of not just cuts, but to raise additional revenue.
It’s a wonderful idea. We have a global problem now with too much money at the top. We need to create a stronger middle class right now. That can be done by taxing the wealthy.
We’re in a time where the government needs to look for new revenue sources. ... I personally like the idea. I don’t think the deficit should be balanced on the backs of the middle class and the poor.
Warren Buffett is a very intelligent man. I think we as a country should pay attention to what he says.
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Charter school operator misrepresented ■ As I have previously pointed out to Crain’s publisher Brian Tucker, he needs to check his facts before he writes commentaries like that of Aug. 15 criticizing White Hat Management. We have frequently suggested that he visit our schools to see what is actually happening in our schools. His column suggests that White Hat Management has not accounted to the public for “the millions in tax dollars it receives.” Nothing could be further from the truth. This seems to be the same kind of “urban legend” perpetuated by White Hat’s critics. The Ohio Revised Code Section 3314.024 states that “A management company … shall provide a detailed accounting …” White Hat annually provides a “detailed accounting” to the schools and to the Auditor of State. This procedure was established in the late 1990s to comply with that section as part of the process for auditing community schools. The Auditor of State reviews the expenditure of funds of each and every school in Ohio, including those operated by White Hat Management, according to these rules. Not only have we complied with all of these rules, we have received commendations from the Auditor of State each and every year our schools have operated in Ohio. Not once have we received any criticism from the auditor about how we are complying with the law. The same cannot be said for the school boards with which we contract, which are audited separately by the state auditor.
LETTER The litigation in question is a dispute with boards that have become unhappy with some of the provisions that they negotiated in their contracts with White Hat. However the boards are not suing to terminate these contracts, as Mr. Tucker states. The lawsuit was filed May 17, 2010, and the agreements expired under their own terms on June 30, 2010. The boards never asked for termination, and they asked that White Hat continue to operate the schools under the “terms of the existing agreements” until further orders from the court. Under those contracts, we provide a guarantee that all expenses will be paid by White Hat, even if the revenues to cover them are inadequate. The schools have no risk of loss whatsoever. The financial statements we are now being asked to submit are the very same as those that had previously been submitted both to the boards and to the auditor. The judge believes that there is greater “evidentiary value” to these being presented in the discovery process. The judge will rule if we have complied with the state statutes. Mr. Tucker points out that charter schools can achieve marvelous things. Our schools are dealing with many of the most difficultto-educate children. We operate 18 schools in Ohio for drop-out recovery. To date we have graduated over 10,000 students with high school diplomas and employment skills
who never would have had either but for our schools. According to the University of Cincinnati, our schools benefit the state of Ohio economically by over $140 million every year. Annually, we receive less than $30 million for educating these students. Our Hope Academies provide education in the neighborhoods that have been virtually abandoned by the Cleveland Public Schools. White Hat succeeds in providing the best possible education solutions at half the cost to the state as the Cleveland Public Schools. Tax dollars provide Cleveland Public Schools facilities. Charter schools pay for facilities from operating dollars. On another note, if the 5,000 Cleveland residents who have chosen our schools instead chose Cleveland Public Schools, Cleveland taxpayers would need to raise $38 million more for schools. School choice not only promotes individual empowerment, it is also economical. I am enormously proud of the hundreds of dedicated teachers and staff who work for White Hat in Ohio dealing with students nobody else wants, and succeeding. The gratuitous criticism of what we do by Crain’s and other media is unwarranted and unfair to them. I only ask for factual reporting. Because of my political donations, White Hat continues to be vilified. In spite of that, we are proud of our success stories and will continue to serve our students. David L. Brennan Founder White Hat Management
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View: Initiatives boost efforts to create new jobs continued from PAGE 8
if their job-creating ventures are fully developed and ready to be implemented. EB-5 applicants also will have the option of requesting premium processing of their immigrant petition, which significantly expedites processing in exchange for a fee, and can be instrumental in whether an investor with time deadlines chooses to invest in the United States. In
addition, the potential implementation of an opportunity for applicant interviews significantly will help clarify who is most deserving of EB-5 status. I welcome these new initiatives to reduce barriers for job-creating immigrant entrepreneurs and investors and wish the USCIS the best in successfully implementing these plans. The new business-friendly initia-
tives will complement the July 17 Immigration and Customs Enforcement (ICE) Memo by director John Morton, which outlines a framework with which ICE officers and prosecutors can exercise discretion with regard to deportations. That way, ICE can focus on the most important removal priorities in order to help our country continue to progress as the great melting pot it has always been. ■
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Hermes: Organization plans market expansion continued from PAGE 3
owns and operates a handful of events, but mostly partners with new or established race administrators to assist in marketing and registration efforts, then manages much of the race-day operations. President Neal Neroni said when he and finance manager Nick Swingos took over Hermes in 2000 — the company was founded in 1981 — it managed 39 races. Now, it has 115 on its schedule, including 11 Susan G. Komen Race for the Cure events nationwide. “We get a phone call every day for a new race,” said Mr. Neroni, who said the company has about a dozen races with over 1,000 participants. “People want to get out,
meet some people, have fun and get in shape.” The growth reflects a rise in road running nationwide. According to the National Sporting Goods Association of Mount Prospect, Ill., which surveys 40,000 U.S. households for its annual sports participation survey, 35.5 million people age 7 or older ran in 2010, up 10% from 2009. The company’s Cleveland 10miler, along with its River Run half marathon (Sept. 11 along the Rocky River), are popular, as is its partnership with the Winking Lizard restaurant chain for “A Shot in the Dark.” That race, which winds its way downtown and into Cleveland’s Tremont neighborhood, is
part of a block party in the city’s Gateway District featuring bands and, of course, post-race beer. The race began in 2003 and has grown to 2,100 runners from 1,300 at its start, Winking Lizard owner John Lane said. Registration runs $20 to $30. Hermes either is paid a flat fee by race organizers or gets a cut of race registrations. “They’ve been a great partner ever since we started,” Mr. Lane said. “They handle permitting for the party, the race operation, everything.” Hermes, which has grown to 12 full-time staff members and uses up to a dozen interns each year, also has a sport and social arm. It organizes activities such as adult
kickball, softball and volleyball leagues and tournaments.
Handling the challenge The company’s Corporate Challenge hit a new high for participation this summer, with 105 organizations total; 70 of those competed in “Corporate Cup,” in which they gathered points for their performances all summer. Hermes made donations to the top finishers’ favorite charities. Other companies participate in an “independent” division, in which companies can enter only events they choose. Sponsorship, too, remains steady, though Mr. Neroni said there always is room for growth in that
If you have an opportunity, we’re ready. This is no time to wait. And
ON THE RUN Hermes Cos.’ road racing division has grown steadily and now consists of 115 races; here are the company’s top-attended events (2010 numbers used for races not yet run this year):
Race
Number
Turkey Trot, Nov.
5,200
St. Malachi Run, March
3,500
A Shot in the Dark, July
2,100
Cleveland 10-miler, April
2,050
River Run half marathon, Sept.
1,300
Run for the Border, May
1,250
Pigskin Classic, Nov.
1,100
Chili Bowl Classic, Feb.
1,000
area in the form of a title sponsor for Corporate Challenge, which the company has been unable to secure. Eleven of 14 events were sponsored this year; CBiz Inc., Titan Insurance and Kaiser Permanente were among the sponsors. Not only has Corporate Challenge grown here, but Hermes for the first time will take it elsewhere: On Aug. 27, it will stage a mini-challenge in Pittsburgh, with four events. Mr. Neroni said Hermes plans a full Pittsburgh version in 2012; depending on how that expansion goes, it may try to move into other cities. CBiz, an Independence-based provider of accounting and business services, has sponsored Corporate Challenge softball for the last six years and also has multiple teams participating in each event. One reason for its involvement is that the events serve as team-building exercises, as the company’s employees are spread among its corporate office and sites in Cleveland and Akron. Director of corporate relations Lori Novickis said CBiz employees can earn a health care premium discount by participating in wellness activities, and Corporate Challenge events count. Also, CBiz sees the sponsorship as a marketing tool. “There are a lot of great and growing companies in Cleveland,” Ms. Novickis said, “and sponsoring and participating in this event is one way we can differentiate ourselves.” Ms. Novickis said the challenge also is a good morale booster, which has come in handy over the last few years as conditions at many area companies have gone south. Mr. Neroni agreed, and said when the economy really tanked in 2008 and 2009, participation in the challenge was stagnant, but it lost few past competitors. “Our pitch always was, ‘When times get tough, let’s keep the people you have happy,’” Mr. Neroni said. ■
we’re not. In fact, so far this year, we’ve extended nearly 10 billion dollars in credit to business customers, and we plan to lend another 28 billion dollars in the year to come. In addition to lending, we will keep supporting local businesses with financial solutions and services that can improve productivity and, ultimately, help them succeed. Find out how we can help you drive results at 53.com/drivingresults or call 1-877-804-2091.
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Research: New VP tasked with bringing faculty together continued from PAGE 1
For more than two decades, Dr. McGimpsey worked at the Worcester Polytechnic Institute, or WPI, in Worcester, Mass., where he most recently served as associate provost for research and director of its bioengineering institute. Dr. McGimpsey’s arrival at Kent State puts him at the helm of a far broader research portfolio than that of WPI, which is a markedly smaller school with between 4,000 and 5,000 students compared with Kent State’s roughly 40,000 across its eight campuses. He also fills a role that has seen two leadership changes in recent years, though it’s one he views as ripe with opportunity, particularly given the increased preference among bodies that fund research for projects crossing several disciplines. Dr. McGimpsey said Kent State’s research enterprise “obviously has a lot of breadth — right from the creative arts, performing arts, all the way over to some pretty hard physics and everything in between.� “There’s a lot of potential there to be supported further,� he said. “It’s my job to help define what those areas should be in the future and leverage all the strengths we have here to do that.�
Kick it up a notch Corralling research dollars isn’t an easy task because of the turmoil facing federal and state budgets that finance a bulk of university research projects, according to Dr. McGimpsey. “It’s going to be challenging for
some time to come, but that’s not to say it hasn’t been challenging in the past,� he said. Kent State officials maintain they haven’t failed in securing research money in recent years, but Dr. McGimpsey noted that it hasn’t grown at the rate some would have preferred. Dr. Lefton, for one, noted during a trustees meeting last spring he would like to see as much as $100 million in research money flow into the university each year, whereas it hasn’t brought in more than $46.3 million in any year over the last five years. A university spokeswoman said the figures for research dollars Kent State secured during the last fiscal year, which ended June 30, weren’t yet available. However, provost Robert Frank, who is stepping down at the end of the next academic year, said last month that administrators were “worried� how the final numbers were shaping up. As of last May, Kent State had brought in only $25 million in federal research dollars for the 2011 fiscal year, according to documents obtained by Crain’s laying out Dr. Frank’s stated goals and objectives for the year. Also, Kent State hadn’t met its research financing goals for the previous two years or its goal for the number of grant proposals for the last three, according to the documents. The largest percentage decline in recent years came in the 2010 fiscal year, when the level of research support it secured fell 21% to $36.4 million from $46.3 million — a drop
With heavy inventory, GM limits pickup production By MIKE COLIAS Automotive News
General Motors is trimming output at one of its truck plants, a sign that the automaker is trying to whittle down its historically high pickup inventory. GM’s Fort Wayne, Ind., assembly plant, which makes full-size Chevrolet Silverado and GMC Sierra pickups, recently canceled Saturday shifts for the rest of the year, according to a posting on UAW Local 2209’s website. The local represents Fort Wayne hourly workers. A person familiar with the plans said the plant had been working a Saturday shift about half the time since the start of the year. Local 2209’s website posting said the elimination of Saturday shifts is because of “the amount of trucks we have had on hand.� Some analysts have expressed concern over GM’s pickup inventory, which hit a 122-day supply in June before falling to 115 days at the end of July. Analysts say an 80-day inventory is typical for full-size pickups. Last month, GM U.S. sales chief Don Johnson said he expects the automaker’s pickup inventory to fall to around 200,000 units, or a 90-day supply, by year end. He said GM would “match demand with our production decisions� and not use big discounts to move the trucks. Johnson said GM had built up a
larger-than-usual pickup inventory partly because of an anticipated uptick in demand during the second half of the year. GM also is trying to build inventories ahead of next year, when the plants will be down for several weeks as GM prepares to build the next-generation pickup, which is scheduled for a 2013 launch. GM spokesman Jim Cain declined to comment on production plans at Fort Wayne or GM’s other pickup plants, which are in Flint, Mich., and Silao, Mexico. He reiterated that GM will adjust its inventory through production changes, rather than incentives. “We’ll make production adjustments at different facilities to make sure we have the right stock on the ground,â€? he said. GM has not trimmed production at its Flint plant, another source familiar with the matter said. The plant recently added a third shift, a decision made in February in part to fill healthy demand for the automaker’s heavy-duty pickups. GM also has scheduled an extra week of downtime at Fort Wayne following the usual two-week closure over the Christmas holiday, according to the posting on the Local 2209 site. That work is for “facility upgrades and maintenance.â€? Last month, GM said it would spend $328 million to overhaul the Flint plant to produce the next-generation truck. It hasn’t announced a similar investment for Fort Wayne. â–
WISHES GRANTED Grant McGimpsey, Kent State University’s vice president for research, wants to make sure the school is nabbing more money to bolster its recognition as a research university. Kent State’s research awards declined in the 2009-2010 school year after a sizable increase in 2008-2009 from the previous year.
School year
Dollars awarded
Percent change
2009-10
$36,384,344
-21.5%
2008-09
46,323,361
42.9
2007-08
32,425,410
-0.6
2006-07
32,629,145
22.6
largely due to a dearth of state money. Regardless, John West, the university’s former vice president of research who stepped down in 2010 to return to the faculty full time, said Kent State has made significant progress in its research programs over the last five to 10 years. Dr. West cited the university’s success with liquid crystals and Kent State’s business accelerator, Centennial Research Park. “There has been a steady focus in areas where KSU can take a lead in excelling,� Dr. West said, “and on translating research dollars into economic development and research
in general.�
Get ’em talking It may sound like an easy fix, but Dr. McGimpsey said one of the ways to bring more research dollars into the university is to get faculty across disciplines to work together on research projects. For example, he said, Kent State’s new College of Public Health has a tremendous amount of research expertise in psychology and other social sciences that can be brought together to tackle particular public health problems, such as obesity. “It is a challenge, but it’s not one
that’s limited to academia, like getting the loading dock guy to talk to the CEO,â€? Dr. McGimpsey said. “My job is to ask various faculty in various disciplines to present a problem and work with others to get a solution.â€? Last year, Kent State started moving toward more collaboration through what Dr. Frank called “coordinated hires,â€? or the hiring of faculty members who can collaborate on particular research interests of the university that cross disciplines. As an example, the university announced this summer it planned to hire a theoretical materials physicist and a physical organic chemist to study organic photovoltaics — a burgeoning research interest at Kent State in which Dr. McGimpsey has a background. Ultimately, Dr. McGimpsey said, while increasing the number of research dollars coming into the university is his first order of business, what really matters is what the university does with those dollars. “There are always a lot (of universities) who raise their hands in the air and say they have a billion dollars in research funding,â€? he said. “But the question is — and I’m not sure what the answer is in all cases — how well were those dollars used?â€? â–
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CRAIN’S CLEVELAND BUSINESS
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McClary and Angelique Rogers to managers; Krista Clarke to associate.
GOING PLACES JOB CHANGES DISTRIBUTOR FERGUSON ENTERPRISES INC.: Kyle Grant to general manager, Ohio region, Ferguson Heating & Cooling.
EDUCATION GILMOUR ACADEMY: Diane Kingsley to director, lower school.
ENGINEERING INTEGRATED ENGINEERING CONSULTANTS INC.: Clifton Hamner to mechanical designer.
FINANCE CITIZENS BANK: Bill Oskowski to branch manager, South Euclid.
AUGUST 22 - 28, 2011
Ditz, Theresa Wisniewski and Lori Sullivan to in charge; Matt Stegmoyer and Adam Deal to level II accountants.
AURUM WEALTH MANAGEMENT: Jacob C. Adamczyk to associate vice president; Michael T. McKeown to first vice president, director of research; Leeann L. Schultz to vice president, operations manager.
FEDERAL RESERVE BANK OF CLEVELAND: Paul Kaboth to vice president, community affairs officer; Maria Bowlin and Matthew Hite to assistant vice presidents. FIFTH THIRD BANK, NORTHEASTERN OHIO: Russell L. Edwards to vice president, retail regional manager; Jason Myers to vice president, business banking relationship manager; Eric Schwarz to vice president, wealth management adviser.
FINANCIAL SERVICE APPLE GROWTH PARTNERS: Wayne Chamberlain to business valuation senior associate; Lindsay Cooper, Sean Cwynar and Paul Martin to senior associates; Kathryn Lee to human resources manager; Tom
HEALTH CARE CLEVELAND CLINIC: Dr. Brian J. Bolwell to chairman, Taussig Cancer Institute.
BOBER MARKEY FEDOROVICH: Tiffany L. Herbert to manager.
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KAISER PERMANENTE, OHIO: Michelle Richter to senior director, sales and marketing strategy; Kathleen Stephens to director, sales and broker relations; Tracy L. Kanouff to director of marketing strategy and effectiveness; Diana Pisanelli to director, account management and client support services.
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MANUFACTURING GEBAUER CO.: Stephanie Morales to director, human resources. MYERS INDUSTRIES INC.: Ray Cunningham to vice president, human resources, organization development and training.
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OLYMPIC STEEL INC.: Andrew S. Greiff to president, specialty metals; Raymond Walker to senior vice president, eastern region; Michael J. Cedoz to vice president, automotive.
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REAL ESTATE MIDWEST REALTY ADVISORS: Howard A. Davis to senior director, residential property management; Paul J. Stroud Jr. to senior director, commercial property management.
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SPECIAL REPORT A DOSE OF REALITY: Is all this health care building good for us?
RUGGERO FATICA PHOTOS
ABOVE LEFT: Dave Confer (foreground) and Justin Confer unload drywall at the work site for Summa Health System’s new $8 million emergency department at its Medina health center. ABOVE RIGHT: Brian Brake uses a cutoff saw to slice through concrete. BELOW: Summa joins the Cleveland Clinic and University Hospitals in expanding in Medina County.
Growth spurt carries nearly $3B price tag Developing, wealthier areas fertile ground for building over past decade By TIMOTHY MAGAW tmagaw@crain.com
I
f Northeast Ohio’s health care systems were awardwinning chefs, Medina County could be considered one of their farmers’ markets of choice. The booming county has some of the region’s best ingredients for maintaining a world-class health system: A growing population with the money and means to finance care without the aid of government programs that have plummeting reimbursement rates. “It’s a community with a little bit of disposable income, the right education mix and cares about
health care,” said Bethany Dentler, executive director of the Medina County Economic Development Corp. “Up until recently, there were a lot of leakages outside the community. People were driving into more urban areas for their health care needs.”
Over the last 10 years, Medina County’s population has surged 14.1% while the state’s as a whole grew a mere 1.6%. As such, many of the region’s major health care players have descended upon the southern county, staking their claims in an effort to gain ground in one of the state’s few growing markets — a move many suggest would help prop up operations in poorer, more urban markets. While perhaps Medina County is one of the most visible examples of the region’s competitive health care market and building explosion of the last decade, similar See BUILDING Page 14
Latest technology, new facilities serve as tools for luring top docs
D
octors matter, too. Bill Ryan, president of the Center for Health Affairs, noted that a central piece of health care systems’ expansion strategies is the lofty task of recruiting high-quality physicians. “It’s not about the direct attraction to patients,” Mr. Ryan said. “Doctors bring patients to the hospital. Being able to have modern operating rooms, high levels of technology on site and being able to do more complicated surgeries and procedures at the hospital convinces doctors of a reasonable place to admit the patients.
“That’s how you get patient flow and how you get doctor loyalty,” he said. Over the last seven years, for instance, University Hospitals has aggressively recruited doctors in Medina County, which served as the precursor to the construction that’s taken place in the county, according to Dr. Michael Nochomovitz, president of University Hospitals Physician Services. “Our strategy always begins with physicians,” he said. “We had a number of physicians who expressed interest in aligning with us.” — Timothy Magaw
Long-term demographic trends guide health care development Population changes could affect viability, force ‘tough decisions’ By SCOTT SUTTELL ssuttell@crain.com
C
leveland Clinic CEO Toby Cosgrove knows there’s no amount of patient usage statistics or demographic data that make it easier for those served by Huron Hospital in East Cleveland to accept that it no longer will offer inpatient and trauma services as of today, Aug. 22.
“Everybody is attached to their community hospital,” Dr. Cosgrove said. “This is not like closing a paint factory. … These are emotionally charged issues.” And yet, Dr. Cosgrove and other executives who run Northeast Ohio hospitals can’t let emotions get the best of them as they guide their health systems through a still-treacherous economy and massive demographic changes that
affect who’s receiving medical care and where and how it is best delivered. In Cuyahoga County, for instance, the population has dropped nearly 10% in just the last 20 years, to about 1.28 million as of 2009, according to Census Bureau data. The decline was quite a bit more pronounced in Huron Hospital’s home base of East Cleveland, where the population in the last two decades fell 26.5%, to
INSIDE: Population and income data show where we might expect more building into the future. Page 16 24,317 in 2009 from 33,096 in 1990. Deborah Chollet, senior fellow and health economist at Mathematica Policy Research in Princeton, N.J., said these sorts of population changes make it “inevitable that health systems will make tough decisions” about delivering care, particularly in cities and inner-ring suburbs that are losing
residents rapidly. “As population shifts, usage rates just aren’t going to support hospitals in every place they have operated,” Ms. Chollet said. A big challenge going forward, then, is for health care systems to deliver care to all who need it, even as changes in population turn their attention to higher-growth portions of their service areas. In Huron Hospital’s case, the Clinic in October is slated to open a $25 million community health See DECISIONS Page 16
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Building: Outpatient care a big focus continued from PAGE 13
patterns have blanketed the entire region. According to data compiled by Crain’s Cleveland Business, nearly $3 billion has been allocated or spent since 2000 to new construction dedicated to patient care in Cuyahoga and contiguous counties. Bill Ryan, president of the Center for Health Affairs, an advocacy group representing area hospitals, said health care providers are expanding into new markets and adjusting their presences in existing markets as health care delivery evolves. “I think what’s important and valuable about health care systems is that unlike a lot of industry in this town, they’re constantly looking at their infrastructure and what they need to do to upgrade in order to be competitive,” Mr. Ryan said. “If steel companies had done that, we still might be making steel in Northeast Ohio.”
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In Medina County alone, the region’s three largest health care systems expanded their operations in the market over the last three years. ■ The Cleveland Clinic in 2009 acquired then-independent Medina General Hospital at the behest of many of the area’s doctors, and breathed new life into the aging facility with about $24 million in infrastructure upgrades and plans for further investments to total $40 million. ■ University Hospitals last year built a $10 million community health center in Medina to bring its physician practices together under one roof, and it has plans for further growth in the community. ■ Summa Health System in Akron invested about $8.5 million of its own cash with additional financial support from Signet Healthcare to build a health center that opened last year, with an $8 million new emergency department slated to open this year. Some question whether all this health care building is setting up Northeast Ohio with an unsustainable health care landscape. As for Medina County, Ms. Dentler said the market hasn’t been oversaturated, but others say it’s only a matter of time, given the pace at which the region’s health care systems are investing in the community. “Ultimately, like any other initiative, some are going to be successful and some will not,” said Thomas Campanella, executive director of Baldwin-Wallace’s health care MBA program. “Some will thrive, some will grow and some will wind up contracting or leaving Medina. Right now, it’s sort of in a state of flux, and they all think they’ll be the winner.”
When one door closes … Though the dirt continues to fly as health care systems continue to pump millions of dollars into new construction, Northeast Ohio has had its fair share of health care providers close shop as the region’s demographics continue to shift. Northeast Ohio alone has witnessed the closure of 16 hospitals since 1980, according to data from the Ohio Hospital Association. “If you’re looking at Northeast Ohio and start from scratch with all
CLOSING UP SHOP The following is a list of Northeast Ohio hospitals that have closed since 1990.* 2011 ■ Huron Hospital, Cleveland Clinic, East Cleveland 2003 ■ Saint Michael Hospital, University Hospitals, Cleveland ■ Deaconess Hospital, Cleveland 2000 ■ Mount Sinai Medical CenterUniversity Circle, Cleveland 1999 ■ Saint Luke’s Medical Center, Cleveland 1994 ■ St. Joseph Hospital and Health
the hospitals and outpatient facilities and look at the population as it exists today, you wouldn’t be putting hospitals or facilities where they’re located,” Mr. Campanella said. “I think over time there will be a hopefully orderly transition of what makes sense.” Noting that the “days of the standalone hospital are numbered,” Cleveland Clinic CEO Toby Cosgrove said the delivery of care has shifted from traditional hospital settings to outpatient facilities — the likes of which the Clinic has invested heavily in recent years. “We are committed to all of the communities we’ve entered, but that’s not to say we’ll have the same types of facilities there,” Dr. Cosgrove said. The Clinic’s Huron Hospital in East Cleveland, for one, will stop offering inpatient and trauma services today, Aug. 22, and shutter in early October to make way for a $25 million health center. However, it’s not all doom and gloom at the region’s community hospitals, particularly in suburban areas where the population continues to grow. University Hospitals’ new $298 million Ahuja Medical Center, which opened this year in Beachwood, is at capacity, according to the system’s CEO Tom Zenty. Mr. Zenty noted that the hospital’s 53acre site could support two additional towers, which could increase the hospital’s capacity to 600 beds. Likewise, the inpatient population at the Clinic’s Medina Hospital continues to increase by about 8% each year, and the hospital’s president, Dr. Thomas Tulisiak, said the 118-bed facility plans to add an additional 23 beds over the next several months to accommodate the growth. “We’re focusing on what the folks in Medina County asked the Cleveland Clinic to do and bring in the services they’ve asked for,” he said. “We’ve seen an increase in our inpatient population and our number of surgeries. It’s been a very positive response.”
Investment strategies The Clinic, University Hospitals, Summa, the MetroHealth System, Southwest General Health System and others have invested millions of dollars in new community health centers. The centers offer an array of outpatient services, and a number of them have full-service emergency departments as well.
Center, Lorain (Followed merger with Lorain Community Hospital) ■ Brentwood Hospital, Warrensville Heights (Followed merger with Meridia Suburban to become Meridia South Pointe Hospital) 1991 ■ MetroHealth Hospital for Women (Booth Memorial Hospital), Cleveland 1990 ■ St. John Hospital of Cleveland, Cleveland * Does not include facilities specializing in mental and behavioral health and long-term care. SOURCE: OHIO HOSPITAL ASSOCIATION
As recovery times shorten and an increasing number of procedures are able to be done on an outpatient basis, occupancy rates at the region’s community hospitals continue to shrink. Coupled with a dwindling population, Dr. Cosgrove said the environment has made it difficult for a hospital to continue to do business as usual. Dr. Cosgrove noted that the region’s hospitals are only at about 68% occupancy, while one operates most effectively at about 85% occupancy. The 137-year-old Huron Hospital saw fewer than 100 patients a day and less than 60% of its 185 staffed beds were occupied when the Clinic announced the hospital would close. The region’s health systems also have invested heavily in their already-thriving emergency rooms as they stare down the possibility of thousands of newly insured patients entering their doors because of the federal health care overhaul. Likewise, a shortage of primary care doctors has increased the public’s reliance on emergency departments for routine care, and the health systems aren’t expecting the demand to soften any time soon. “When you put those pieces together, it’s almost a no-brainer, especially with expansion of coverage that will occur,” Summa CEO Thomas Strauss said. “We’re very careful to expand penetration and access points and not overbuild the market.” Summa and University Hospitals have invested more than $40 million each in upgrading their emergency departments at their anchor hospitals — both of which had been over capacity.
Close to homes A growing trend on the part of the health systems has been building freestanding emergency departments far from the systems’ headquarters. Southwest General, for one, converted its urgent care clinic in Brunswick to a 24-hour emergency department in 2009, and ultimately built a new ER facility for the location. Summa and Akron General Health System are building emergency departments in Green and Medina, and the Clinic and UH have invested in emergency care in Twinsburg. And given the increasing competitiveness throughout the region, health care systems are making concerted efforts to bring continued on NEXT PAGE ➤
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CRAIN’S CLEVELAND BUSINESS
Benefactors play ‘critical’ roles in hospital building By MICHELLE PARK mpark@crain.com
T
heir names grace many a new health care facility, but it is not philanthropists who dictate what is built by Northeast Ohio’s hospital systems. “The philanthropic piece of the puzzle is exceptionally important, but philanthropy is really not the driver for our building projects or for the growth of our system,” said Steven P. Schmidt, interim president and chief operating officer of the Summa Foundation and vice president of clinical research and innovation for Summa Health System. Armando Chardiet, who oversees all fundraising at the Cleveland
Clinic, said the process works similarly at the Clinic. Clinical priorities are used to plan building projects, and philanthropy comes into play once they’re identified, he explained. Generally, the region’s hospital systems first identify their priorities and then solicit donations from benefactors, many of whose philanthropic passions are known. “It’s not the other way around,” said Mr. Chardiet, chairman of institutional relations and development. “There are certainly other places that will do that. Most of the time that’s not the way it happens here.” The executives who oversee fundraising for local hospitals agree: The economic downturn
made their jobs more difficult, as some donors delayed giving and others became more cautious. However, they emphasized that benefactors’ confidence and giving are returning as the economy displays signs of recovery. “The role (of benefactors) is critical,” said Sherri L. Bishop, chief development officer for University Hospitals. “It’s rare that any hospital or health care system would be doing (building) without philanthropy as part of the plan.” As University Hospitals develops its strategic plans, Ms. Bishop is involved from the beginning to develop, in concert, plans for philanthropic funding, she said. Some of this region’s most well-
known philanthropists say they don’t want to tell hospitals what to build. Lee G. Seidman and his wife, Jane, have contributed millions to University Hospitals, which named for them the Seidman Cancer Center, and to the Cleveland Clinic, which last November opened the Jane and Lee Seidman Tower. Mr. Seidman said he hopes his family’s dollars go to defeat cancer, but said his family makes no demands. “There are people that tie their gifts to certain dictates,” said Mr. Seidman, the original owner of The Motorcars Group. “That is not our style. We just choose not to give anybody instructions; we hope that they will use it for the best possible purpose.”
Robert B. Cooper’s family gave an undisclosed gift to Summa shortly after his mother died in 2001, when the system’s cancer center was in conceptual development. The $28 million Jean and Milton Cooper Cancer Center is named for his father and his mother, who was treated for cancer at Summa. His father took an active role in the design and implementation of the cancer center, Mr. Cooper noted. “It’s not so much about the naming rights,” said Mr. Cooper, a director for CB Richard Ellis. “The real goal was to see the conditions improve with a new building that would be state-of-the-art and help people at such a tough time. “We get letters with some frequency from people who are treated there, which is the nicest reward,” he said. ■
continued from PAGE 14
health care close to their customers’ homes through new community health centers and freestanding emergency departments. “What we see looking at the demographics is that you have patients from Cuyahoga County who are moving to various other areas — Brunswick, Medina, wherever,” said Albert Matyas, vice president of ambulatory operations and business development at Southwest General. “You want to maintain those patients and keep them within your system, and patients want to be close to where their health care is.”
A LOAN WITH
The evolution of care The CEOs of the region’s heath care systems are quick to note they simply aren’t building for the sake of building, and that much of the construction over the last decade has been the product of the evolution of health care delivery and a careful evaluation of the marketplace. “We build new facilities when we have a business plan that has the kind of returns that are required,” Mr. Strauss said. “We’re very cautious to make sure when we build facilities to have the return on investment and kind of balance sheet strengths that allow us to develop in the future.” But despite the recession and uncertainty surrounding health care reform, Dr. Cosgrove said, “I don’t think you’ll see a shortage of health care building in the future.” He noted that health systems are always looking to rebuild and renew their facilities in order to stay competitive and able to treat the health issues facing today’s population. Mr. Ryan of the Center for Health Affairs echoed Dr. Cosgrove’s comments, noting that the Huron Hospital closing is a perfect example of how health care has evolved in Northeast Ohio. Huron, he said, had served the community well during its lengthy tenure, but there comes a time when a breath of fresh air is needed in order to remain financially viable. As to whether all this building is sustainable, some say only time will tell. “It’s not impossible 20 years from now that the decisions we’ve made today have to be re-thought, but that’s not a bad thing,” Mr. Ryan said. “The agility of the health care leaders in this town and the flexibility they have in terms of making certain that they’re positioned to effectively care for community has been pretty impressive in my lifetime.” ■
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Decisions: Older residents make suburbs attractive continued from PAGE 13
center in East Cleveland to serve the community, and it has agreed to pay the city more than $8 million over five years to offset lost payroll tax revenue. Dr. Cosgrove said Clinic officials were cognizant of the need to “blunt the blow” to East Cleveland of the closing of Huron. But he acknowledged this might be a “special case,” due to the severe economic distress of the eastern suburb, and that there’s no guarantee any future hospital closings would be handled in the same way.
Where the patients are The health care building boom in Northeast Ohio to a large extent is taking place outside Cuyahoga County, and that makes sense. The region including Cuyahoga and its six contiguous counties has seen its population edge up only a bit more than 1% since 1990. But only Cuyahoga County, with its nearly 10% population drop, has lost residents; all six of the contiguous counties have grown, led by Medina County’s 42% increase in the past two decades. (Though to
be sure, Medina County, at 174,035 people in 2009, is less than oneseventh the size of Cuyahoga County.) And it’s not just that the population is growing outside the region’s core of Cleveland/Cuyahoga County — the demographic makeup of the growth makes outlying areas attractive for adding health care facilities. William Frey, senior fellow at the Brookings Institution and author of a recent study about the aging of the U.S. population, found suburbs are aging more rapidly than cities, with higher growth rates for their 45-and-older populations and larger shares of seniors. For instance, Mr. Frey said, people age 45 and older — the sweet spot for demand for medical care — now represent about 40% of suburban residents, compared with 35% of city residents. And the older a person, the more likely he or she is to live in a suburb, according to Mr. Frey’s study. For instance, 66% of people ages 15 to 24 live in suburbs, but that figure rises to 72% for all age groups over age 45. “America is beginning to show its age,” Mr. Frey said, and health
AUGUST 22 - 28, 2011
THE BIG SHIFT Six of seven Northeast Ohio counties have grown in population during the past 20 years, and four of them have posted double-digit percentage gains. But the region’s overall population is up just 1% in that time, due to the shrinking of Cuyahoga County — a development health care providers must take into account as they assess new building opportunities.
County
2009 pop.
2000 pop.
1990 pop.
% change, ’90-’09
Cuyahoga
1,275,709
1,393,978
1,412,140
-9.8%
Summit
542,405
542,899
514,990
5.3
Lorain
305,707
284,664
271,126
12.8
Lake
236,775
227,511
215,499
9.9
Medina
174,035
151,095
122,354
42.2
Portage
157,530
152,061
142,585
10.5
Geauga
99,060
90,895
81,129
22.1
2,791,221
2,843,103
2,759,823
1.1
Total
care systems are seeking to accommodate them by building facilities in close proximity to the people leading this demographic shift. The aging of the U.S. population is well-documented, and Mr. Frey’s study puts it in clear relief. The median age in the Midwest has risen to 37.7 years as of 2010 from 32.9 in 1990. (In both categories, the Midwest is slightly older than the national median.) Cleveland at present has one of the nation’s oldest population bases, with 15% of its residents age 65 or older, according to Mr. Frey’s study.
FOLLOW THE MONEY Northeast Ohio’s two largest counties — Cuyahoga and Summit — are the only two counties in the region with median family income below the national average. The two wealthiest counties — Geauga and Medina — also have posted the highest population growth in the region during the past 20 years.
County
Median family income (2009 dollars)
Per capita income (2009 dollars)
Geauga
$79,876
$32,554
Medina
76,154
29,604
Lake
66,526
27,514
Portage
65,422
24,594
Lorain
62,541
24,605
Summit
61,579
26,613
Cuyahoga
57,208
25,788
U.S. averages
62,363
27,041
Only 15 U.S. cities have a 15% share of their populations at age 65 and over, and six of those are in Florida. But if the study shows that the demographics of the Cleveland market are favorable now to the construction of health care facilities, there’s some question as to how long that might be true. The Cleveland area had the nation’s fifth-largest decline in population of people age 45 and under, losing 10% of that population from 2000 to 2010. (Youngstown had the biggest decline in under-45 population, at 14%.) Cleveland is hardly alone in this predicament, though. Mr. Frey’s study found that in 36 of the largest 100 metro areas in the United States, the population below age 45 declined in 2010 from 2000. If such trends hold long term, he said, Cleveland and other regions with declining populations of younger people might find themselves overbuilt with health care facilities 30 years from now. He cautioned, though, that it’s difficult to apply broad demographic trends for the future to specific site-location decisions today. Rapidly changing health care technology and other factors could change these equations. In 1950, the average life expectancy for men was about 70, and for women it was about 75, according to the U.S. Census Bureau. Today, due in large part to superior medical care, it’s about 77 for men and 83 for women. By 2050, men are projected to live until about age 82, while women make it to age 87. As a result, Mr. Frey noted, even with declining population numbers, a region’s demand for health care services still could rise as people live longer. The bottom line, he said, is that decisions about “age-related public resources,” including health care
facilities, “must be made considering changing demographic realities.”
Be prepared Tom Zenty, CEO of University Hospitals Health System, said the system is mindful of demographic trends and builds its facilities for the long term. Outpatient care is and will continue to be a focus of new facilities, he said, as is making them “technologically adaptable” to accommodate changes in health care technology and to extend the life of the facilities. At UH’s new Ahuja Medical Center in Beachwood, for instance, the system is monitoring patient use of the center closely “to match demand and service offerings.” The property has about 50 acres that can be used for future expansion if, as expected, the center attracts greater numbers of patients from outlying areas. “You can’t ... predict demand based purely on demographics, but you can prepare,” he said. Mr. Zenty said about 500,000 people live within a 10-mile radius of Ahuja. While the focus is on attracting those nearby patients, Mr. Zenty said Ahuja already is receiving interest from patients in Akron and Medina because the hospital’s highway-friendly location makes access easy for people who live in outlying areas. Dr. Cosgrove said the Clinic continues to see “tremendous growth in outpatient” demand, but flat inpatient demand, in Cuyahoga County. The Clinic has a national and international brand, with operations in Florida, Nevada and, soon, Abu Dhabi. He said the Clinic every week receives inquiries about partnership opportunities and listens to all of them in search of growth opportunities outside Northeast Ohio. “Our key bandwidth limitation is people,” he said. ■
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CRAIN’S CLEVELAND BUSINESS
17
Nationwide building focused on paying customers By AMY ANN STOESSEL astoessel@crain.com
F
rom the perspective of Houston-based architect Ron Smith, health care construction nationwide is moving in a different direction, fueled by different factors than in the past. And that may mean a change in course for Northeast Ohio since this region’s building patterns appear to align generally with what experts say is happening nationwide. In addition to working in health care design for the past 25 years, Mr. Smith is the 2011 president of the Academy of Architecture for Health, a component of the American Institute of Architects. The most recent wave of construction, which has taken place over roughly the past 10 years, has been driven primarily by demographics, competition and the need for replacement hospitals, he said. “I think there’s been a definite shift in the last couple of years,” he said. Mr. Smith described the recent evolution of health care design and construction as first driven by the 1946 Hill-Burton Act, which was legislation that set up shared federal and state financing for hospital construction. Its effect lasted through the 1970s, he said, and it created a “whole generation of hospitals designed around a set of guidelines.” Next came the ’80s and ’90s, when there was a movement centered on the notion that more thoughtful design of the health care environment would affect in a positive way those being treated and working in it. As such, he said, many decisions were made with an eye toward delivery of care and technology. While those concerns still may be top of mind, Mr. Smith said he expects the next era of health care construction will be more related to the business model of health care. “The general hospital model of the past … is sort of being taken apart and realigned,” he said.
consolidation and affiliation, as has been the case nationally, has played a role in building projects. “The bigger you are, the more aggressive you are right now,” Mr. Mulholland said. “The emphasis is going to renovation.” Spencer Grover, vice president of the Indiana Hospital Association, said the largest health care building project in Indianapolis at present is an effort by Wishard Health Services to replace the public hospital’s aging complex. As part of the multiphase project, a new, 1.2 million-square-foot facility is scheduled to open in 2014. The $754 million hospital part of the project will feature 327 inpatient beds in addition to an adult
Level I trauma center and adult burn center, according to a May 2011 hospital construction update. “It’s known as the safety-net hospital,” Mr. Grover said. “One of the things their new facility is going to do is draw a lot of new patients.” That’s a sentiment he believes is a driving force in general: “The building that you’re seeing right now is to attract the paying customer.”
Aches and pains As for the economic downturn’s effect on health care construction, Mr. Smith of the Academy of Architecture for Health called its effect “tremendous.” Add to the mix that the recession aligned with uncertainty over health care reform, and
the market took a double hit. Even so, Mike Kuntz, senior vice president of Turner Construction Co. who is responsible for the firm’s national health care group, said he believes the market for health care building is at least as robust as it was roughly two years ago. “It’s coming back, and it’s coming back strong,” he said. Medical office buildings and outpatient facilities have become the order of the day, along with projects centered on patient satisfaction and outcomes, a side effect of health care reform. Yet, “there’s still a shortage of quality health care facilities in the country,” Mr. Kuntz said. And, he said, there’s no telling where tech-
nology may take the industry. “If you look at the way we always thought of hospitals … all that’s gone by the wayside,” he said. ■
Hoosier health care Ohio’s neighbor to the west, Indiana, has experienced a health care building boom similar to that seen in Northeast Ohio and elsewhere. Shawn Mulholland of BSA LifeStructures in Indianapolis, a design firm with a health care focus that also has offices in Chicago and St. Louis, called what’s happened in Indiana’s capital “the arms race of trying to beat out the competitor.” Indeed, Indiana was among the top six states for new hospital construction as of November 2010, according to information from Reed Construction Data, published by Health Facilities Management magazine in its 2011 hospital building report. (Other states falling into the top category of $1 billion or more in new hospital or outpatient clinic construction are California, Georgia, Illinois, Texas and Virginia. Ohio shared the second-tier ranking, $500-$999.9 million of construction, with nine other states.) Mr. Mulholland said the Indianapolis health care market is much like Cleveland’s in that there are several key health care systems. In Indy, however, there are four basic competitors, each with a smaller market share and each with a predominant area it serves. Like Northeast Ohio, there has been movement among providers into each other’s territories. Also,
After delivering all four of my children at MetroHealth, I wouldn’t go anywhere else for my family’s pediatric care. In our busy house, we can’t afford to be sick. Fortunately, their caring staff goes above and beyond to keep our kids well. And should the unexpected happen, it’s comforting to know MetroHealth has the services and expertise to bring us all back to health. I am Karolyn of Strongsville, and MetroHealth keeps my family going strong.
thecomeback.org
MetroHealth provides convenient care for your family at 16 community health centers from Pepper Pike to Westlake and from Cleveland to Strongsville.
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CRAIN’S CLEVELAND BUSINESS
AUGUST 22 - 28, 2011
$3 BILLION A DOSE OF NEARLY IN HEALTH CARE CONSTRUCTION
REALITY SINCE 2000
Crain’s Cleveland Business asked the region’s major health care systems and providers for lists of new facilities and additions built since 2000. Systems were asked to report only new construction rather than renovations or leases. Only construction related to direct patient care is included.
1. AKRON Akron Children’s Hospital • William H. Considine Professional Building (see inset) • Akron Children’s Hospital North addition, 2004 $27 million; added 70,000 square feet, including an intensive care unit, burn center and helipad • Akron Children’s Hospital East addition, 2005 $11 million; added 26,000 square feet, including two new surgical suites • Emily Cooper Welty Expressive Therapy Center, 2011 $1.8 million; 3,000-square-foot addition dedicated to holistic healing through the arts Akron General Health System • Montrose/Bath Township Emergency Department, 2009 $7.6 million; emergency department with a full range of diagnostic and laboratory services Summa Health System • Center of Excellence at Summa Akron City Hospital, 2003 $24.6 million; facility houses patient care and physician offices • Professional Center at Summa Akron City Hospital, 2004 $9 million; facility houses administrative offices, physician offices and patient rooms • Ann and David Brennan Critical Care Center, 2006 $35 million; 120,000-square-foot facility with 96 beds and a restaurant • Jean and Milton Cooper Cancer Center at Akron City Hospital, 2008 $28 million; 77,000-square-foot facility with research offices, infusion center, cancer treatment and MRI imaging • University Park YMCA, 2010 $11 million (Summa split cost with YMCA); facility houses a rehab clinic and YMCA services • Rehab hospital, 2011- 2012 (expected) * $19.6 million; a partnership with Vibra Healthcare, the rehab hospital will have 60 inpatient beds and a rehab center • Emergency department at Summa Akron City Hospital, 2012 (expected) $49 million; department will include 73 exam rooms, 10 triage rooms and administrative offices
2. AVON Cleveland Clinic • Avon Family Health and Surgery Center, 2011 (expected) $97 million; 190,000-square-foot facility will include an emergency department and other services EMH Healthcare • EMH Avon Emergency Care Center, 2005 Cost not provided; freestanding emergency department with 18 patient bays, on-site laboratory and imaging services
Mercy • Mercy Avon health campus, 2013 (expected) $17-$21 million; 82,000-square-foot campus will offer primary care, surgery and other services
3. BARBERTON Summa Health System • Heart and Vascular Center at Barberton Hospital (now Summa Barberton Hospital), 2005 $12 million; built in two phases, the center houses cardiac services • Parkview Center at Barberton Hospital (now Summa Barberton Hospital), 2006 $11-$12 million; 25,000-square-foot facility housing medical and radiation oncology, breast imaging, outpatient chemotherapy • Emergency department at Summa Barberton Hospital, 2013 (expected) $19 million; the new department will increase the number of beds from 18 to 32 and triple the size of the facility
4. BEACHWOOD University Hospitals • UH Ahuja Medical Center, 2011 $298 million; 144-bed center offers inpatient, outpatient and emergency services • Rehabilitation hospital, 2012 (expected) $17 million; a joint venture with Centerre Healthcare of Nashville, Tenn., the 50,000square-foot facility will offer an array of therapy services.
• Emergency department expansion at Fairview Hospital, 2013 (expected) $76 million; 125,000-square-foot addition will add emergency and intensive care space The MetroHealth System • Critical Care Pavilion, MetroHealth Medical Center, 2004 $70 million; 150,000-square-foot facility houses the emergency, surgery and endoscopy centers • MetroHealth Broadway Health Center, 2004 $6.5 million; 45,000-square-foot health center houses primary care, obstetrics, dentistry and other services • MetroHealth Buckeye Health Center, 2005 $3.5 million; 25,000-square-foot health center offers primary care, obstetrics, cardiology, nephrology and other services University Hospitals • Center for Emergency Medicine at Case Medical Center, 2011 $41 million; 23,000-square-foot emergency department expanded to 54,000 square feet • UH Seidman Cancer Center, 2011 $260 million; 375,000-square-foot center consolidated UH’s cancer services under one roof
8. CONCORD TOWNSHIP
Cleveland Clinic • Brunswick Family Health Center, 2008 $13.6 million; facility houses primary care, cardiology, neurology and other services
University Hospitals • UH Concord Health Center, 2009 $29 million; offers an urgent care, primary care and specialty services
Southwest General Health System • Southwest General Brunswick Medical Center (see inset)
Lake Health • TriPoint Medical Center (see inset)
6. CHESTERLAND University Hospitals • UH Chesterland Health Center (see inset)
7. CLEVELAND Cleveland Clinic • Center for Autism, Shaker Campus, 2008 $8.3 million; autism treatment services, including diagnostic services and training for parents • Miller Family Pavilion (see inset) • Glickman Tower, 2008 $112 million; 330,000-square-foot tower houses the urological and kidney institute • Pathology & Laboratory Medicine building; 2011 (expected) $72.5 million; 135,000-square-foot building will focus on medical testing capabilities
17 26
• TriPoint Medical Center Physician Pavilion, 2009 $18 million; pavilion is home to various Lake Health primary care and specialty physicians
9. CUYAHOGA FALLS Summa Health System • ICU at Cuyahoga Falls General (now Summa Western Reserve Hospital), 2000 $6.4 million; 30,000-square-foot addition, includes an intensive care unit and other services
10. EAST CLEVELAND Cleveland Clinic • Huron Community Health Center, 2011 (expected) $25 million; 50,000-square-foot facility will offer primary and specialty care
11. ELYRIA EMH Healthcare • Physician Access Center at Elyria Medical Center, 2009 Cost not provided; 15,000-square-foot addition to main campus with office space for physicians Mercy • Mercy Cancer Center (see inset)
2
32
CUYAHOGA 21
11 22
29
LORAIN 16
• Breen Breast Health Pavilion at UH Seidman Cancer Center, 2011 $6.5 million; pavilion provides comprehensive breast health services
5. BRUNSWICK
• Southwest General Brunswick emergency room, 2010 $5.2 million; expansion includes an ambulance bay, trauma rooms and 10 private treatment rooms
Mercy Mercy Cancer Center, 2002, Elyria $8 million; outpatient facility offering radiation and oncology services
5
MEDINA 20
31
Southwest General Health Brunswick Medical Center, 2008, Brunswick $14.1 million; 40,000-squarefoot building houses physicians and a variety of outpatient services
Ak Akron Children’s Child ’ H Hospital i l William H. Considine Professional Building, 2003, Akron $43 million; 246,000-squarefoot building with pediatric specialty offices, an auditorium and other offices
* For any future/proposed projects reported by health systems, expected completion dates and estimated costs are included.
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CRAIN’S CLEVELAND BUSINESS
Lake Health TriPoint Medical Center, 2009, Concord Township $155 million; 300,000-square-foot facility has 119 private patient rooms and replaces East Medical Center in Painesville
12. EUCLID Cleveland Clinic • Emergency department, Euclid Hospital, 2007 $5 million; 8,000-square-foot expansion to the hospital’s emergency unit
C Cleveland Clinic Miller Family Pavilion, 2009, M Cleveland C $504 million; home of the $ heart and vascular institute h aand entrance to the hospital
18
LAKE 33
8
34
12
10
19
7
6
GEAUGA
4 23
GA
Cleveland Clinic • OR expansion, Marymount Hospital, 2013 (expected) $45 million; 74,000-square-foot renovation and expansion project, which features new operating rooms
30
15
PORTAGE
28
9
25
1
14. GREEN
22. OBERLIN
Summa Health System • Summa Health Center at Green, 2000 $11.2 million; nearly 100,000-square-foot facility with imaging, fitness programs, lab services and other programs
Akron General Health System • Green Health & Wellness Center, 2012 (expected) $40 million; 100,000-square-foot facility will include a medical office building, emergency department and other services Summa Health System • Summa Wellness Institute, 2007 $15 million; health center offering fitness equipment, a track and sports performance clinic
16. LAGRANGE Mercy • Mercy Primary Care in LaGrange, 2008 $813,271; a partnership between Mercy Medical Partners and Mercy Allen Hospital, the office features four exam rooms
3 14
17. LORAIN Mercy • The Stroke Center at Mercy Regional Medical Center, 2008 $1 million; center is a nine-bed unit consisting of 6,000 square feet offering a private environment for stroke treatment and recovery
18. MADISON
Summa Health System Robinson Health Center at Streetsboro, 2010, Streetsboro $23.2 million; 76,000-squarefoot outpatient facility consolidated existing services in the city and added additional services such as imaging, wound care, sports medicine, mammography and others
University Hospitals UH Chesterland Health Center, 2004, Chesterland $2.5 million; facility offers primary care services, physical therapy and other services
Lake Health • Freestanding emergency department at Madison Campus, 2011 $4.7 million; 10,000-square-foot facility features 10 private treatment rooms, two private trauma rooms and one private behavioral health observation room
19. MAYFIELD HEIGHTS Cleveland Clinic • Hillcrest Hospital expansion and renovation, 2011 $163 million; project included the new sixstory Jane and Lee Seidman tower that added 72 private rooms to the hospital
20. MEDINA Information compiled by Timothy Magaw Map by Lauren Rafferty
21. MIDDLEBURG HEIGHTS
• Emergency/ICU expansion, Marymount Hospital, 2007 $25.3 million; new critical care tower houses a 30-bed emergency department and expands 28-bed intensive care unit
15. HUDSON
SUMMIT 27
University Hospitals • UH Medina Health Center, 2010 $10 million; facility brings together UH physician practices, offers additional specialty services Southwest General Health System • UH Ireland Cancer Center at Southwest General (now UH Seidman Cancer Center at Southwest General), 2000 $7.6 million; community-based location of University Hospitals’ cancer services
• Green emergency department, 2011 or 2012 (expected) $17 million; new emergency department includes 16 exam rooms and an imaging suite
13
24
13. GARFIELD HEIGHTS
• Summa Health Center at Lake Medina, 2011 (expected) $8 million; freestanding emergency department will include 14 exam rooms and a conference area
Summa Health System • Summa Health Center at Lake Medina, 2010 $8.5 million (Summa’s investment); outpatient health center is a partnership with Signet Healthcare
Mercy • Mercy Surgery Center at Mercy Allen Hospital, 2005 $4.6 million; 15,000-square-foot center has 16 beds, two large surgery suites and other services
23. ORANGE VILLAGE University Hospitals • UH Chagrin Highlands Health Center, 2001 $26 million; facility offers primary and specialty care, women’s health and other services
24. PARMA Parma Community General Hospital • Cancer Center/Medical Arts Center 3, 2000 $7.3 million; facility offers outpatient cancer treatment and office space for physicians • Residential hospice, 2001 $2.6 million; hospice facility has 10 beds and is staffed 24 hours a day • Intensive care unit addition, 2003 $6.5 million; 18-bed intensive care unit • SurgiCenter, 2003 $9.7 million; outpatient surgery center with a connecting bridge to the hospital • Medical Arts Center 4; 2003 $7 million; facility houses medical offices
25. RAVENNA Summa Health System • Emergency department at Robinson Memorial Hospital, 2000 $9.6 million; doubled size of emergency department by adding about 10,000 square feet • Radiology department at Robinson Memorial Hospital, 2002 $10 million; doubled the size of the radiology department, adding 15,000 square feet • Robinson Professional Center, 2009 $13.8 million; 59,000-square-foot facility for an endoscopy center and congestive heart failure clinic • Surgery department at Robinson Memorial Hospital, 2011 $19.7 million; 20,000-square-foot addition for eight new operating rooms
26. SHEFFIELD VILLAGE EMH Healthcare • EMH Sheffield Medical Building, 2006 Cost not provided; three-story medical office building housing orthopedics and physical therapy services
27. STOW Akron General Health System • Stow Health & Wellness Center, 2007 $31 million; full-service, medically based fitness center with an emergency department and other services • Stow Medical Office Building, 2009 $7 million; located on the Stow Health & Wellness Center’s campus, facility houses physician offices
28. STREETSBORO Summa Health System • Robinson Health Center at Streetsboro (see inset)
29. STRONGSVILLE Southwest General Health System • The Thomas P. Perciak Family Residential Hospice, 2002 $3.4 million; facility features 10 private rooms and is staffed 24 hours a day
30. TWINSBURG Cleveland Clinic • Twinsburg Family Health and Surgery Center, 2011 $96 million; 190,000-square-foot center houses an emergency department and other services University Hospitals • UH Twinsburg Health Center, 2007 $18 million; facility offers primary care, specialty care and other services. UH invested an additional $2.4 million for a new emergency department.
31. WADSWORTH Summa Health System • Founders Hall at Wadsworth-Rittman Hospital (now Summa Wadsworth-Rittman Hospital), 2001 $8.7 million; four-story facility houses administrative departments, pharmacy, cafeteria and nutrition services • ICU at Summa Wadsworth-Rittman Hospital, 2010 $1.8 million; built a new second floor onto the hospital building and doubled the number of rooms for the intensive care unit • Emergency department at Summa Wadsworth-Rittman Hospital, 2011 (expected) $3.2 million; will increase the emergency department’s size from 9,300 to 16,000 square feet and its capacity by 20 beds University Hospitals • UH Sharon Health Center, 2010 $3 million; facility houses a Seidman Cancer Center, family medicine practice, laboratory and radiology services
32. WESTLAKE St. John Medical Center • Emergency department and chiller plant, 2004 $15.5 million; ED offers 26 treatment rooms, including two trauma rooms
33. WILLOWICK Lake Health • Willowick Campus, 2008 $4 million; 15,000-square-foot center offers urgent care, primary care and other services
34. WILLOUGHBY Lake Health • West Medical Center Physician Pavilion, 2005 $10 million; 75,000-square-foot addition houses the system’s center for sports medicine and rehabilitation
19
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CRAIN’S CLEVELAND BUSINESS
WWW.CRAINSCLEVELAND.COM
AUGUST 22 - 28, 2011
LARGEST NURSING HOMES RANKED BY NUMBER OF CERTIFIED BEDS(1)
Name Address Rank Phone/web
Certified beds
Medicare provider number
Assets ($)
Net patient revenue ($)
Net income/ (loss) $
# of FTE employees
Cost report date
Type of ownership
1
Menorah Park Center for Senior Living 27100 Cedar Road, Beachwood 44122 (216) 831-6500/www.menorahpark.org
360
365094
11,051,829
47,921,595
(665,014)
475.0
June 30, 2010
nonprofit
2
West Bay Care and Rehabilitation 27601 Westchester Parkway, Westlake 44145 (440) 871-5900/www.sunbridgehealthcare.com
303
365451
4,534,205
17,235,420
454,014
198.0
Dec. 31, 2009
proprietary, corporation
Karen Williams
3
Park East Care and Rehabilitation 3800 Park East Drive, Beachwood 44122 (216) 831-4303/www.sunbridgehealthcare.com
274
365810
6,321,436
21,780,060
96,220
231.0
Dec. 31, 2009
proprietary, corporation
Bernard Centa
4
Montefiore One David N. Myers Parkway, Beachwood 44122 (216) 360-9080/www.montefiorecare.org
268
365046
33,574,950
27,088,501
(305,172)
329.9
June 30, 2010
nonprofit
Lauren B. Rock
5
St. Augustine Manor 7801 Detroit Ave., Cleveland 44102 (216) 634-7400/http://staugustinemanor.org
248
365883
9,755,893
18,852,778
892,162
188.0
Dec. 31, 2009
nonprofit
Andrew Koha
6
Center for Clinical Care 8800 Carnegie Ave., Cleveland 44106 (216) 229-3300
220
365948
2,216,554
7,963,240
(1,440,090)
119.5
Dec. 31, 2009
proprietary, corporation
NA
7
Broadview Nursing Home 5520 Broadview Road, Cleveland 44134 (216) 749-4010/www.broadviewmulticare.com
218
365757
1,963,774
17,536,178
596,894
212.6
Dec. 31, 2009
proprietary, corporation
Isaac Lifschutz
8
ManorCare Rocky River 4102 Rocky River Drive, Cleveland 44135 (216) 251-3300/www.hcr-manorcare.com
210
365392
2,242,638
12,017,113
833,412
150.6
May 31, 2010
proprietary, other
Jody McConnell
9
Willow Park Skilled Nursing & Rehab.Center 18810 Harvard Ave., Cleveland 44122 (216) 752-3600/www.atriumlivingcenters.com
209
365828
2,356,732
11,632,339
342,253
169.1
Dec. 31, 2009
proprietary, other
Terri Plush
10
University Manor 2186 Ambleside Road, Cleveland 44106 (216) 721-1400
208
365832
1,619,748
8,439,126
(295,026)
126.5
Dec. 31, 2009
proprietary, corporation
Robert Peterson
11
Carington Park 2217 West Ave., Ashtabula 44004 (440) 964-8446/www.carington.com
207
365286
18,953,619
12,875,325
2,516,539
170.0
Dec. 31, 2009
proprietary, corporation
Kelly Johnson
12
ManorCare Euclid Beach 16101 Euclid Beach Blvd., Cleveland 44110 (216) 486-2300/www.hcr-manorcare.com
202
365594
2,121,542
11,841,526
693,749
147.6
May 31, 2010
proprietary, other
Joe Wilson
12
St. Luke Lutheran Community-North Canton 220 Applegrove St. NE, North Canton 44720 (330) 499-8341/www.stlukelutherancommunity.org
202
365521
14,242,084
15,850,901
805,840
249.0
Dec. 31, 2009
nonprofit
Administrator Steven Raichilson
Jeannie Williams
HOW WILL YOU HANDLE FUNDING CUTS? CALL US. Denise Gadomski 216.274.6514 • denise.gadomski@plantemoran.com
14
Andover Village Retirement Community 486 S. Main St., Andover 44003 (440) 293-5416/www.andovervillageretirement.com
200
365411
2,592,792
11,360,645
(854,761)
222.0
Dec. 31, 2009
proprietary, partnership
Fawn Phillips
14
Hanover House Nursing and Rehabilitation Center 435 Avis Ave. NW, Massillon 44646 (330) 837-1741/www.communicarehealth.com
200
365292
2,022,455
8,994,050
588,889
164.2
Aug. 31, 2009
proprietary, corporation
Robert Knapp
14
Omni Manor 3245 Vestal Road, Youngstown 44509 (330) 793-5648/www.windsorhouseinc.com
200
365433
11,629,356
13,250,502
1,338,156
195.0
Dec. 31, 2009
proprietary, corporation
Paul Fabian
17
Pleasant Lake Villa 7260 Ridge Road, Parma 44129 (440) 842-2273/www.lhshealth.com
199
365706
4,516,583
19,235,055
1,022,376
260.6
Dec. 31, 2009
proprietary, corporation
James J. Taylor
18
Crandall Medical Center 800 S. 15th St., Sebring 44672 (330) 938-6126/www.copelandoaks.com
198
365574
4,168,146
15,582,124
918,648
232.6
Dec. 31, 2009
nonprofit
Robert Cameron
18
Golden Living Center at Western Reserve 9685 Chillicothe Road, Kirtland 44094 (440) 256-8100/www.goldenlivingcenters.com
198
365290
1,985,720
10,540,447
(14,304)
73.0
Dec. 31, 2009
proprietary, corporation
Amanda Eberhart
20
Greenbrier Senior Living Community 6455 Pearl Road, Parma Heights 44130 (440) 888-5900/www.communicarehealth.com
194
365192
2,566,878
3,557,840
64,943
151.0
March 31, 2010
proprietary, corporation
Jill Burke
21
Lutheran Home at Concord Reserve 2116 Dover Center Road, Westlake 44145 (440) 871-0090/www.concordreserve.org
192
365020
42,204,425
16,602,240
(2,330,032)
231.4
Dec. 31, 2009
nonprofit
Jean Hollenbeck
22
Wickliffe Country Place 1919 Bishop Road, Wickliffe 44092 (440) 944-9400/www.lhshealth.com
188
365381
4,141,930
14,060,238
842,391
201.5
Dec. 31, 2009
proprietary, corporation
Deborah Farris
23
Lake Pointe Health Center 3364 Kolbe Road, Lorain 44053 (440) 282-2244/www.communicarehealth.com
182
365623
2,057,816
12,164,889
(203,491)
155.8
May 31, 2010
proprietary, corporation
Terri Durkin-Williams
24
Briarfield at the Ridge 3379 Main St., Mineral Ridge 44440 (330) 652-9901/www.briarfield.net
180
365823
12,863,947
10,250,233
787,338
142.0
Dec. 31, 2009
proprietary, partnership
Stacey Bettura
24
Suburban Pavilion 20265 Emery Road, North Randall 44128 (216) 475-8880/www.communicarehealth.com
180
365215
2,438,825
8,514,918
(32,391)
145.1
Aug. 31, 2009
proprietary, corporation
Mark Grippi
24
Wyant Woods Care Center 200 Wyant Road, Akron 44313 (330) 836-7953/www.communicarehealth.com
180
365779
1,821,918
3,187,348
104,884
130.8
March 31, 2010
proprietary, corporation
Judy Dennis
27
Pleasantview Care Center 7377 Ridge Road, Parma 44129 (440) 845-0200/www.pleasantview-care-center.com
179
365084
1,199,622
15,879,602
45,688
205.0
Dec. 31, 2009
proprietary, corporation
David Farkas
(1) Information is from SNFData Resources LLC, www.snfdata.com and the nursing homes. Crain's Cleveland Business does not independently verify the information and there is no guarantee these listings are complete or accurate. We welcome all responses to our lists and will include omitted information or clarifications in coming issues.
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Expand: Defense, medical device work orders bustle continued from PAGE 3
end of 2010. Since then, he has been busy rewiring the building for the electricity-hungry heavy equipment that Fredon uses, while at the same time doubling the building’s size with a 33,000-square-foot expansion. He also bought an adjacent twoacre parcel, bringing the total property size to eight acres. Mr. Sustar said his business has emerged from the recession with strong sales. And while Mr. Sustar often is quite skeptical about the government’s handling of the economy — and always critical of deficit spending — he said he was not so worried as to forestall expansion. Even since the recent downgrading of the U.S. credit rating and related wrangling over government spending, none of his customers have canceled any orders or indicated they are slowing down, he said.
But, at the end of the day, it’s his faith in his own company and employees that is driving the expansion, Mr. Sustar said. “This, I can control, I have full control over what goes on here — I don’t have any control over that other stuff,” he said. Down the road in Eastlake, another contract machine shop and even larger manufacturer, Astro Manufacturing and Design, is experiencing the same growth, said its vice president, Rich Peterson. Like Fredon, Astro does a lot of business in the aerospace, defense and medical device markets. Mr. Peterson said those areas, especially medical devices, are going gangbusters. Astro makes small medical devices used in surgery, as well as components for large equipment for Philips Healthcare, which produces CT scanners and other high-
end medical imaging equipment. To continue to grow, Astro likely will need more space, and it’s considering a purchase of Fredon’s older, 40,000-square-foot building on Enterprise Drive that Mr. Peterson said could house Astro’s medical device operations. No decision has been made or is imminent, “but there are definite plans to grow our medical division,” Mr. Peterson said. “They are bursting at the seams out there, and sales are strong,” he said. At present, Astro has about 60 employees at its Mentor plant on Industrial Park Boulevard, which mainly makes implantable medical devices, such as orthopedic screws and plates. The rest of its 275 employees are in Eastlake, where Astro makes components for Philips, surgical simulators and other larger medical equipment. ■
RUGGERO FATICA
Roger Sustar, CEO of Fredon Corp., said the company plans to move by spring 2012 from its 40,000 square-foot Mentor facility to a building that will have about 65,000 square feet of space, once renovations there are complete.
Buybacks: Cash allows for purchases Shows: Other fixes help continued from PAGE 1
Invacare’s reduced valuation. The company, which makes wheelchairs and other long-term care products, has had steady earnings improvement and strong cash flow, Mr. Blouch noted. “Therefore, we view it as a strong buying opportunity,” he said. In other cases, companies are ramping up the purchasing they have previous authorization to make. Parker Hannifin Corp. has accelerated its stock buyback, said Aidan Gormley, director of corporate communications. The diversified manufacturer in June alone bought six million shares of the eight million it purchased in its fiscal year that ended June 30 under an existing authorization. According to Parker Hannifin chairman, CEO and president Don Washkewicz, it was the largest acquisition of shares in one month in company history. During Parker’s Aug. 2 conference call to discuss its earnings, Mr. Washkewicz said Parker made the acquisition because “this company is so cheap, it is pathetic.”
An eye on ‘downticks’ Executives of Applied Industrial Technologies, too, have acknowledged the Cleveland-based distributor of bearings and industrial parts will be inclined to buy back more stock than it has in recent quarters considering the recent drop in stock price, said Mark O. Eisele, vice president, chief financial officer and treasurer. The company’s share price, Mr. Eisele noted, had fallen by early August to its 52-week low of about $25 a share from a 52-week high of about $36. The company, which has had its current authorization to repurchase shares in place since before the recession began, buys opportunistically when it sees perceived weakness in its stock price, Mr. Eisele said. “We try to do what everybody else does — buy on downticks,” he said. “There’s a good probability that we may use our remaining authorization.” As of June 30, that remaining authorization allowed Applied to repurchase 650,000 shares. If Applied buys back all it can, the purchase would total about 230,000 shares more than the company’s
combined purchases during the fiscal years that ended June 30, 2011, 2010 and 2009. Its repurchase amounts were much higher in 2008 and 2007, when the company bought more than 1 million shares each year, Mr. Eisele said. “We obviously pulled back during the credit crisis because, well, we were wondering if Armageddon was going to happen,” he said. “We were wondering, ‘Where is the bottom, how far can this continue to fall?’” Mr. Eisele said. “I don’t think we have those concerns today. Our belief is that the industrial economy still has strength, still has room to grow, and we expect it to continue to grow. The real question now is: At what rate will it continue to grow?”
Sending a message Local executives said they could not discuss very recent stock purchases that haven’t been disclosed publicly. (Companies generally report buybacks in lump sums when announcing their quarterly results.) However, over the last 18 months or so, companies in Northeast Ohio and across the country have been heavy buyers of their own shares, according to Elliott L. Schlang, managing director of Great Lakes Review, a Shaker Heights institutional research boutique that, among other things, handles corporate repurchase programs. Though Mr. Schlang thinks there may be a slight slackening in repurchases overall because so many companies have been aggressive buyers and were burned by the recent market drop, he sees many companies continuing to be buyers, though they may be acting more cautiously. Mr. Schlang said the increased buyback activity is spurred by falling stock prices and the huge stashes of cash many companies have built up. Fifteen of the 30 companies Great Lakes Review covers, he noted, are sitting on piles of cash. Buybacks are one way to deploy that money. Repurchases reduce a company’s stock outstanding and thus boost earnings per share. Executives of the companies that look to be buyers say their repurchases assert such activity is a sign of their strength. “I believe it’s sending a positive signal to the marketplace that the
company believes its future is solid and that (the stock) is worth more than what it’s currently trading at,” Mr. Eisele said. “If we would think it’s worth less, theoretically, we wouldn’t be buying it.”
Walking the talk While he wouldn’t say whether Nordson Corp. in Westlake is doing more buying, Jim Jaye, director of communications and investor relations, noted the producer of automated dispensing equipment tends to be opportunistic when it believes its shares are undervalued, which he said they are now. The Nordson board authorized in May a share repurchase program of up to 2 million shares because the company had about reached the buyback limit of a former authorization, Mr. Jaye said. “It’s a statement of confidence in a company’s management team and board, that the company has strong prospects going forward,” Mr. Jaye said of stock buybacks. “I think if you’re seeing companies accelerate, they believe there’s upside.” Not everyone is high on buybacks, though. Local investment professional Michael McKeown says many academic studies have shown that companies are poor at timing stock buybacks, resulting in poor use of excess capital for shareholders. Cash dividends often are the more judicious use of cash, asserted Mr. McKeown, director of research for Aurum Wealth Management Group in Mayfield Village. Nonetheless, if stock prices stay at about current levels and business confidence is improved, Mr. Schlang predicts there will be a renewed rash of corporate repurchases. Parker Hannifin’s Mr. Washkewicz, for one, said during the Aug. 2 conference call that the company would remain active as a buyer of its own shares if the price continues to drop. Mr. Schlang agrees with local executives that the buybacks are, by and large, a positive sign to investors. “It’s an indication to the street the company feels that their own stock is very attractive,” he said. “I like to see a company that puts its own money where its mouth is.” ■
continued from PAGE 1
regularly, Mr. Julian said. But when the city’s old convention center fell behind to newer meeting halls in other cities, and eventually was closed, Cleveland just could not compete as a venue. Now that’s changing, and some of the same groups that gave up on Cleveland are eager to come back, he said.
Really big shows Ron Ashburn, executive director of the Pittsburgh-based Association for Iron and Steel Technology, said he was so eager to see Cleveland update its facilities that he came to Cleveland for the medical mart and convention center’s groundbreaking last January. “Absolutely,” he recalled. “We were very pleased to see that shovel go into the ground and the steel start to go up.” Hosting a trade show for a group such as AISTech, as Mr. Ashburn’s organization is known, is no small thing. The group has about 15,000 members in 73 different countries, and between 7,000 and 8,000 are expected in 2015, when Mr. Ashburn said he plans to hold the show in Cleveland, which it last visited in 2006. The group requested 6,100 hotel rooms for its meeting, according to information from Mr. Julian. Likewise, the American Chemical Society’s Rubber Division also is coming back to town. It isn’t even waiting for the new convention center to open, though it is a big reason the group is returning to Cleveland, said executive director Ed Miller. Mr. Miller said he’ll bring between 6,000 and 7,000 attendees to the International Exposition Center in Brook Park this October, when the Rubber Division holds its large trade show, which it stages every other year. But the real driver and ultimate goal is to get back downtown, and the division plans to be the first to hold its trade show in the new convention center when it opens in fall 2013. It last held a show here in 2007. “The biggest two reasons would be, one, the fact that the rubber industry still tends to concentrate around the Midwest, even though it’s a global industry,” Mr. Miller said. “The second is this new market in health care. It’s concentrating around
Cleveland, and that’s an area our show has expanded into, not just health care, but biomaterials generally.” So, the Rubber Division is coming back — and going forward intends to hold its major show every other year in Cleveland, Mr. Miller said.
Cleveland rocks Another manufacturing organization that has confirmed its coming to Cleveland with its trade show is the New York-based National Association for Surface Finishing. Sound like an esoteric gathering? Perhaps so, but it’s a sizable one, nonetheless. The group plans to take up to 600 hotel rooms when it comes to town in June 2014, Positively Cleveland reports. While the convention center, medical mart and the area’s industrial base are big draws, comments from those planning to hold shows here indicate Cleveland has made other bright moves in recent times that are boosting its attractiveness as a convention center. They cite the entertainmentrelated development of East Fourth Street and the Warehouse District as draws, along with the hotels, sports venues and the new casino that’s planned. Mr. Ashburn said his iron and steel group’s members, who last visited for a trade show in 2006, love coming to Cleveland, and so does he. The hotels, restaurants, nightclubs and tourist destinations are all top-notch, he said, and members want to come back. Mr. Miller of the American Chemical Society’s Rubber Division agreed. “People love Cleveland, especially the international travelers,” he said. “The nightlife, the things to see, the culture, the restaurants — it’s just perfect.” It’s still too early to say just how many shows will be in town once the convention center opens. But so far, Mr. Julian said, all signs indicate the increase in conventions will be significant — and support the view that building the convention center was a good idea. “Every other city in our competition set has had a new convention center,” Mr. Julian said. “Now, we’re the ones seeing a resurgence of activity because we’re getting a new facility.” ■
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BRIGHT SPOTS It’s not all bad out there. Here’s the latest installment of a weekly web feature that highlights positive developments in the Northeast Ohio business community.
Flight. The Boeing 707-120 sits on a tarmac at the museum’s Boeing Field, and since it’s Seattle, the plane absorbs a lot of rain. It was last detailed in 2008. The jet carried presidents Eisenhower, Kennedy, Johnson and Nixon, according to the museum. It remained in the presidential fleet, carrying the vice president and VIPs, until June 1996. Mr. Koutavas also was on the 10member Air Force One “finishing� team charged with looking for even small remaining blemishes. Also part of the project was
■One of Nicko Koutavas’ most recent jobs required a presidential level of detail. The owner of Detailed Xpress in Hudson was part of a 40-person team that last month detailed a former Air Force One presidential jet that’s now on display at Seattle’s Museum of
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AUGUST 22 - 28, 2011
detailing a World War II B29 bomber that sits in a reconditioning hangar where its war-torn wings are under repair. Mr. Koutavas and Detailed Xpress specialize in customer car-specific detailing for high-end cars such as Lamborghinis, Rolls Royce, Spyker and Mercedes, though he said he also has found a niche with small aircraft and boats.
building and global leadership development. Mr. Eaton, a partner at consulting firm Global Novations of Waltham, Mass., and son of the late Henry Eaton, Dix & Eaton’s co-owner, “has facilitated more than 500 workshops, team workouts and one-on-one coaching sessions for more than 100 clients in the Global 1000, across a broad range of industries, geographies and functions,� according to Dix & Eaton. His primary area of focus recently is on mergers and acquisitions, joint ventures and globalization efforts. Mr. Eaton was a Dix & Eaton account executive early in his career
â– Cleveland integrated communications firm Dix & Eaton said it has established a strategic partnership with Dave Eaton, a global consultant with more than 20 years of experience in the areas of cultural integration, multinational team-
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and serves on the firm’s board of directors. ■Concord Technology Group has moved from Lake County to a 3,000-square-foot office/warehouse space in Valley View. The IT services company on Sept. 22 will host a grand opening for vendors and customers at the new location, 6180 Halle Drive, Unit C. Concord Technology, founded in 2008, bills itself as “a source for (customers’) hardware, software and support solutions on a wide range of networking, infrastructure and security products.� Its president is Andrew Lingenfelter.
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THEINSIDER
THEWEEK
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AUGUST 15 - 21
Look for him in the 2040 class of Forty Under 40
Around the Circle: Efforts to expand the University Circle district of Cleveland beyond its health care and educational offerings with additional residential options are about to take a step forward. WXZ/Hazel LLC, an affiliate of WXZ Development Inc. of Fairview Park, secured financing for a $10 million apartment development it has planned with University Circle Inc., the nonprofit managing the district’s development, marketing and maintenance efforts. Jim Wymer, WXZ president, said the developer plans to start construction soon and expects to hold a ceremonial groundbreaking a few weeks after receiving final building approvals. Plans call for the 59-unit project to be completed by next June.
■ Connor Zamary could be Northeast Ohio’s Mark Zuckerberg. Of course, we won’t know that for at least another 10 to 15 years. That’s because he’s 7. With help from his dad, Connor started Toaster Pop LLC, a company named after a game it sells for $1 on the Apple App Store. The game requires players to spread butter, jam and other toppings on a piece of toast as fast as possible. Connor thought of the idea for the game, filled out the forms to start the company, created a PowerPoint presentation, made a pitch to investor Jeff Herrmann at the Youngstown Business Incubator and selected the Californiabased company that developed the app. He responds to business emails, too — using his dad’s account. Of course, Craig Zamary provided advice along the way — something he’s qualified to do in light of starting a few businesses himself, including Youngstown-based Green Energy TV, which is like a “YouTube” for videos related to environmental issues. He’s also an entrepreneur-in-residence at Kent State University. After already earning the distinction as the game’s high scorer (just ahead of his cousin), Connor’s next goal is to get a version developed for Android phones. They account for half the hits on the Toaster Pop website, so ignoring them would be “like throwing half of the money in the trash,” he said. Connor said he wants to be an entrepre-
■ Want to get into the Cleveland Indians’ Social Suite, to which the team invites six influential social media users and guests for each home game? Clear your schedule for 2012. Or maybe 2013. Indians spokesman Curtis Danburg said the suite has a waiting list of 600 people. Mr. Danburg said the allure of sitting in a suite has added to application numbers; last year, the Indians introduced their “Tribe Social Deck,” constructed in front of the leftfield bleachers. To avoid weather-related problems, though, the team moved the tweeters and Facebookers inside. (Plus, they have plenty of suite space available, as a cursory glance around the ballpark on any game night would show.) I sat there twice last year, including the infamous debut of much-hyped Washington Nationals pitcher Stephen Strasburg, when that fancy boy complained about the pitcher’s mound. You’ll have to ask someone else about the suite, though; my “application” was “lost.” — Joel Hammond
MILESTONE
BEST OF THE BLOGS
THE COMPANY: Weatherchem, Twinsburg THE OCCASION: Its 40th anniversary
Excerpts from recent blog entries on CrainsCleveland.com
In the money: SironRX Therapeutics of Cleveland raised $3.4 million that it will use to fund clinical trials that would test whether a drug licensed by the company safely and effectively can treat post-surgical wounds. The investment was led by North Coast Angel Fund, a group of individual investors from throughout the area. Other investors included the Cleveland Clinic, JumpStart Inc. of Cleveland, Fletcher Spaght Investments of Boston, Glengary LLC of Beachwood, Ohio Tech Angel Fund III of Columbus, Early Stage Partners of Cleveland, X Gen Ltd. of Cleveland and several individuals. Opportunity knocks:
Middlefield Banc Corp. said Bank Opportunity Fund, an affiliate of Hovde Private Equity Advisors LLC, agreed to buy $9.45 million of the company’s common stock in a deal that will give the investor a large stake in the parent of Middlefield Banking Co. Middlefield Banc said a stock purchase agreement provides for the sale of its common stock to Bank Opportunity Fund for $16 a share cash. Bank Opportunity Fund will own and control up to 24.9% of Middlefield Banc’s common stock outstanding after closing the sale of shares under the agreement.
Meet the new boss: Goodyear Tire & Rubber Co. named Stephen R. McClellan, a 23-year company veteran, as president of its North American Tire business unit. Mr. McClellan, 45, succeeds Curt Andersson, who plans “to pursue other professional interests,” Goodyear said. The Akron-based tiremaker said Mr. McClellan, who has been president of Goodyear’s North American consumer tire business since August 2008, will continue in that role until a successor is named. Entering the Ice age: Schottenstein, Zox and Dunn Co., a Columbus-based law firm with an office in Cleveland, is about to be absorbed by Ice Miller LLP, a firm based in Indianapolis. Ice Miller said the combination will create a regional firm of 314 lawyers with offices in Indianapolis, Columbus, Chicago, Cleveland, DuPage County, Ill., and Washington, D.C. The combined firm, which will operate as Ice Miller LLP, will rank among the top 150 largest law firms in the United States.
This and that: Specialty chemicals maker Lubrizol Corp. of Wickliffe pledged $1 million to the Cleveland Orchestra’s “Sound for the Centennial” campaign. The money is designated toward orchestra education and community programs. … Dinosaurs will make their way to Cedar Point next summer. The Sandusky amusement park said it will spend about $1 million to install “Dinosaurs Alive! on Adventure Island,” a prehistoric-themed attraction, for 2012. The park is sending the Paddlewheel Excursions boat cruise up the river into retirement.
The maker of dispensing closures has put a lid on four decades in business. Weatherchem got its start in 1971 when Albert J. Weatherhead bought Ankeny Co., a small tooling business. Consumer products companies at the time were moving to adopt plastic, rigid packaging containers, according to the company, and Mr. Weatherhead “realized that Ankeny could make significant gains in the packaging industry by developing and manufacturing a value-added packaging product line, if it received the right attention and capital investment.” With that formula, the company now known as Weatherchem has become a global enterprise with 100 employees and a full range of dispensing closures used in markets from pet food to spices Weatherhead to household chemicals and candy. The company has customers in North America, Europe, the Middle East and Australia. Weatherchem says its products have received a variety of awards, such as “Best Package of the Year” from the Association for Liquids and Sauces in both 2009 and 2010 for its LiquiFlapper closure. The company also says it has undertaken “a long-standing and extensive sustainability initiative” to reduce its own energy consumption. Even during the recent recession, Weatherchem says it reduced scrap by 50%, installing new hydraulic presses that consumed 35% to 45% less energy and using 800,000 fewer gallons of water annually. For information, visit www.Weatherchem. com.
neur when he grows up. And he might end up inspiring others to follow his lead. “My cousin, friend and sister are all thinking of apps, too,” Connor said. — Chuck Soder
The Tribe attracts a chatty bunch
Giving credit to those who find credit tight ■ In a first for the institution, GenFed
In Cleveland, at least, the check really is in the mail ■ Congratulations, Cleveland-area residents — you are doing a better job at paying your bills. Consumer data firm Experian PLC released data on credit card delinquencies and mortgage payment behavior in the top 30 U.S. markets. By both measures, Cleveland is at or near the top when it comes to timely payment. Experian’s data show the percentage changes from 2007 (pre-recession) to June 2011 in credit card payments and mortgage payments that are 60 days late. On credit cards, Cleveland ranked first nationwide with a 34.7% reduction in the number of credit card payments that are two months past due. Other top markets for reducing credit card delinquencies: San Antonio (a 30.5% decline), Cincinnati (30%), Dallas (28.8%) and Houston (28.6%). Ohio and Texas must be doing something right. Since 2007, about 20% fewer credit card payments nationwide are 60 days late. The mortgage situation is worse in most markets, though again, Cleveland bucks the trend. Nationwide, about 25% more consumers are paying their mortgage 60 days late, Experian reports. But in Cleveland, the number of late mortgage payers declined by 3.8%.
Despite Washington anxieties, bank exec sees solid economy ■ Need a shot of (relative) economic opti-
Financial Credit Union in Akron is partnering with a nonprofit to offer a loan product. The 11-branch GenFed, in collaboration with Greenleaf Family Center in Akron, on Aug. 1 initiated a program that will award car loans of up to $4,000 to Summit County residents who do not qualify for traditional loans. The aim is to close at least two loans a month in the program’s first year. Greenleaf, a provider of behavioral counseling services, is guaranteeing the loans. Sue Turns, who manages a GenFed branch in Akron and one in Fairlawn, had worked personally with Greenleaf on another auto loan program called Ways to Work out of Milwaukee. Now the nonprofit and the credit union are going it alone. This way, clients can have direct contact with the local lender, and Greenleaf no longer will pay and pass along to clients a $60 fee for each loan it makes, said Bob Sukel, who manages Greenleaf’s financial services for families program. All program applicants have low income and/or spotty credit, Mr. Sukel said, but the program will take into account their ability to repay. “It’s easy to find a reason not to do a loan,” Mr. Sukel said. “This committee looks for reasons to do it.” The program fits GenFed’s mission to “always try to get to people who may be underserved and aren’t traditional borrowers,” Ms. Turns said. The new program’s loan committee considered its first round of applications last week. Seven applications were received, including one from a woman who must enter her vehicle from the back seat, and another from a woman who must walk a mile home from a bus stop after dark. — Michelle Park
mism? Check out an interview in The News Tribune of Tacoma, Wash., with Bruce McCain, chief investment strategist at KeyBank in Cleveland. Despite the stock market’s recent wild swings, Mr. McCain told the newspaper that he remains optimistic — at least for the short term. Unless Europe implodes, Mr. McCain said, look for some good short-term opportunities for investors. “Usually, oncoming recessions tend to come as the economy gradually slows and the market shows topping,” McCain said. “We just haven’t seen the leading indicators of a recession.” Instead, he told the paper the current turmoil is marked by the “anxieties created by the Washington debacle.” Mr. McCain said citizens “have come to the realization that there is a major threat to their future with the prospect of the federal deficit, and they don’t have any faith that politicians can come together to solve it.” As a result, people “have overreacted to how much slowing there is.” He said he sees “a chance for a rebound in the market.”
Time is money, especially when it comes to jail time ■ Six states — including Ohio — reduced incarceration rates by focusing on parole or probation instead of prison time and have cut costs without increasing crime rates, according to a report from the American Civil Liberties Union. Reuters said the report “highlights Texas, Mississippi, Kansas, South Carolina, Kentucky and Ohio as traditionally ‘tough-oncrime’ states that benefited from reducing incarceration rates.”
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Scheduled Inspection: $0
BMW Cleveland 6135 Kruse Dr. • Solon • 1-866-210-6710
Factory certified Sales associates and Factory trained technicians
MASERATI OF OF CLEVELAND CLEVELAND MASERATI
Brake Rotors: $0
www.BMWCleveland.com Monthly lease payments of $599.00 for 36 months based on MSRP of $56875.00. Vehicle may need to be ordered. Excludes tax, title, license and registration fees. 1st payment, $3500.00 down payment and Bank fee and $0 security deposit program are due at delivery. Program available to qualified customers and not everyone will qualify. Subject to credit approval. Dealer contribution may affect terms. Lessee must cover insurance and all items not covered under the BMW Maintenance Program. Excess mileage charges of $.20 per mile for miles driven in excess of 10,000 miles per year. Purchase option at lease end for $33556.25 excludes taxes. Lessee acquires no ownership interest unless purchase option is exercised. Expires 8/31/2011.
THE END OF WOULDA COULDA SHOULDA. 11-17maseratiAAA.indd 1
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EXCEPTIONALLY EQUIPPED. TOTALLY IRRESISTIBLE. SEE JAGUAR CLEVELAND TO LEARN MORE ABOUT THE XF AND ITS BEST-IN-CLASS JAGUAR PLATINUM COVERAGE*.
>> 2011 XF LEASE $
599 39-MONTH LEASE**
DUE AT SIGNING: $4,795 + TAX, TITLE AND FEES $0 SECURITY DEPOSIT BASED ON $53,375 MSRP
2006 - 2010 RANGE ROVER SPORTS
0.9
% APR* Up to 24 months APR finance or special lease rates now available
LAND ROVER SOLON 6137 KRUSE DR., SOLON 1-866-210-6707
www.landroversolon.com LAND ROVER SOLON
* Up to 24-month financing is available at 0.9% APR. Program valid through August 31st, 2011. Eligibility limited to Pre-Owned 2006-2010 model-year Land Rover Range Rover Sport vehicles. Out-cycled service loaner vehicles are not eligible. Not all buyers will qualify for participating lender’s financing. See Land Rover Solon for qualification requirements and complete details. ©2010 Jaguar Land Rover North America, LLC.
www.landroversolon.com
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6137 KRUSE DR., SOLON (440) 542-0601 www.jaguarcleveland.com
CLEVELAND
* Jaguar Platinum Coverage includes all factory recommended scheduled maintenance for 5 years or 50,000 miles, whichever occurs first. Wear and tear items are limited to brake pads, brake discs, brake fluid changes and wiper blade inserts based on factory specified wear limits or intervals. All work must be performed by an authorized Jaguar dealer. For complete details on Jaguar Platinum Coverage, including warranty and maintenance coverage and exclusions, please visit your local Jaguar dealer. ** * With approved credit. 39 month lease. Total due at signing $4,795. Includes $4,196 down payment, $0 security deposit plus tax, title and fees extra. Customer responsible for excess wear and tear. 10,000 miles per year, 30¢ per mile over. Expires 8/31/11. Jaguar Platinum Coverage includes all factory recommended scheduled maintenance for 5 years or 50,000 miles, whichever occurs first. Wear and tear items are limited to brake pads, brake discs, brake fluid changes and wiper blade inserts based on factory specified wear limits or intervals. All work must be performed by an authorized Jaguar dealer. For complete details on Jaguar Platinum Coverage, including warranty and maintenance coverage and exclusions, please visit your local Jaguar dealer.
6135 Kruse Dr. • Solon • (440) 542-0600 • www.DavisAutomotive.com