Significant forces are reshaping the entire healthcare industry, and perhaps no sector is facing more change than academic medical centers: traditionally hubs for training, research, and cutting- edge care. Can they preserve their historic—and still essential— role while responding to the industry-wide pressures to be more efficient, transparent, and consumer-friendly?
“We're in the same healthcare market as everyone," says Donald Karcher, professor and chair of pathology and director of laboratories at the George Washington University Medical Center in Washington, DC. He is an actively practicing hematopathologist and also directs the Flow Cytometry laboratory at GW. “It is a common misconception that some how or other, academic medicine is significantly subsidized, and that some how or other we don't have to make ends meet at the end of the day. This is not true."
Academic centers are up against three “Cs" that they must navigate in order to stay relevant and financially viable.
Academic medical centers are often competing against corporate entities much larger and more powerful than in the past. “Nonprofit hospitals used to be generally local," says Robert I. Field, professor of law at Drexel University's Thomas R. Kline School of Law and professor of health management and policy at the Dornsife School of Public Health. “We now have nonprofit systems with literally hundreds of hospitals across multiple states. We have consolidation of physicians with hospitals, of ancillary providers with hospitals. We're more and more seeing individual markets being consolidated into one or two dominant systems." If one of those dominant national systems takes over a local competitor, the academic medical center risks losing some of its unique position in advanced specialty services and its ability to attract top talent.
Patients increasingly expect their healthcare providers to be as easily accessed as Uber. “People are looking for convenient locations and suitable hours, and brand and reputation means a lot," says Steven Gudowski, administrator for the Department of Pathology, Anatomy and Cell Biology for the Sidney Kimmel Medical College at Thomas Jefferson University, and administrator for the Clinical Laboratories at Thomas Jefferson University Hospitals, Inc. in Philadelphia, Pennsylvania." The use of technology is a big thing for these folks, and people want it now, and they want it sooner." The trend to contract out any services that can be handled by an outside organization, like scheduling and billing, can hurt an academic center's ability to connect with consumers, Gadowski says. “It clobbers us on the other side of the coin, because while patients are looking for cohesiveness and a coherent experience, we're farming things out, so our brand recognition gets lost."
Academic medical centers incur research and teaching costs that other hospitals don't have, but they can no longer get away with charging more for their services to cover those costs, as they might have in the past. “Payers don't really care whether the institution with which they contract is teaching, doing research, doing community outreach," Field says. “ They just want to get the best care for the best price. Medicare builds teaching and research into its cost structure, but private insurers do not. As payers become more aggressive, academic medical centers will be less and less insulated from the market. I think at this point, they're not very insulated at all."
It will be challenging, but not impossible, to navigate these Cs, Karcher says. GW has adopted "mission-based" budgeting, so that research and teaching have separate funding streams and are no longer subsidized by clinical care revenue. "We have to be as cost- conscious as any providers in any healthcare system, and we are," he says. " We spend a great deal of resources watching our costs."
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