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P&S Journal

P&S Journal: Winter 1996, Vol.16, No.1
The Academic Medical Center: Challenge and Opportunities

Since the academic medical center as a unique organization in health care was defined in the 1920s through the creation of Columbia-Presbyterian Medical Center as the world's first academic medical center, the role of academic medicine has evolved. The evolution has brought Columbia-Presbyterian-indeed, all academic medical centers-to a crossroads.

The signposts for this crossroads read "change" and "rest on your laurels." It's clear that to survive, the leaders of the "Columbia" and the "Presbyterian" components of "Columbia-Presbyterian" are taking the road marked "change." Because some of the missions of Presbyterian Hospital and Columbia Health Sciences overlap, the two leaders share many of the same concerns while taking pride in the quality of their endeavors.

"I think the major strength of the hospital is the quality of its medical staff," says Dr. William T. Speck, president and CEO of Presbyterian Hospital. "On average, our physicians and surgeons are superior to their colleagues and counterparts at other academic health care centers. Clearly there are programs here that are recognized as world class. I think the whole cardiovascular medicine and surgery program is outstanding, whether you're talking about pediatric cardiology, pediatric heart surgery, or adult cardiology and adult heart surgery, or basic science research and pharmacology. There's an enormous amount of excellence here."

"I would match the caliber of the faculty, students, and staff here against others at any academic medical center anywhere in the world," says Dr. Herbert Pardes, vice president for Health Sciences and dean of the Faculty of Medicine for Columbia University. "People here have a great ethic, one of working hard, striving to achieve excellence, and trying to bring the best of what we have to the benefit of all people in society."

Both leaders mention shared strengths: new technology through the largest MRI in the world, a new PET scan center, an invasive cardiac catheterization center; a strengthened cancer center; and international leadership in neurosurgery, neurology, psychiatry, molecular biology, and brain science.

The strengths of the medical center make up only the base of growth, however, as both leaders acknowledge. As the American health care landscape continues to shift, hospitals and universities that comprise academic medical centers are being forced to re-think their roles and devise survival strategies.

"One of the things that makes this hospital different than every other hospital is the relationship we have with Columbia University," Dr. Speck says. "Moving forward we have to make sure that the relationship with Columbia not just exists but becomes fervent."

Strengthening the hospital has been the first step in strengthening the relationship. Dr. Speck has instituted dramatic changes since assuming his role as president and CEO of Presbyterian Hospital in 1993. In 1992, for instance, the hospital had a deficit that exceeded $50 million. The following year, under Dr. Speck's leadership, losses were reduced to $22 million. By 1994, new and continued efforts to trim costs lowered the deficit even further, to $2 million. Dr. Speck attributes this turnaround to improved management.

"When I came here, the hospital in many ways reminded me of the old Soviet Union," Dr. Speck says. "The Soviet Union had great armies, great submarines. They could put men on the moon, really high-tech stuff. But you couldn't make a phone call from Moscow to St. Petersburg. You couldn't deliver a letter from one side of Moscow to the other.

"This was a great hospital with outstanding physicians, surgeons, and clinical programs, but you couldn't generate an accurate bill. You couldn't get a patient from the emergency room into an empty bed in a timely fashion. The whole infrastructure of this hospital was neglected, in my opinion, for many years."

To improve efficiency, Dr. Speck and his staff instituted a cost-reduction program, developed a better billing system and computer network, and made efforts to increase the patient base. "Financially, we were on target to break even this year until the cuts in Medicaid occurred, and recently the cuts in Medicare came along," he says. "It's now a bigger challenge.

"I think the hospital recognizes that because of managed care, health care delivery is a financially driven market. Although quality is important, it's the cost per unit of service that's the determinant factor. If you look at what's happened in the rest of the country, where managed care is a bigger part of the business, other major academic centers have recognized that they are in a financially driven market where cost per unit of service is the determining factor," says Dr. Speck.

"One of the things we have done is develop a plan to reduce our costs so that we will be cost-competitive. You can have the best hospital in the world, but if you're the most expensive, only a handful of people will come. Generally, you will have your surgery where your insurance company tells you to go. Your insurance company is a business, so they're interested in profit and thus the cost per unit of service. We like to think that, despite our high cost, we deliver higher quality care, and I happen to believe that. But the insurance company wants proof. It's hard to prove that for most medical and surgical diseases the quality here is really better than that received at lower-cost good community hospitals. It's clear that only a small subset of patients can come to the academic medical center. You can't go to a community hospital for your heart transplant or your bone marrow transplant, but that's less than 3 percent of our business. The way we're preparing ourselves for managed care is to get our cost per unit of service down to a competitive level. The idea of organizing the physicians into a negotiating group with a single spokesperson is another way we're dealing with it. A third way we're dealing with it is trying to develop a regional delivery system."

Creating a system involves affiliations. "Three years ago the hospital had no affiliate hospitals," Dr. Speck says. "The school had affiliate hospitals. Now the hospital is in the process of developing a health care system or network of affiliated hospitals. We now have seven or eight affiliates. Each of those affiliates have their own group of physicians. The buzzword is to develop an integrated health care system that will be attractive to health care companies."

Dr. Pardes charts a strategy that sees the medical center becoming more efficient in operations while seeking new financial support, collaborations, and institutional partnerships for a diversified base that will offer strength in the future. "Industry should be seen as one source which can help. The development of the Audubon Business and Technology Center and our efforts through the CPMC Office of Clinical Trials are designed to foster collaborations with industry. We're expanding our fund-raising efforts and working closely with the hospital to find ways to cut costs."

In any discussion about the future of the medical center, government support looms large as a common area of concern. "This country is trying to strengthen its financial condition. Some unintended effects of that effort, if not carried out carefully, are very worrisome for academic medical centers," says Dr. Pardes. "There are many challenges to our financial base, including the support of research; clinical care and education; possible slowing of federal support for the NIH; risk to indirect costs which support the administrative parts of research; risk to financial coverage of the clinical services and education we render from cuts to Medicaid and Medicare; challenges to student loans; and the tightening of state funding. Every academic medical center in the country is facing these issues. It's a formidable time."

Presbyterian Hospital was affected by state Medicaid cuts that translated into a loss of approximately $17 million on a budget of $600 or $700 million. Medicare funding appears to be the next target. "It's clear that there will be decreased reimbursement for Medicare," says Dr. Speck. "In order to balance the budget and give tax relief to high income earners the government has to figure out a way to balance its books. They'll probably do it on the backs of entitlement programs. One entitlement program they are looking at now is Medicare. Probably what they've targeted is a significant reduction in the direct/indirect reimbursement for medical education. I'm predicting we will be looking at a $30 to $40 million a year revenue reduction. The hospital has to figure out a way to absorb that lost revenue and deliver high quality care in a more cost-efficient fashion. How much can you cut out of the system before quality begins to suffer?"

Ironically, financial challenges come at a time of great community outreach. In recent years both Presbyterian Hospital and Columbia Health Sciences have made unprecedented efforts to establish health clinics and programs in Washington Heights/Inwood. The hospital's Ambulatory Care Network, for instance, has been called a national model for intelligent community health care. ACNC is specifically designed to reduce congestion in the emergency room, link patients to ongoing primary care, and reduce the cost of health care delivery.

One innovative component of the ACNC enabled Columbia School of Nursing faculty to form a group practice with full admitting privileges to Presbyterian Hospital. Called the Center for Advanced Practice, the clinic uses faculty nurse practitioners to evaluate and treat patients of all ages for the full range of common health problems. The program is the first of its kind in the country.

"We added two new practice sites in the last two years," Dr. Speck says. "We have assumed responsibility for the WIC program, a program for women and infants. It's the largest WIC program in the country. We, along with the School of Public Health, have developed a series of school-based clinics. Most recently we've become involved with organizing community physicians-principally Latino physicians-into a group that will facilitate their participation in Medicaid managed care."

Managed care has resulted in growing emphasis on services away from CPMC. Patient volume at the new Columbia-Presbyterian East-side location, for example, increased 50 percent between June 1994 and June 1995. The move to 16 E. 60th St. meant twice the space for physicians and patients. Also, CPMC West Side opened in May, offering primary care in medicine, pediatrics, and obstetrics and gynecology. The Columbia-Presbyterian Physician Network represents larger numbers of doctors.

The most distant CPMC satellite was established eight time zones away at the CPMC/Moscow Clinic. This site was created in 1994 to provide American-style health care for U.S. travelers and expatriates and for local residents in Moscow. This globalization effort is a joint venture of Pepsico World Trading Inc., Columbia-Presbyterian Health Services, and the Fund for Large Enterprises in Russia, a private investment company.

"The plans originally were that this would be the first of a series of clinics based in eastern Europe and maybe even Asia," Dr. Speck says. "It's a little too early to tell where those plans are going to go, but the Moscow clinic is struggling. The numbers in terms of visits are ahead of budget, as are the number of companies enrolling, however Russia is a difficult country to do business in."

Both Presbyterian Hospital and Columbia Health Sciences view education and research as integral missions. As restructuring and cost-reduction programs continue, both leaders commit to sustaining the quality in the educational and research programs.

"We're aware that the hospital has not just the mission of quality care but of education and research," says Dr. Speck. "In all of our cost-reduction programs we have tried very much to have little or no impact on education and research. Going forward it's going to be increasingly difficult, particularly if the state and the federal government continue to withdraw educational support. We will simply have to adapt medical education and medical research with the changes that are taking place in health care. But I think as health care delivery has changed from being hospital-based to being ambulatory-based, research and teaching will change as well. There is more clinical research being done outside of the hospital and more education is taking place in an ambulatory setting as opposed to an inpatient setting."

"At Columbia, we will still recruit top students, sustain excellent faculty, and make cutting-edge contributions in research, education, and clinical care," says Dr. Pardes. "What we should not do now is simply sit back and rest on our laurels. Academic medicine is an investment that pays off. If we were able to solve dementia-related problems such as memory deterioration, for instance, a lot of people wouldn't have to be in nursing homes supported by Medicare and Medicaid. If we can treat and prevent AIDS, not only would we be getting control of a horrendous illness, we would also not have lengthy hospitalizations that incur high costs. Research and good clinical care are where the answers for these and other conditions will come from. If you take that capacity away, what do you have? No one should want to destroy the investment that makes the society healthier and the condition of life better. We all must be spokespersons to the public at large and educators of our colleagues, so that they understand what academic centers like this are all about and what makes them tick. Then they will understand the formidable nature of the challenges we're experiencing right now."

Many academic medical centers nationwide are facing the challenges by considering consolidations, affiliations, and mergers to reduce costs and duplication of certain programs and departments. "We've been talking to several major academic medical centers while trying to bring our principal affiliates-Presbyterian Hospital and St. Luke's-Roosevelt-closer together," says Dr. Pardes. "Many institutions are considering consolidations, collaborations, affiliations, and mergers. If an institution with multiple strengths finds another institution that may be able to complement it through a partnership, a partnership can be very advantageous and exciting. It is responsible and forward-looking for our leadership to explore these options."

Dr. Speck says Presbyterian Hospital leaders are in a series of discussions with potential partners. "We believe that five years down the road we will have a corporate relationship with another academic health care center. This will enable us to get the cost per unit of service down to where it's comparable to that of the non-academic hospitals without compromising quality, which will make us able to compete much more effectively in a managed care market."

A decade down the road, Dr. Speck predicts, the New York metropolitan area will be served by a handful of health care delivery systems.

"One of them will be a for-profit chain of hospitals," he says. "The second might be the federated hospitals. The Catholic hospitals will have their own system in place, and finally there will be an academic system, which will consist of two or three academic medical centers corporately linked. We have to make sure we're one of them."

copyright ©, Columbia-Presbyterian Medical Center

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