Next-generation academic medicine.

Today I would like to speak to you about the remarkable successes of academic medical centers to date, the significant problems that we are now facing, and the need for us to evolve into the next generation of academic medical centers. Academic medical centers have been remarkably successful in fulfilling our three missions of clinical care, research, and education. We graduate 17,000 physicians each year, we provide 40% of the undercompensated care, and we account for 20% of all hospital admissions throughout the United States. However, I believe it is not generally understood how the three missions interact and how they are currently supported. A Venn diagram (Figure 1 and ref. 1) demonstrates how the three missions of academic medical centers are linked and displays the relative effort devoted to each of the three missions. The overlap shows how the three missions really cannot be separated. For example, a postdoctoral fellow participating in a clinical trial will be at the interface of all three missions. So what is supporting the three missions of the academic medical centers? It is largely driven by the success of the financial performance of the medical centers. For example, starting in 2007, there has been an impressive financial improvement at the five medical centers at the University of California, which culminated in an unprecedented 13% profit margin in 2011. However, in the early 1990s, the five UC medical centers were losing money, and starting with this current year, the margin will decrease substantially. The critical issue that we need to understand is how these UC Health funds flow from the medical centers to support the medical school (Figure 2). The UC medical centers had revenue of $6.5 billion last year, which consisted of 60% from public payers, 40% from commercial insurance, and a very small amount from the state. So in reality, UC medical centers are functioning as private, not for profit, medical centers. $514 million was transferred from the medical centers to the medical schools to provide both for the purchase of services, such as medical directorships, and, more significantly, for programmatic support. The five UC medical schools had revenue of $3.8 billion, of which research and clinical care accounted for 78%, state support accounted for 7%, tuition for 2%, and medical center support for 13%. It is only through this funds flow from the medical centers to the medical schools that the UC’s medical schools are thriving or even viable. However, impending risks to the academic medical centers will prevent us from carrying on business as usual. Our traditional operating margins have averaged 5%, and in fact this is approximately the UC’s expected margin for this current year. We have three major sources of income: clinical, research, and state support, for those of us who are state institutions. None of these three sources of income is expected to increase at its traditional rate, as for example I showed you for the clinical income of the UC’s medical centers. In fact, recent studies have estimated that 10% of our traditional revenue is at risk. In light of the 5% operating margin, it is obvious that we cannot conduct business as usual. According to PricewaterhouseCoopers (1), forces that require academic medical centers to change include these budget cutbacks as well as a risk to our academic brand. The budgetary and political pressures facing academic medical centers have been well documented. The obvious hits include a decrease in the disproportionate share hospital (DSH) payment and a decrease in direct state funding. However, even more significant will be major changes in our payer mix. The good news is that we might have increased insurance coverage. However, the bad news, which might very well outweigh the good news, is there will be increased Medicaid and decreased commercial insurance. Since currently academic medical centers cannot be successful on Medicaid rates, we will need to change our model for providing medical care. Academic medical centers currently have great brand recognition throughout the world. However, there is legitimate concern about a breakdown of the branding of academic medical centers. In general, academic medical centers do not rank highly in new quantitative assessments of quality and efficiency. Furthermore, there are concerns that in our attempt to form a network with extensive affiliations, we can undermine our branding. The organization of academic medical centers has evolved over time to mirror other academic institutions. Most academic medical centers are decentralized, with separate structures for the medical schools, medical center, and faculty practices. These different silos or fiefdoms are each driven by their own unique motivation. In the extreme, in many academic medical centers you can see the organization was driven largely by individual personalities and agendas and not by what is best for the institution as a whole. It also leaves us unable to quickly realign our efforts when the situation changes. Now that I have depressed you, what are the possible solutions for academic medical centers? Like the response to the energy crisis, I think it will be an all-of-the-above