Mulcahy flubs Econ 101 in his defense of flawed Measure A tax

Santa Clara Valley Medical Center, San Jose, CA. Image by Cristiano Tomás, CC BY-SA 4.0, via Wikimedia Commons

SJ CM Michael Mulcahy only spent less than two minutes endorsing Measure A sales tax increase (ostensibly to bail out the county's bankrupt hospitals). But in that brief time, he diminished his pro-business credentials by misreading the impacts of big hospitals on local business community. Experts (including the National Community Reinvestment Coalition) unpack some of Mulcahy's dubious assertions.

Mulcahy comment: “You have to consider the surrounding small-business ecosystems that support it, like the Bascom corridor in D6 that serves Valley Med's massive main campus and the soon-to-open 160,000-square-foot clinic down on Bascom Avenue right near Hamilton Avenue, or the generational medical community on Forest Avenue around O'Connor.”

Analysis: Mulcahy's framing of the issues around Measure A misses a number of key concerns:

Hospitals’ negative impact on surrounding business districts.
Mulcahy ignores the fact that large hospitals and consolidations can hurt surrounding business districts through healthcare consolidation, which reduces competition, raises healthcare costs, and can even lead to job losses among smaller healthcare concerns.
Mulcahy refuses to consider how the expansion of the hospital economy in D6 via Measure A can lead to reduced variety in local businesses: Large hospitals often provide their own services, such as large cafeterias, coffee shops, and gift shops. This competition can draw business away from smaller, independent restaurants and retail stores that would typically benefit from hospital employees and visitors.
Mulcahy doesn't address another potential concern about county consolidation of hospitals: primary care. To maximize revenue, some large hospital systems acquire primary care practices and shift patient treatments to more expensive hospital outpatient facilities. This makes nearby, independent primary care clinics less profitable and can increase overall healthcare costs for the community.
Consolidated health care systems and big hospitals can have a negative impact on local job market.
By singing the praises of consolidated healthcare activity under county financing and management, Mulcahy loses track of how the county, now one of the largest health care employers in the county, can suppress wages and decrease job mobility for its workers. This is especially true for nurses and pharmacy staff, who may have few other local employment options. When workers' wages stagnate, they have less disposable income to spend at surrounding businesses.
Similarly, hospital mergers reduce competition, giving larger systems the leverage to demand higher reimbursement rates from insurance companies and impose fees on patients. For employers, these higher healthcare costs crowd out wage increases, further shrinking employee spending.

Mulcahy flubs Econ 101 in his defense of flawed Measure A tax

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