ACADEMIC MEDICAL CENTERS
September 15, 2000

Academic medical centers include the nation's roughly 125 medical schools and their affiliated teaching hospitals and clinics. Many are now under serious financial stress. Several universities recently sold their hospitals to corporate groups. The Health Unit is a partnership with the Henry J. Kaiser Family Foundation.

Academic Medical Centers Extended Excerpts: Dr. David Blumenthal David Hunter Sen. Patrick Moynihan Dr. Herbert Pardes A Health Spotlight Report: Remaking Medicare A Health Spotlight Report: Uninsured in America Browse the NewsHour's coverage of Medicare and Health     Association of American Medical Colleges The Association of Academic Health Centers	HEALTH CARE WORKER: Two liters… SUSAN DENTZER: Like many academic medical centers New York Presbyterian Health System in Manhattan represents the state of the art in American health care. Its physicians perform highly specialized surgeries for complex medical conditions… researches the causes of top killers like heart disease, and train the nation's future doctors and other medical personnel. But at the same time many of these powerhouses of education, science, and technology are also in serious trouble.
	Financial stress and losing margins
	DR. DAVID BLUMENTHAL: Fourteen of the twenty most research-intensive institutions are showing some evidence, some real evidence, of financial stress. DAVID HUNTER: Fifty percent of the academic medical centers are losing money. The other 50 percent, most of those leaders will tell you that their margins are eroding. SEN. DANIEL PATRICK MOYNIHAN: Without anybody noticing, we could lose the greatest research institutions in the world and probably in the history of the world. SUSAN DENTZER: Academic medical centers consist of the nation's roughly 125 medical schools and their affiliated hospitals, clinics, and other patient-care facilities. But many are now under such stress that their parent universities have had to take drastic action. Harvard's Dr. David Blumenthal directs a task force on academic medical centers sponsored by the New York-based Commonwealth Fund. DR. DAVID BLUMENTHAL: There are a number of institutions like Georgetown University Medical Center that have sold their hospitals either to for profit or non-profit chains, Georgetown did that, the University of Minnesota did that, the Tulane University did that, the University of South Carolina has done that. SEN. DANIEL PATRICK MOYNIHAN: I'm Pat Moynihan.
	An alarming trend
	SUSAN DENTZER: These trends have alarmed the academic medical centers' few key allies in government -- foremost among them Senator Daniel Patrick Moynihan. A New York Democrat who's retiring at the end of this year, he's long championed the centers' cause from his seat on the powerful Senate Finance Committee. SEN. DANIEL PATRICK MOYNIHAN: What we're dealing with here is what economists call a public good. Columbia Presbyterian is a public good. Everybody benefits from it. SUSAN DENTZER: That's because academic medical centers conduct nearly $20 billion a year in basic biomedical research and so-called "clinical" research that tests new ways of treating patients. They also provide an estimated 40 percent of the care given each year to millions without health insurance. What's more, they help to train the next generation of doctors, including more than 15,000 medical students who graduate each year, along with roughly 80,000 residents or fellows. DOCTOR: Take a deep breath, sir. SUSAN DENTZER: On a recent visit to New York Moynihan accompanied a group of doctors in training at New York Presbyterian on a visit similar to the typical teaching sessions known as "rounds." DR. RANDY BARROWS: Mr. N.W. is a 72-year-old man with Parkinson's Disease, who comes in with a blood clot in his legs which went to his heart, a pulmonary embolism. DR. BRIAN LANSBERG: We also have a better understanding of why people do form clots, and we have better ways of treating clots as well. SEN. DANIEL PATRICK MOYNIHAN: Well, this 73-year-old is happy to hear that. SUSAN DENTZER: As America's outlays for scientific research and health care ballooned in the years after World War II, academic medical centers multiplied and prospered. And with few, if any, constraints on spending, the so-called "teaching" hospitals at the heart of these centers generally charged more to care for patients than local community hospitals. That was partly to cover the higher level of care they delivered and partly to cover teaching costs and other social missions. But all that began to change in the early 1990's. HMO's and other managed care health plans began to resist paying these higher fees as a way to contain health costs. Fair enough, says Dr. Herbert Pardes, president and CEO of New York Presbyterian.
	Controlling and cutting health care costs
	DR. HERBERT PARDES: They are expressing a view felt by the body politic over the last number of years -- a view which said we had to do something to rein in health care costs. SUSAN DENTZER: But now the centers say that cost cutting by managed care has gone to the extreme. KATHLEEN O'DONNELL: The dollars are fewer and the bureaucratic red tape and the hassles have increased exponentially. SUSAN DENTZER: The pressures on academic centers only grew worse with the passage of a federal law: the 1997 Balanced Budget Act. It made big cuts in a number of areas of government spending, but among the largest were a range of cuts in Medicare. And a small portion of those were directly targeted at teaching hospitals out of the belief that some institutions were getting too much money from Medicare to help train too many doctors. Since the law was enacted, though, all the Medicare cuts have sliced far more deeply than lawmakers ever imagined. Originally estimated to shave just $116 billion in Medicare spending over five years, the cuts are now projected to total at least $200 billion, unless reversed. That's prompted regret and a reversal of positions among many of the lawmakers who voted for the measure, including, ironically, Moynihan. SEN. DANIEL PATRICK MOYNIHAN: Never should have been enacted; never should have been signed into law… Should be repealed, changed, and with a measure of energy. SUSAN DENTZER: Unless and until that happens, academic medical centers, like New York Presbyterian, face a serious financial squeeze. DR. HERBERT PARDES: Our financial people tell us that a rough estimate is that we face something in the neighborhood of a $40 million deficit in a recurring fashion each year. SUSAN DENTZER: That means his institution could face delays in installing state-of-the-art information technology that could revolutionize treatment of patients. Dr. Stephen Shea, who heads a group of internists on Columbia's Medical School faculty, demonstrated a prototype to Moynihan. DR. STEPHEN SHEA: What I wanted to show you was the computer that we are now using in outpatient settings, and very shortly we're going to be using telemedicine to actually deliver care. SEN. DANIEL PATRICK MOYNIHAN: Telemedicine... DR. STEPHEN SHEA: Telemedicine, e-health. We can take care of your diabetes in your home. We can make an electronic house call. SUSAN DENTZER: Financial pressures also mean that New York Presbyterian will be stuck for a while longer with equipment that is five or more years out of date. Dr. Ivor Douglas heads the medical intensive care unit. DR. IVOR DOUGLAS: What we do predominantly here is care for the very, very critically ill patients, many of whom suffer multiple organ failures and dysfunctions. I could walk around and show you a lot of empty holes where clearly, in a cutting edge ICU, we should have a piece of equipment, an additional person, an additional resource. SUSAN DENTZER: And there are still the gnawing pressures of managed care. Kathleen O'Donnell is an associate dean at Columbia's medical school, who oversees the faculty practice plan in which doctors like Shea and Ivor participate KATHLEEN O'DONNELL: Because the reimbursement rates keep declining, physicians in the clinical departments find that they have to work harder to generate the same amount of funds they used to generate, or take a loss in income. SUSAN DENTZER: O'Donnell says that restricts not only the time doctors can spend with individual patients, but also the time that they have for teaching and research. That includes physicians like Dr. Elsa Giardina, a cardiologist and pharmacologist. DR. ELSA GIARDIAN: I hope you are not nervous. PATIENT: No, no. SUSAN DENTZER: She's conducting leading-edge research to explore the role of a microscopic bacterium in causing heart disease -- the leading killer of Americans. Giardina says the increased administrative burdens of managed care cut into the hours she can devote to research. DR. ELSA GIARDINA: You may have to provide the patient with a referral, or you may have to certify a patient who is going to have a cardiac catheterization, or you may have to deal with a managed care company over their pharmacy benefits. SUSAN DENTZER: Harvard's Dr. Blumenthal says there's evidence that such pressures have already taken a toll on research conducted at many institutions. DR. DAVID BLUMENTHAL: We found that in the very competitive markets, that is, the markets with a lot of managed care penetration, that faculty seemed to publish somewhat fewer clinical research papers, that they seem to compete less effectively for federal funding for research, and also that their faculty seem to be less stable. SUSAN DENTZER: Many of these problems are likely to grow worse, says hospital consultant David Hunter. He's a turnaround expert and take-no-prisoners cost-cutter who's helped about 15 centers wrestle with their problems. DAVID HUNTER: What we try to tell our clients lately is that the hospital business will pay for the hospital business. It's very hard to generate large subsidies anymore, large margins which you can use to prop up the other pieces of an academic enterprise. SUSAN DENTZER: To cut costs, Hunter has told some centers they must reduce the number of nurses and other hospital staff. But he says even that approach is running its course at many institutions. DAVID HUNTER: You could make the argument, historically, that some of them have been fat, you know, used excessive supplies, and done things that could have been more efficient. But on balance, our experience is, we go to these institutions, they have taken a lot of people out by the time we get there. SUSAN DENTZER: As a result, he's also had to recommend scaling back social missions that many institutions value deeply. For example, Hunter told the University of California at San Francisco to close down Mt. Zion Hospital, an inner-city institution that treated many uninsured patients. Hunter recommended shifting their care to the university's other clinical sites, but even he worries such steps may not be enough to save some academic centers. DAVID HUNTER: If it is in the public interest for there to be a major contraction in the health care system, including the academic medical centers, the way we're going about it is all wrong, because what's going to happen is the efficient producers and the right institutions in the right places may not be the ones that survive three to four years of continued cutting, and continued financial pressure.
	What's next?
	SUSAN DENTZER: Some relief may be in sight. President Clinton has now proposed pumping $21 billion back into Medicare over the next five years. That's in part to alleviate the cuts on teaching hospitals. Congress is likely to go along, but Moynihan still thinks broader changes are needed. For years he's pushed for a national trust fund that would fund medical education and research. He has these parting words of advice for his colleagues, urging them to overcome indifference to these institutions' fates. SEN. DANIEL PATRICK MOYNIHAN: These are teachers. These are people who give their lives to research. They are healers. This is not the NASDAQ. These are people who devote their lives to the science of helping human beings who need their help. SUSAN DENTZER: And many of these people are now waiting to see whether Congress acts on their concerns before it adjourns in the fall.