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xxvi  Introduction expenses using the income from robust endowments. In addition, all AMCs are now faced with caring for a larger number of uninsured patients due to the marked increase in unemployment rates, annual fundraising has lagged behind historic levels, state support for higher education has diminished, and students are finding it increasingly difficult to pay tuitions for graduate school, medical school, and the allied health sciences. As a result, AMCs across the country have frozen salaries, cut budgets, increased tuitions, and delayed needed capital improvements [23–26]. Over the past several decades, the overwhelming challenges of the healthcare environment have led to a change in the underlying culture of the AMC. e unflagging attention to providing outstanding patient care has been replaced by missions more consistent with expediency of care than of quality of care. Although multiple experiences and conversations led to the work that culmi- nated in this book, one event stands out as illustrating the need for readdressing the role of the AMC. It occurred when a senior physician–administrator pointed out to a room full of academic physicians that the keys to the future success of their AMCs were a strict adherence to what he referred to as the four As: affability, availability, affordability, and accessibility. I immediately wondered what had happened to the four Cs that I had been taught: compassion, confi- dence, commitment, and competence—hallmarks that were the foundation of my training as a physician. e grave challenges facing America’s AMCs led me to ask an audacious question: How can AMCs compete, survive, and continue to fulfill their societal missions in a highly competitive and hostile marketplace? To answer this ques- tion, it was important to understand how successful AMCs differed from less successful AMCs in their core mission of the delivery of outstanding patient care, their organizational and economic structure, their ability to support innovative research and effective education of the next generation of clinicians, and the approaches they took to finance their teaching and scientific enterprises. In addi- tion, it became critical to understand how lessons learned by academic scholars in business and management could be applicable to AMCs and how local and federal governments can be leveraged to support the missions of AMCs. e efforts to answer this question led to the development of a radically dif- ferent model for achieving success in academic medical centers: restoring the delivery of outstanding care as the core mission and focus of AMCs. is core mission is supported by focusing efforts on four intersecting spheres of action: 1. developing an integrated structure; 2. pursuing and supporting disease-related research; 3. educating the healthcare workforce; and Introduction  xxvii 4. focusing attention on the “business” of medicine, recognizing that “no margin equals no mission.” Each of these spheres is necessary but not sufficient to support the core mission. All four must work together synergistically in order for the AMC to prosper. Ironically, we will see that many of the fundamental concepts on which each of the four intersecting spheres is built are not new; rather, they were first described by the plans for e Johns Hopkins Hospital in 1875 and by Abraham Flexner in 1910. Evaluating the Health of America’s Academic Medical Centers In order to evaluate the issues facing the AMC today properly and write this book, a comprehensive understanding of their function, evolution, and histori- cal context was required—as well as a thorough understanding of the “health” of the organization itself. Evaluating the financial health of an AMC is a chal- lenge because, unlike those of public companies, their economic data are not readily available. It is difficult to assess the flow of funds among the medical school, the hospital, and the faculty practice plan (the organization responsible for billing and collecting revenues), and some AMCs have a diverse array of “nonmedical” businesses that provide capital for the AMC but are often not included in its financial statements. It is even more difficult to understand the finances of an AMC when the hospital and the medical school are not integrated as well as when parts of the academic hospital are “owned” or “leased” by out- side groups, including physician practices, because each entity then reports its finances separately. e Association of American Medical Colleges provided important data on the average finances at AMCs but did not provide information regarding individual hospitals or individual medical schools, and the information is self- reported [27]. Some of the most relevant data were obtained from reports in the lay press because the press often has the finances and the clout to obtain data that are impossible for an individual to obtain. Other important sources of information regarding the overall health of AMCs were trends in NIH funding to medical schools and hospitals that until recently was available for individual AMCs [28], public disclosure of “profit” margins of various academic medical center hospitals, and published support for AMCs from state and local governments. Unfortunately, even state alloca- tions to AMCs are often difficult to follow due to marked differences in how xxviii  Introduction states and academic medical centers show faculty salaries and benefits, Medicaid payments and federal grants, and disproportionate share hospital payments on their individual balance sheets. Information regarding endowment support was available from the capital campaign status reports published each year by the Chronicle of Higher Education. Further information on the overall health of the AMC was obtained from extensive reviews of the literature, investigative reports in the lay press, and visits to many AMCs over the past 4 years. Demographic data from the Association of American Medical Colleges, the Association of Academic Health Centers, and the American Medical Association were also very helpful. Critical informa- tion came from conversations with hundreds of academic leaders as well as past and current leaders of major U.S. pharmaceutical and device companies and AMC-related businesses. Healthcare consultants and, in particular, Dr. Andrew Epstein of the Bard Group (Boston) provided additional important background information for this text. Wherever possible, we have included references to articles in the lay press, studies in the peer-reviewed and non-peer-reviewed scientific and business litera- ture, monographs published by authoritative national organizations, testimony before state legislatures, and numerous textbooks on the history of medicine and from the fields of business management, organization, and leadership. However, to ensure confidentiality and at their requests, we have not annotated the many comments provided by AMC faculty. is has allowed us to provide anecdotes that provide a unique insight into the workings of the AMC. Why Delivery of Outstanding Patient Care Is the Core Mission of the Model A distinguishing feature of each of America’s great AMCs is an uncompromising focus on providing outstanding patient care. is leads us to the primary mes- sage of this work: Success in the AMC’s clinical mission is necessary and obliga- tory for success in the academic mission, including education and research. In some respects, this concept of the primacy of outstanding patient care is not new. In his letter to the trustees of his new hospital, the Baltimore philanthro- pist Johns Hopkins wrote: “It will be your special duty to secure for the service of the Hospital, surgeons and physicians of the highest character and greatest skill.” In other respects, a model that establishes providing outstanding patient care as the core mission for building the success of an AMC is a radical concept because many academicians view the AMC as having a tripartite mission of research, education, and patient care and they struggle to allocate resources. Introduction  xxix In today’s competitive healthcare market, some institutions are able to support all three missions, but most are not so fortunate; as a result, limited resources are spread across the three missions. Because AMC revenues are a zero sum game, shifting resources from one mission to support another mission inhibits the ability to pursue excellence in any one of the tripartite missions. By contrast, we will see throughout this text how focusing on the core mission of providing outstanding patient care can allow AMCs to compete effectively in the healthcare marketplace while at the same time enhancing an AMC’s ability to excel in research and education also. e principle of a single core mission effectively enhancing the ability of a complex and multidisciplinary organization to excel across a diverse array of missions or products is not new in the world of business. In 1993, Isaiah Berlin published a landmark book, e Hedgehog and the Fox [29]. e unifying con- cept of the book was that hedgehogs succeed because they simplify a complex agenda into a single idea, principle, or concept that guides everything that they do. In his best selling comparison of good and great companies, Jim Collins found that successful companies succeeded because they were able to focus their efforts on a single core mission determined by identifying what they could be best at, what drove their economic engine, and what they could be deeply pas- sionate about [30]. erefore, the model presented in this book uses the core mission of pro- viding outstanding patient care as the central defining principle, supported by the four circles or spheres of action intersecting and providing support for the nucleus or core mission. The Four Spheres of Action Although outstanding patient care serves as the core focus of many if not most of America’s great AMCs, it is difficult to achieve without the synergistic interac- tion of four fundamental spheres of action: structure, research, education, and business. Although AMCs approach each of these fundamental spheres differ- ently, strong arguments will be presented that an AMC cannot fulfill its societal mission and provide outstanding patient care without successfully addressing each of the four spheres of action and linking them to the core mission. Indeed, we will see that when an AMC loses sight of that core mission, it may abrogate its societal responsibility. is book is laid out in four main sections that represent each sphere of action. Each section has three chapters that address the complex issues present within each sphere. ese complex issues must be addressed in order to achieve the best possible results in each sphere, thereby ensuring the future health of the AMC. xxx  Introduction Section 1—Sphere of Action: Structure In his seminal study of America’s AMCs published in 1910, Abraham Flexner noted the importance of the structure of the AMC and in particular its relation- ship with its accompanying hospital. e report noted that “a hospital under complete educational control is as necessary to a medical school as is a laboratory of chemistry or pathology.…Centralized administration of wards, dispensary, and laboratories, as organically one, requires that the school relationship be con- tinuous and unhampered” [31]. Ironically, during the past two decades, many AMCs that were once integrated have separated into their individual components as universities have jettisoned their affiliated hospitals in the fear that financial downturns could adversely influence university endowments. Few of the plans for new medical schools include an association between the medical school and an academic hospital. Indeed, fewer than half of today’s academic hospitals have a direct relationship with their affiliated medical school. e relationships of the various parts of the care delivery system within a given AMC are also often ambiguous. Academic physicians work in departmental silos rather than in cohesive, collaborative, and integrated multidisciplinary teams. However, it is now becoming clear that the current structures of many AMCs are not effective; the following facts can be noted with regard to structure: Contemporary AMCs require higher levels of integration among and ◾ between the component entities to succeed as a distinctive clinical enter- prise in a competitive market. Departmental silos are anachronistic at a time when patient care must be ◾ multidisciplinary and collaborative. AMCs with the highest levels of performance and the best reputations ◾ were founded as or are evolving toward highly integrated systems. Integrated systems are more able to meet the current challenges facing ◾ AMCs and better achieve the goal of providing outstanding patient care. A separation of the hospital and the medical school makes it more difficult ◾ to take advantage of market opportunities, align vision and strategy across all parts of the AMC, invest in the academic missions of the AMC, and rationally invest in capital improvements. Restructuring is not simple and requires a shared vision across the entire ◾ AMC regarding the core goals and missions. ere is no perfect structure for any single AMC. However, recognizing that success in the core mission is necessary for success in the academic mission, it is imperative that AMCs undertake self-analysis and restructuring. In Chapters 1, 2, and 3, I will present three fundamental concepts upon which the ideal Introduction  xxxi structure for each AMC can be built while supporting the core mission of excel- lence of patient care: Chapter 1 describes the need to integrate the economic and administrative structure of the teaching hospital, the medical school, the practice plan, and the university. Chapter 2 addresses the need to create a care delivery system that seamlessly links the various components of the healthcare delivery system that have an impact on the care of patients with a specific disease. Chapter 3 discusses developing a new generation of physician leaders with the authority, the knowledge, and the courage to lead change. Section 2—Sphere of Action: Research Over the past century, fundamental discoveries from academic medical centers have resulted in transformational changes in the way that clinicians care for patients with a vast array of diseases. ese discoveries have been as diverse as the development of the polio vaccine or the development of novel treatments for some forms of breast cancer. More recently, new scientific discoveries and break- throughs in technology, including the sequencing of the human genome and advances in stem cell biology, have provided potential opportunities to enhance dramatically our ability to treat human disease in the future. Positioned at the center of both basic and clinical research, AMCs should be poised to translate these scientific breakthroughs into outstanding new methods of patient care that can provide a competitive edge in the healthcare marketplace. However, it must be remembered that the “best healthcare” cannot be con- fused with “high-technology healthcare”: e highest level of technology might not necessarily be the best healthcare for a given patient. Unfortunately, external and internal impediments now challenge the ability of even America’s foremost AMCs to fulfill their research goals. In a monograph titled, “A Broken Pipeline? Flat Funding of the NIH Puts a Generation of Science at Risk,” representatives from six of America’s most prestigious AMCs noted that “even as substantial advances appear within our grasp—including breakthroughs in Alzheimer’s disease, lung cancer, and depression—they are at risk of slipping away because the NIH is experiencing a dangerous slowdown in funding—one that is unprecedented in the history of the nation’s biomedical research enterprise” [32]. ese concerns are supported by the following findings: ere has been an unprecedented decrease in NIH funding for each of the ◾ past 5 years. xxxii  Introduction Only 8 out of every 100 scientists submitting an NIH grant will be funded. ◾ Both young and established investigators are leaving AMCs to pursue ◾ careers in industry. Well-endowed AMCs have lured teams of funded scientists from smaller ◾ AMCs rather than seeking young and less established investigators. e difficulty in obtaining NIH funding has caused junior investigators to ◾ become conservative in their scientific approaches. Physician–scientists have been forced to do more clinical work to sup- ◾ port themselves. Clinical research has shifted from U.S. academic medical centers to for- ◾ eign centers. High-profile articles in the lay press about conflicts of interest on the parts ◾ of scientists and clinicians have led to a loss of public trust. e departmental structure of AMCs obviates the development of collab- ◾ orative and cross-disciplinary research. In order to regain their international leadership in both basic and clinical sci- ence and achieve the core mission of providing outstanding patient care by trans- lating new scientific and technical discoveries into new and novel means of patient care delivery, America’s AMCs must address three fundamental concepts: Chapter 4 discusses fixing the “broken pipeline” of academic scientists and discovery. Chapter 5 presents the need to resolve the conflict of interest issues that per- vade academic medicine. Chapter 6 describes novel ways to commercialize research discoveries so that AMCs can be less dependent on external funding. Section 3—Sphere of Action: Education As part of his landmark study, Abraham Flexner visited each of the 160 U.S. medical schools in existence in 1910. He found that e Johns Hopkins Hospital provided “practically ideal opportunities” for medical education and held the Medical Department of the Johns Hopkins University as a standard. Unfortunately, Hopkins was not typical: e report noted across the United States “an enormous over-production of un-educated and ill trained medical practitioners…in absolute disregard of the public welfare and without any seri- ous thought of the interests of the public” [31]. Flexner blamed the overproduction of ill-trained doctors on “the existence of a very large number of commercial schools…also known as proprietary or for-profit schools.” He also noted that although the ideal doctor had to be well Introduction  xxxiii educated, “the question is, then, not merely to define the ideal training of the physician; it is just as much, at this particular juncture, to strike the solution that, economic and social factors being what they are, will distribute as widely as possible the best type of physician so distributable” [31]. In response to the Flexner report, state legislatures across the country passed regulations that resulted in the closure of the many proprietary medical schools, and medical educators and hospital officials recognized that education and research improved patient care. By 1925, modern teaching hospitals had been created across the country. After World War II, academic departments increased in size as grants from the National Institutes of Health supported the research efforts of the faculty, many of the patients treated at AMCs paid for their care through health insurance plans, and fee-for-service, third-party reimbursements increased for the high-cost, high-technology services found at many AMCs [33]. Medical school leaders could cross-subsidize the teaching programs of the AMC with the high reimbursements for patient care. However, over the past two decades, a variety of economic and demographic factors has combined to threaten the educational mission of the AMC. is in turn has threatened the ability of the physician workforce to fulfill its core mis- sion of delivery of outstanding care for patients. Some of the factors include: e United States faces a critical shortage in the physician workforce. ◾ It is increasingly difficult for AMCs to recruit and retain the high-quality ◾ physicians needed to teach the next generation of physicians. Graduating physicians—over half of whom are women—have sought spe- ◾ cialties that are more “family friendly” and offer a more controllable lifestyle, thereby drawing them away from research or primary care specialties. e Balanced Budget Act of 1997 capped the number of postgraduate ◾ training positions in the United States. is resulted in limited postgradu- ate training opportunities. e high cost of a medical education coupled with high indebtedness and ◾ comparatively low salaries for many specialties has had an undue influence on students’ career choices. New medical schools have evolved without affiliations with research uni- ◾ versities, existing medical schools, or sophisticated quaternary hospitals. e regulatory agencies that oversee medical education are diffuse and ◾ poorly integrated. e ability of some AMCs to support the full cost of a medical education ◾ for all or a substantial number of their students threatens to result in the development of a two-tiered system of medical education. AMCs must face the challenge of incorporating rapidly evolving science ◾ and technology into the clinical education of students and graduates. xxxiv  Introduction America’s AMCs must focus their efforts on ensuring that the next gen- eration of physicians receives a level of education that allows them to provide outstanding patient care. To do this, they must create a new generation of clini- cian–educators and clinician–scientists to serve as teachers and role models by excelling in both the art and science of medicine. is will not be an easy task, but it can be facilitated by pursuing three fundamental concepts in Chapters 7, 8, and 9, which provide the framework for the education sphere for future AMCs: Chapter 7 looks at how to resolve the physician workforce crisis by expanding current medical schools or building the right kinds of new medical schools. Chapter 8 addresses the changing demographics of America’s trainees. Chapter 9 describes how to improve the clinical training of America’s future workforce by focusing on professionalism. Section 4—Sphere of Action: Business In his report to the Carnegie Foundation in 1910, Abraham Flexner pointed out the relationship between finances and the quality of American medical schools. He criticized schools that had poor financial underpinning as well as those that used positive margins to pay “well-to-do” clinicians or “profes- sors in regular practice” or to “pay out fees salaries to some of the most suc- cessful practitioners in New York City while the laboratory branches still lack anything like uniform development” [31]. In the years after World War II, NIH funding, lucrative reimbursements from health insurance companies, and robust returns for high-technology services provided at many academic medical centers allowed AMC leaders to fund the many missions of the AMC without focusing on the “business” of the academic enterprise. However, in the mid- 1990s, the financial health of AMCs changed dramatically as impediments to financial success multiplied: ird-party payers became unwilling to support the academic and research ◾ missions of the AMC despite harboring billion-dollar margins. Community hospitals became active competitors for high-technology care. ◾ e Balanced Budget Act of 1997 lowered the financial margin for many ◾ AMCs by 35–50%. NIH funding decreased substantially between 2003 and 2008. ◾ At a time when U.S. industry pays nearly $30 billion to support clinical ◾ research, the majority of the research is performed outside the United States. Many public hospitals closed due to inadequate state or community support. ◾ Introduction  xxxv AMCs were forced to care for over 60% of the 47 million uninsured ◾ patients in the United States. Only 30% of U.S. academic medical centers reported positive margins. ◾ Federal funding fell far short of the dollars necessary to support the educa- ◾ tion activities of AMCs. Rising costs in malpractice insurance fees and large verdicts in states ◾ without caps changed the geographic distribution of many physicians and adversely affected AMCs. e catastrophic collapse of U.S. and global financial markets has ◾ increased the number of patients without health insurance, depleted revenues from endowment portfolios, and decreased yearly fundraising efforts. is has resulted in AMCs having to trim budgets by as much as $100 million. Although each of the intersecting spheres of action plays a critical role in allowing AMCs to overcome the unique set of internal and external challenges they face in achieving their core mission of providing outstanding patient care, the importance of the business sphere cannot be overemphasized. If Flexner had written his landmark text in 2008, he might have expressed the importance of the AMCs’ business mission as “no margin—no mission.” In Chapters 10, 11, and 12, I present three specific concepts fundamental to incorporating business practices into the culture of the AMC: Chapter 10 describes the need to develop new and innovative methods to finance the missions of the AMC. Chapter 11 presents novel ways in which AMCs can develop strategic regional and global collaborations. Chapter 12 points out the need to obtain consistent governmental and com- munity support. A Heritage of Excellence: Continuing the Core Mission Each Friday morning, a hundred medical residents at Hopkins, a large number of Hopkins faculty and graduates of the Hopkins medical residency across the country, and I take from our drawers a dark blue tie or a scarf emblazoned with a group of small silver shields. Upon each shield is the word Aequanimitas, mean- ing calm in the face of adversity. is was the title of a speech that William Osler presented at the time of his departure for his new position at Hopkins in 1889 to [...]... hospital margins and took place at a time of an “arms race” in Pennsylvania: The Allegheny Health System was purchasing a large number of hospitals and physician practices in both western and eastern Pennsylvania as well as two medical schools in Philadelphia However, decreasing compensation for physician services and the Balanced Budget Act substantially eroded the positive margin of the hospital and the. .. The hospital director would change from the role of academician to that of a businessman in a highly competitive environment, while the role of a department chair would migrate from “that of a business entrepreneur and manager to that of a senior clinician and academician” [20] Thus, not only the relationship between the hospital and the medical school needed to change but also the roles of the academic... Budget Act of 1997, which capped payments to AMCs, including those for postgraduate education As a 6    Pursuing Excellence in Healthcare result, if an AMC wanted to start a new program or increase the size of its postgraduate training program, it had to support the cost of expansion itself In response to the financial stresses placed by the appearance of the perfect storm, many AMCs took a careful... teaching hospitals that are part of the UHC After ranking all 97 for their quality of patient care, they selected a representative group of top-ranked and average programs A team with expertise in leadership, nursing, quality improvement, patient safety, and risk management—but blinded as to the ranking of each school—then performed site visits at each of the programs They interviewed key members of. .. lower ranked institutions seemed unable to resolve their internal conflicts between the missions of patient care, teaching, and research and seemed largely satisfied with the level of quality and safety at their institutions The CEO of each of the top-performing institutions was passionate about improvement in quality, safety, and service and took a very hands-on approach to improving these areas The top-performing... hospitals decreased because health maintenance organizations (HMOs) were unwilling to support the social, educational, and research missions of AMCs Thus, managed care organizations directed their patients to lower cost community hospitals that did not have teaching programs and away from higher cost AMCs This negatively affected the academic missions of the AMCs The final part of the storm was the Balanced... Rather, we did so as a reminder and a reaffirmation of the heritage of excellence passed on as an unbroken chain from Osler to his numerous successors and the primacy of outstanding patient care in all that we do as physicians, educators, and investigators Osler’s message becomes ever more important today as physicians face increasing adversity Subsequent chapters of this book will point out the many... top-performing centers were integrated across the multiple components of the AMC In two of the top performers, the lead executive in the hospital and the leadership of the clinical departments reported to a single CEO Although the third leading AMC had a more traditional structure—separation of the hospital, the school of medicine, and the faculty practice plan the AMC was managed collaboratively with... five distinct groups [14]: ◾◾ The medical school, the physician practice plan, and the affiliated hospital or hospitals are “owned” by the same entity (the University of Pennsylvania and the University of Michigan) ◾◾ The teaching hospital owns the practice plan, but is separate and distinct from the university and the school of medicine (the Massachusetts General Hospital and Harvard University, the New... plan is a separate and distinct entity (New Jersey Medical School and the University of Kentucky) ◾◾ The hospital, the school of medicine, and the physician practice plan are separate and distinct entities (Northwestern University and the University of Arizona) Additional factors must be considered when trying to evaluate the various structures that exist in American AMCs In the case of AMCs where the . Some of the most relevant data were obtained from reports in the lay press because the press often has the finances and the clout to obtain data that are impossible for an individual to obtain. Other. understanding of their function, evolution, and histori- cal context was required—as well as a thorough understanding of the “health” of the organization itself. Evaluating the financial health of an. 18 75 and by Abraham Flexner in 19 10. Evaluating the Health of America’s Academic Medical Centers In order to evaluate the issues facing the AMC today properly and write this book, a comprehensive