Bullish but Realistic

Taking Stock

by Michael Johns  

Even though bearish external forces continue to threaten academic health center (AHC) traditions everywhere, there's much to be bullish about - especially at Emory. In his keynote speech (excerpted here) earlier this year to the American College of Cardiology, Emory's executive vice president for health affairs and director of the Woodruff Health Sciences Center discussed what AHCs must do to remain master of their own destiny.

The academic health center continues to operate on precarious, shifting terrain. Most of our centers continue to have strong programs of education, research, and patient care, and increasingly in technology transfer and in public health and patient education. Much of the credit for the continuing solvency of many of our institutions must go to our hospital CEOs, who have figured out how to stay substantially in the black in the face of significant cost pressures.

Yet we all continue to feel the pressure to reduce costs and to become ever more competitive with the private players in clinical care and increasingly in many areas of research. Overwhelmingly, we remain vulnerable to even the slightest changes in reimbursement, patient demographics, payer reimbursement schedules, new competitors in specialized fields, and the ebbs and flows of support from NIH, NSF, and the philanthropic sector. In other words, we remain subject to the impact of external forces that continue to shift and change and create new challenges. Few centers are really master of their own destiny.

The bottom line is that AHC leadership must do everything we can to protect and enhance the academic mission. Without that, without the absolute commitment to AHCs' being the centers of inquiry, education, and discovery, we are - or will be - nothing special.

On the clinical side, we will see more of the same pressures to lower costs and for reduced payments. Cross-subsidizing research and education will become even tougher.

This means, first of all, that we need to be hard-nosed and require careful budgeting in all units. I know this sort of attention to budgeting is not a popular idea, but I can't emphasize enough how important it is. We must know how our costs are generated and where our revenues and our service costs and our productivity issues are. Without this information and without rational planning based on it, we cannot work effectively in this new environment. We have to face up to this reality. We are expected by the public to be accountable.

Second, physicians must work with hospitals to reduce costs and improve efficiencies in the delivery of care. The problem is that this is not in the nature of many academic physicians. But this too must change. There is so much that can be accomplished when hospital personnel and physicians work together. It's better for everyone.

Third, we still need to embrace, understand, and better manage the practice of population-based care. The future of gatekeepers and the prospects for large increases in the training of primary care physicians are still uncertain. The concept of primary care gatekeepers is in competition with the concept of "principal care." In this model, a specialist, usually the one treating the primary symptoms, coordinates care with a multidisciplinary team of expert care providers.

The viability of this disease-management paradigm will depend on whether "principal care" providers will do the necessary partnering with primary care and nonphysician care providers, and family/community members, and in nonhospital settings, including in-home and long-term-care settings. The comparative costs of these different models are not well known yet. But, don't be surprised to see remote access, diagnostic, and delivery technologies proliferate soon and really begin to have an impact on population-based care models.

Most important to the clinical enterprise is to get payers to the table as partners with providers. Just as we need to align incentives between physicians and hospitals, we need better partnerships with and better feedback from payers. Payers must begin to share information, rather than simply using it as a weapon and in a piecemeal fashion to approve or deny coverage. There is a tremendous amount of power in the information that payers can collect, and if it were shared properly with providers, we could be working together to reduce costs and increase efficiencies. We need better relationships too, so that we can work through difficulties such as when a provider has an unusual population of sick people or other special circumstances.

A good example of such collaboration is the trend among software developers to release to the public the proprietary code they use for their software. Until a couple of years ago, this code was the most heavily guarded secret in a software company. If that was compromised, your competitive edge was lost and so was your business. But now, many have realized that if you open up the code to the public, your development staff suddenly goes from a dozen or two to tens of thousands of developers. People all over the world can and do contribute to improving the product, creating more demand, more sales, and better outcomes for everyone.

We need that same sort of openness and new thinking between payers and providers. We need to think of information as a tool to use and improve together for the sake of our missions in the health care marketplace. We need to see our missions as complementary and overlapping and then act accordingly. This is absolutely key to our future.

Protecting the academic mission

Causes for Concern

  • Health care cost inflation growing almost 8% per year
  • Drug costs up, now 20% of health care bill
  • Falling insurer and HMO profits squeezing providers
  • Payer consolidation = more power to payers
  • Consumer backlash against HMOs = increasing cost pressure on providers
  • Physician management groups floundering
  • Falling corporate earnings = pressure to reduce cost of employer-provided insurance
  • Providers pressured to lower costs, increase value, account for outcomes
  • More working poor (43.4 million uninsured and rising)

We all need capital - new money to invest not only in research and educational programs, but also in new infrastructure, including new facilities, expanded information systems capabilities, and new people with expertise in managing, communicating, and providing service in this new environment.

As insurers and HMOs consolidate in order to compete, AHCs must also expand their reach, if not globally, then in strategically chosen areas. But we can't buy hospitals. Often we can't open or create new facilities that we need because of budget and resource constraints, or just as often, because of local CON constraints.

One major answer we have found is strategic partnering. Emory has just penned a deal with Columbia/HCA. I know many other academic centers have created relationships with Columbia and with many other hospital and health care corporations. But the difference I see in our relationship is that we structured it as an equal partnership. We didn't put out a nickel and they didn't acquire anything of ours: not a hospital, physician group, or anything else. In other words, we didn't sell a hospital; we didn't sell our soul. Instead what we both acquired was a partner. We established a joint-venture LLC with a board with equal representation of both entities. We got access to their eight community hospitals and other community care centers in our region. They got access to our reputation for the finest care and to the comprehensive services that we provide. And we got a partner with whom new projects can be floated and joint ventures can be created, in which we have behind us the capital capabilities of a corporation like Columbia and the substantial research, educational, and clinical capabilities of an entity like Emory.

Certainly it's early in our relationship. We have yet to hit the inevitable bumps in the road, but we're convinced that we have a win-win situation here for the two of us as well as an even bigger win for an expanded population of patients in the Atlanta metropolitan area.

Other important areas for increasing funding are efforts in technology transfer and in entrepreneurial activity among faculty. Patenting and licensing of new technologies can become a serious source of revenues - institutional, individual, and departmental. Establishing and incubating biotech companies can provide incredible opportunities across the institution and beyond. These should be priorities in all AHCs.

Another priority must be the philanthropic sector. Emory has benefited greatly from grateful patients and far-sighted industrialists and philanthropists. The Foundation Center, which tracks trends in foundation giving, reported that 1997 saw health care and research grants increase to 17% of all private foundation giving, putting health care in second place behind education (at about 24%). This amounted to more than $14 billion! AHCs need to see this as a prime source of support.

In the area of research, we also have new challenges. Contract research organizations (CROs) have started eating our lunch in providing a fast-expanding menu of sophisticated contract services to the pharmaceutical industry that we had always assumed would forever be ours. What to do about it? First, get better at providing these services ourselves. But second, again, we should look at some of these new organizations not simply as competitors, but as potential partners. We've done that by establishing a very positive, forward-looking partnership with Quintiles, one of the two largest CROs in the world. We've created a preferred provider relationship that will increase opportunities for Emory physician-scientists to clinically evaluate new drugs and devices. Just like partnering on the clinical side, it's a matter of matching up complementary capabilities for mutual benefit.

What should AHCs do?

Reasons for Optimism

  • Robust economy
  • NIH funding increasing
  • Popular support for basic research
  • Exciting new discoveries and medical advances
  • Innovative delivery and service programs
  • Growing discontent with managed care cost emphasis
  • Incredible new technologies and information systems
  • More accessible medical and health knowledge

We also need to be more active in our local communities - take leadership positions and become resources for local, state, and regional issues relevant to our missions. We can't just be thinking of ourselves all hunkered down and myopically focused on survival. It's absolutely critical to realize that our communities and our patients are our most important and enduring allies. We should be doing everything we can to reinforce that alliance and to build on it - both for their sake and for ours.

One important aspect of this community focus is to take new leadership in providing health information and education both to patients and to the community at large. There is now an enormous flow of health information directed to the consumer. Health information is provided in print, radio, and TV, both in the form of public interest messaging and in direct-to-consumer advertising by the pharmaceutical industry. And more and more information is being presented by the alternative medicine industry.

Then there is the web, where the amount of information and the various ways in which it can be accessed and manipulated and packaged are just astounding.

But with so much information out there, consumers more and more are trying to identify sources they can trust to give them the best information. AHCs should be that resource for the vast majority of people. We're the natural place and source for that. Some recent marketing research at Emory suggests strongly that community members look to academic health centers for reliable health and medical information more than they look to other sources. They know they can trust us to provide the best information without bias. They are virtually begging us to make it easier to access that information. That's why AHCs ought to actively sponsor web sites and other forms of information for community and patient use. We all should develop the capacity to deliver timely and accurate health information to our communities in ways that effectively meet their needs to make good health care and lifestyle choices - information that helps people participate intelligently and effectively in their own care. If done right, these new resources will become important catalysts of increased community and philanthropic support.

Which brings me back to strengthening relationships with the private philanthropic sector, where there is much interest in pioneering programs in population health management, health services development, and health care delivery. We should be aggressively pursuing, supporting, and conducting that work because plenty of private entrepreneurs are out there looking to do that themselves. In fact, there already are some pretty exciting programs in practice management, physician training, and patient education. The point is, do we want to sit around while other people pioneer in these areas and then have to buy their products? Or do we want to be the leaders in these areas? Philanthropic support and strategic partnering are ways to ensure we are key players.

Cultivating other important allies

Last, but certainly not least, we need to spend much more time and resources preparing good people for leadership in this new environment. Division heads and department chairs need to understand the tools and imperatives of leadership and what they involve. It cannot simply be that I have great credentials in research and so I ought to be in charge. The credentials to lead are different. Leadership development is something we need to get on top of quickly. We all need to initiate programs to create, enhance, and improve the leadership we need for the future.

Why bullish?

I started out by saying that as a group we had lost for the moment our capacity to determine our own destiny. This doesn't have to be. We can take powerful steps to reassert our critical roles, our expertise, and our proper place at the forefront of defining the future of health care. It seems to me that the way forward must consist of the types of initiatives to restructure and reform our internal practices and standards that I have mentioned, and likewise efforts to partner with private sector health care, pharmaceutical, and research industry players that I've described. And when I say partner, I mean partner - not subsuming our facilities or our missions or our people to other people's agendas.

Again, none of this is possible or at least sustainable in the long term unless we can get our own internal acts together. No partnership can last if one part of it cannot bring itself to adopt modern rules of accountability and best-practice standards - if there is not genuine, system-wide commitment from leadership in the organization, especially department chairs, who have to take responsibility for driving down into the organization the new practices and new standards.

We cannot succeed unless leadership at all levels - especially the faculty - is committed to aligning incentives throughout the organization and instituting the foremost programs for managing care, managing research, and even for managing education and training.

So, even in this uncertain environment, I am bullish on the future of the AHC. I think it's an indispensable part of the best health care in the world and that many AHCs will continue to play the foundational and catalyzing roles required of them. But I am a realist and a pragmatist. I'm less bullish about the prospect for those AHCs where faculty cling to outworn paradigms and practices and where leadership fails to effectively engage their communities, their local governments, and the private sector in the new types of relationships and partnerships necessary to survival, not to mention real progress in this environment.

The power to determine our own destiny rests on our capacities to innovate and think our way through these difficult, but far-from-impossible challenges.

In this Issue

From the Director  /  Letters

Emory & Columbia/HCA Open New Doors

Q & A with Columbia/HCA

EHCA at a Glance  /  Map

Emory's Newest Chessman

Global Attack on AIDS

Taking Stock

Moving Forward  /  Noteworthy

Drug trials. Who needs them?

Reaching Out to Nicaragua


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Web version by Jaime Henriquez.