Academic Medical Centers—Too Large for Their Own Good?
This Viewpoint discusses the conflict between the role of academic medical centers as providers of complex uncompensated care, and the large profit margins they realize from expensive fee-for-service clinical activity that puts them at odds with attempts to reorganize medicine to provide...
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Insightful commentary. Rad onc has become a microcosm of this right here:
Thus, many of today’s AMCs are similar to huge tankers loaded with health care services, and research and education are merely passengers. The growth of the clinical enterprise has allowed academic medicine to maintain its research and education missions in the face of relatively stagnant funding for research from the NIH, and limited core support from state and federal governments, particularly when inflation is considered. In fact, the margins on clinical revenues are often used to cover deficits in budgets for research and education and from providing subsidized care. There is the crux of the issue: any changes threatening the margins from clinical care will affect the entire mission of an AMC. The AMC missions are not self-funded; the margins on clinical care are required at most AMCs as is philanthropy.
Clinical activities at AMCs are predominated by tertiary care and by fee-for-service medicine. In 1998, the average cost of care at teaching hospitals was estimated to be 44% greater than at community hospitals7 and elevated costs have persisted.8 Academic medical centers tend to do well in negotiating reimbursement rates from insurers, and they tend to admit patients who require more expensive and invasive interventions. Academic medical centers are optimized to deliver financial results in the prevailing fee-for-service system.
Thus, by necessity, the majority of AMCs are inclined to stay the course of the current health care system. A move to value-based care is more than just risky; it is counter to their best interests unless a clear line of sight to new payment models exists. In the fee-for-service payment system, preventing illness and reducing wasteful diagnostics or unnecessary treatments could reduce the income of AMCs (as well as other medical centers). Although many reports that have described the need to reallocate resources toward prevention, population health, and value-based care come from medical school faculty, the leaders of the AMC clinical enterprise will tend to resist change because it puts the entire institution at risk. Faculty can discuss population health and value, but may be stymied from making important progress. In this way, academic medicine is not fully aligned with society’s interest in optimizing health outcomes or in reducing waste.