Five Billion Dollars Philadelphia's Hospitals and Universities Spend

Philadelphia’s hospitals and universities buy more than five billion dollars of goods and services every year. Cleaning contracts, food, laundry, information technology, construction, uniforms, printing, security. It is the single largest pot of discretionary money in the city, and almost nobody campaigns about it. I have spent enough time around this number to find that strange.

A disclosure before anything else, because it should shape how you read this. I work full time at the Economy League of Greater Philadelphia, and the program described below is the Economy League’s. What follows is my own reading of it, not an institutional position.

What PAGE is

Philadelphia Anchors for Growth and Equity, universally shortened to PAGE, is a collaborative built to shift some of that institutional purchasing toward local and diverse suppliers. Its founding members are the institutions anyone would guess: Children’s Hospital of Philadelphia, Jefferson, the University of Pennsylvania and Penn Medicine, and Temple University and Temple Health.

The idea behind it is not complicated, and it is not new. Anchor institutions are called anchors because they cannot leave. A hospital cannot relocate to a cheaper state the way a factory can. Its buildings, its staff and its patients are fixed in place. That immobility makes its purchasing unusually reliable, and reliable purchasing is the thing a small supplier can actually build a business on.

The three numbers, in one sentence

According to the Economy League’s own reporting on PAGE, the program supported more than 95 businesses and put over $38.6 million of contract revenue into local, minority owned firms.

Its stated ambition, set out when the collaborative launched, is $500 million in localized contract opportunity and as many as 5,000 living wage, middle skill jobs for Philadelphia residents. Underneath both figures sits the five billion dollars those institutions spend annually. Contemporary coverage of the launch put all three side by side.

Five billion spent here. Five hundred million targeted. Thirty eight point six million moved.

Those three numbers belong in the same sentence, because the distance between them is the entire argument, and reading any one of them alone gets the story wrong.

Why the gap is not a failure

There is an easy version of this article that treats $38.6 million against a $500 million target as an underperformance and files it under good intentions. I think that reading is wrong, and it is worth explaining why rather than simply asserting it.

Thirty eight million dollars of contract revenue is real money that reached firms it was not reaching before. Each of those contracts had to be found, scoped, bid and won, usually by a company that had never sold into an institution that size. That is slow, unglamorous work and none of it is automatic.

More importantly, it establishes that the mechanism functions. The question was never whether a hospital could buy locally in principle. It was whether the procurement process could actually be reworked so that a smaller local supplier could win, and the answer turns out to be yes, at least at this scale.

So the gap to $500 million is not a measure of failure. It is a measure of how much is still sitting there, in a pot that gets refilled every single year whether anyone acts on it or not.

What Preston did

The case everyone reaches for is Preston, a city in the north west of England of roughly 150,000 people, which rebuilt its local economy around exactly this idea after a large redevelopment scheme collapsed and left it with no capital plan.

Research on the Preston Model records that in its first four years local procurement rose from about 5 percent to 18.2 percent within Preston, and from 39 percent to 79.2 percent across Lancashire. An additional £74 million of public sector spending landed inside Preston, with around £200 million more across the county.

The employment effects are documented more cautiously, and the honest version is worth stating rather than the dramatic one. Analysis of the model reports that growth per head and labor productivity both grew faster than the UK average, and that unemployment moved from above the national average to below it. Local government case studies describe the same pattern.

We do not need to copy Preston. Preston is a smaller city with a different legal framework for public procurement and a different institutional mix. What transfers is the principle, not the implementation: that where an institution buys is a policy lever, and that it can be pulled deliberately rather than left to whichever vendor has the best sales team.

The uncomfortable part

Here is what makes anchor procurement unusual among economic development ideas, and it is the reason I keep coming back to it.

Almost every proposal to improve a local economy requires money that does not currently exist. A grant program needs an appropriation. A tax incentive needs foregone revenue. A development needs a bond. Every one of those has to win an argument against something else that also needs funding, and most of them lose.

This one does not. The five billion dollars is already being spent. It is in existing budgets, for services those institutions already need, under contracts that come up for renewal on a schedule. Nothing has to be created. What has to change is where the money lands when it leaves.

That makes the obstacle procedural rather than financial, which is both the good news and the reason progress is slower than the numbers suggest it should be. Procurement rules exist to protect institutions from risk and from favoritism, and they do that job by preferring large, established, well documented vendors. A small local firm fails on paperwork long before it fails on price or quality.

What would actually move it

The work that closes a gap like this is not glamorous and does not photograph well. It looks like unbundling a single enormous contract into pieces a smaller firm can bid on. It looks like paying invoices in fifteen days instead of ninety, because a small supplier’s cash flow cannot absorb the wait. It looks like publishing a forward pipeline so a firm knows a contract is coming and can prepare rather than discovering it a fortnight before the deadline.

It also looks like counting. The Economy League’s work on living wage employment and the city’s own commerce department both track pieces of this, but a single public figure for how much anchor spending stays inside Philadelphia, published annually, would do more than most policy proposals. What gets measured in public tends to move.

None of that is a new idea either. A detailed account of PAGE’s early years sets out most of it. The difficulty has never been knowing what to do.

The five billion is spent this year regardless. It will be spent again next year. The only open question is how much of it stays, and that one we get to answer.