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Hazards ahead for AMCs

By Gordon K. MacLeod, M.D.

Health care in the United States is generally thought to epitomize the most advanced technological medical care in the world, in no small part due to scientific breakthroughs at academic medical centers. Such high praise, however, could soon end abruptly if academic medical centers fail to cope with problems of collegial divisiveness between community practitioners and academicians in the managed care era.

In face of the challenges created by managed care, many academic medical centers are perceived to be engaged in a power struggle with each other and with community teaching hospitals in order to preserve control over medical training and research. Although radically new approaches to solving the problems facing academic medical centers are needed, they are given little consideration as academic administrators focus on maintaining old familiar patterns for education, training and research.

Problems facing university health centers go back almost a hundred years, to the time of the Flexner Report, which tended to insulate academic medicine from the community practice of medicine. Of greater concern today is the further sequestration of community practitioners and hospitals into categorical enclaves exclusively aligned with specific teaching medical centers. Academic flagships in the same community further fragmenting health care could prove to be very damaging to the delivery of the highest quality of medical care.

Two types of financial pressures are forcing academic medical centers to struggle for survival: first, the financial setbacks suffered in the transition from traditional indemnity health insurance cash settlements to capitation payments from managed care plans, and second, pressure on providers from managed care plans to accept lower rates of reimbursement.

Centers of excellence can no longer shift payments received for health care services to offset the expense of teaching, training and research activities as they were once able to do when reimbursed for charges and fees-for-service under indemnity health insurance plans. Furthermore, managed care plans, well known to be rapaciously self-serving, increase their own profits by whipsawing community and teaching hospitals as well as physicians into accepting lower payments for health care services with the heaviest burden falling upon teaching hospitals and other academic medical centers. Under managed care, community hospitals and teaching medical centers receive the same amount of money for rendering medical care even though the latter incur substantially higher costs from having to pay expenses for education, training and the development of advanced technological and biomedical research programs. Reimbursement of high cost teaching hospitals at the same low level as community hospitals has already led to significant curtailment of many academic activities. Many centers of medical excellence have already had to shift their policy from recruiting academicians to employing practitioners.

Look for factionalism between academicians and their colleagues from the private practice of medicine employed by academic medical centers.

The long-standing estrangement between academic and community practitioners is likely to interfere with the successful assimilation of the two groupings. This estrangement is fueled by the perception held by practicing physicians of their academic colleagues. Community practitioners have long resented the condescending manner of faculty members at centers of excellence. They are offended by the lack of responsiveness of medical staffs at academic medical centers whose trainees receive little instruction in how to interact with community-based practitioners and hospital personnel.

These perceptions have been reinforced by faculty members, fellows and residents routinely neglecting to return phone calls to community practitioners, to send discharge summaries to a patient’s personal physician, and to return patients referred to the center for diagnosis or treatment to their primary care physician.

If the past is prologue to the future, the career goals of community practitioners providing clinical care in expanded academic medical centers will be assigned a lower priority than that given to academicians.

Look for centers of excellence to purchase more hospitals and physician practices and to close down some of the community hospitals already acquired.

In addition to mergers between academic medical centers, the rush to gain coveted referrals from community physicians has prompted an outpouring of a wide array of joint ventures, including hastily arranged mergers, acquisitions, affiliations and alliances with practitioners, community hospitals and other health care facilities. Negotiations are made more stressful when managed care plans further reduce payments for patients referred to teaching hospitals.

Even the best efforts of academic administrators to link community-based medical care more closely to teaching medical centers have not avoided the inevitable downsizing of their own centers of medical excellence. Moreover, many centers have yet to grapple with the impact of hospital closings in an effort to reduce cost and competition. Long-term difficulties lie ahead for joint ventures, primarily in sustaining referral patterns from community-based professional constituencies and health care organizations. Northwestern University’s Distinguished Professor of Health Services Management Stephen Shortell, reports: “There is little evidence of economies of scale or coordination in healthcare…If anything, larger healthcare organizations have actually displayed diseconomies, both of scale and coordination.” Surely, some of these short-sighted, ill-founded professional and institutional relationships will not survive.

Many academic medical centers that have purchased private medical practices in order to increase their referrals often end up employing the physicians who owned the practices. Employment of salaried physicians has increased referrals somewhat, but few, if any, centers have yet to turn a profit from these investments. With the likelihood of reduced government payments for medical care, the financial risk associated with such investments by academic medical centers or teaching hospitals can only increase.

Look for attempts by academic medical centers to control community practitioners’ referral patterns—with only limited success.

Many community hospitals, unless owned and operated by academic medical centers, will be reluctant to encourage their physicians to make referrals when their own bed occupancies drop. New covenants that restrict referrals from one or more community hospitals to a specific academic medical center promise to disrupt effective working relationships in the health care community at large. The news media have reported that this impasse has already generated enormous dissatisfaction among patients, health professionals and community hospitals alike.

Look for the spread of merger-mania between and among academic medical centers in communities that have two or more centers of excellence.

Witness the mergers of Columbia University-Presbyterian Medical Center with the New York Hospital-Cornell Medical Center, Mt. Sinai Medical Center with New York University’s Academic Medical Center, Hahnemann’s Medical Center with the Medical College of Pennsylvania, Stanford University Hospital with the hospital of the University of California at San Francisco, and the most unexpected of all, the merger of long-standing rivals, Massachusetts General Hospital and the Brigham and Women’s Hospital in Boston. Despite some reports to the contrary, integration of services among these mergers is continuing apace, albeit somewhat cautiously. More such mergers are under discussion around the country.

As recently as 1994-1995, less than one third of the medical schools or their parent universities owned a managed care plan. Without the autonomy to control their own health care delivery system, mergers are more likely to take place. When academic medical centers do not own or operate their own managed care plan, physicians employed by centers of excellence must be paid by profit-oriented non-academically based health insurance companies. Under such circumstances, physicians at centers of excellence will have to answer to two masters: the academic medical center and the managed care corporation. There is little doubt about which will prevail.

Look for a concomitant reduction in the number of medical schools.

Despite the fact that some centers of excellence are still replete with past revenues in reserve from generous Medicare training reimbursement and insurance payments that resulted in huge financial reserves, this source of funds will rapidly be diminished under managed care. With most centers of medical excellence facing reductions in reserves, more will be forced to merge, and with the mergers, the number of medical schools will be reduced.

Look for the government to cut back funds to teaching hospitals.

As a consequence of shrinking inpatient populations, along with anticipated Medicare and Medicaid reductions, federal and state governments’ funding of academic medical centers is apt to be cut back sharply. What’s more, many academic and community hospital administrators have serious misgivings about being able to retain the tax exempt status of their faculty practice plans.

In conclusion, a new emphasis on the integration of community practitioners and academicians through innovative restructuring of medical education and training for health care providers is needed, rather than trying to preserve patterns that were prevalent for the past century in academic medical centers. If this does not happen, we can look for determined government support of teaching, training and research in a much reduced number of centers of excellence. Without the successful transformation of academic medical centers, our reputation for delivering the most advanced technological medical care that has been the envy of the world will almost surely come to an end.

Gordon K. MacLeod, M.D., is clinical professor of medicine and professor of Health Services Administration at the University of Pittsburgh. References used for this essay are available on request by email: gmacleod@vms.cis.pitt.edu.

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