Many Academic Medical Centers Struggling Financially, Panel Says

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Many of the country’s 150 academic medical centers, considered the crown jewels of the U.S. health care system, are fighting for their survival despite a nationwide economic boom, top health care leaders said Thursday.

These prestigious institutions, including several in California, starved by cutbacks in Medicare and managed care, are struggling to balance their costly teaching, clinical and research missions against the pressures of the bottom line, the experts argued at a news conference organized by the Journal of the American Medical Assn.

Despite the contributions of academic medical centers, they said, most Americans are unaware of the institutions’ financial peril.


The conference was called to publicize a series of editorials and commentaries in next week’s edition of the magazine, the nation’s largest-circulation medical journal, focusing on the plight of academic medicine.

The journal depicts the problem as a lack of broad-based, stable economic support for academic institutions, coupled with increased competition from health care entities that don’t share the same social mission.

Because of the federal Balanced Budget Act, academic medical centers are expected to lose more than $110 billion in Medicare dollars between 1998 and 2004.

“Bankruptcies, massive deficits and merger dissolutions characterize the ominous state of many U.S. teaching hospitals,” wrote Dr. Herbert Pardes, a guest commentator from New York-Presbyterian Hospital, in the journal.

Academic medical institutions may be “doomed to extinction” or destined to become for-profit businesses unless physicians work together to regain control of patient care, medical education and research, journal editor Catherine D. DeAngelis argued in an editorial.

She said that “the ethics of business in a capitalist society cannot apply to the ethics of health care.”


DeAngelis’ opinion piece is one of six in the journal to underscore the challenges facing academic medical institutions.

DeAngelis took particular aim at managed care organizations. In reality, she argued, they are managed “cash” organizations, which funnel profits to the pockets of chief executives and pay nearly nothing for medical research and education.

Yet she acknowledged that in the current environment, some academic institutions necessarily will face cutbacks or closure.

“The closing down or downsizing of a number of [academic health centers] is warranted,” she said.

As it stands, one health care consulting firm estimated that nearly 70% of U.S. hospitals will show negative balances in the next several years.

Ralph Muller, president of the University of Chicago Hospitals and Health system, urged Thursday that Medicare cuts be halted and that pending legislation be passed requiring all insurers to contribute to the costs of teaching hospitals.


Pardes contended in his journal article that the problem is going unaddressed because of a “cynical disbelief” among some people that the financial risks of these high-tech centers are real and a failure among politicians to give the issue priority.

He points out that the University of Pennsylvania, “one of the world’s finest academic medical centers,” reported a $200-million deficit in 1999. New York Presbyterian, Duke, Stanford and Mount Sinai of New York also have experienced layoffs and fiscal turmoil.

Although Pardes does not mention it, UC San Francisco, which just disentangled itself from a merger with Stanford, is anticipating a $40-million loss this fiscal year.

“To say that these institutions are crying wolf ignores the financial catastrophes,” Pardes wrote. “These problems are spreading throughout the country.”

“The vitality of teaching hospitals should be a primary concern of the president and congressional leadership,” Pardes added.

Several of the journal commentators acknowledged, however, that academic medical institutions bear a degree of responsibility for their plight.


Drs. Paul F. Griner and Deborah Danoff of Washington contended in journal articles that academia has not sufficiently emphasized the value of teaching, allowing faculty to treat instruction as optional rather than a core duty. In addition, they said, institutions have insufficiently compensated teachers.

Rashi Fein of Harvard Medical School said academic leaders were so pleased when money was flowing freely their way that they did not point out that the funding mechanisms made no sense. They failed to speak out for more broad-based support and “more rational ways to ensure care,” he wrote.

At Thursday’s news conference, Fein said that academic medical centers need to do a better job of “explaining to the public what this enterprise is about.”

DeAngelis contended that academic medical centers, in effect, have been “sharing” the doctors they train and the discoveries they generate with the outside world--including competitors--for virtually no compensation.

Now, there are signs that such generosity is eroding. In some cases, privately funded academic researchers have delayed publication of their results at the request of firms that paid for the research.

“Using business ethics without tempering them with the needs of society simply is not working,” she said.