Can Academic Medical Centers Become Accountable Care Organizations?

Below, an excerpt from a superb post by Bob Wachter, Associate Chairman of the Department of Medicine at the University of California, San Francisco, that was originally published on Wachte'r's World. There, he questions whether academic medical centers (AMCs) will be able to turn themselves into the accountable care organizations (ACOs) that reform legislation favors. Or as Wachter, puts it: "Are Academic  Medical Centers Toast in a Post-Healthcare Reform World?”

I believe that some AMCs will be able to “re-vision” themselves, and that this will be the best thing that ever happened to them. Many AMCs need to re-set their priorities, putting less emphasis on money-driven research, while focusing more of  their resources on safe, patient-centered care. As  Wachter,observes, this will mean changing the keenly competitive and often wasteful medical culture traditional at many AMCs.

At the same time, some forward-looking medical centers are not that far from the ACO model.  Off-hand, I think of Maimonides Medical Center in Brooklyn, Dartmouth-Hitchcock in New Hampshire, and  Wachter's own UCSF as three that are likely to lead the way. And these are just a few AMCs that I happen to know fairly well. I also can think of AMCs that will never make the transition unless extraordinarily arrogant CEOs and power-hungry department heads are replaced. I won’t name them. I just hope that, with time, physicians, nurses, residents and interns at these institutions will create a revolution from within.
In the new world of healthcare, the winners will be those organizations that figure out how to deliver care of the highest value – the safest, highest quality, most satisfying care at the lowest cost. Doing this will require the creation of new entities (“Accountable Care Organizations”) that integrate the docs and the delivery system – not just hospitals but clinics, nursing facilities, hospices, home care – into a seamless whole that can deliver cost-effective care across the continuum. ACOs will profit if they can deliver high value care, and fail if they can’t.
In a recent NEJM article Dr. John Kastor, former chair of medicine at Maryland, analyzed the chances that academic medical centers could become successful ACOs. John based his research on discussions with 37 senior faculty members and administrators at Academic Medical Centers, government agencies, and foundations (I was one of them), and his analysis is sobering. In category after category, John chronicled how AMCs are disadvantaged on the new healthcare payment playing field. The challenges include:

Organizational and Structural: most AMCs and their faculty physician groups work in separate organizations and have distinct reporting relationships. Fusing them will be messy. As Kastor writes,
“Without an official who can resolve differences and to whom the dean and the CEO both report, this division of authority can interfere with an institution’s ability to make the changes necessary to form a successful ACO.”

The Costs of Training: Our training model is expensive and inefficient. As Kastor notes, an inexperienced trainee is more likely to over-test than under-test, particularly if he or she is embedded in a culture that ladles out criticism for “missing something” and atta-boys for diagnosing zerbras [extremely rare conditions.]

The Departmental Model: ACOs will require close collaboration between leaders of clinical departments, not exactly our forte. Writes Kastor:

“The effectiveness of ACOs will depend on the centralization of the administration of medical care, whereas clinical departments in medical schools operate on a decentralized model…. Without such coordination, it will be difficult for academic medical centers to reduce the costs of practicing medicine….”

Faculty Incentives and Culture: Kastor points out that many academic faculty operate under incentives that drive them to focus more on their teaching and research than on the provision of high-value clinical care. Moreover, the culture of AMCs is entrepreneurial and individualistic, not team-based and definitely not welcoming of standardization in the name of cost savings.

Lack of Primary Care Infrastructure: Most AMCs are dominated by specialists and concentrate on the care of patients with highly unusual problems. But ACOs require a strong primary care network to ensure that patients receive coordinated and efficient care. Many AMCs will not be able to build and manage an efficient primary care network or develop model patient-centered medical homes. And relatively few have crafted alliances with community-based networks that are free of the town-gown frictions that rob systems of the sense of shared mission needed for success.

After reflecting on all of these issues and considering the counsel he received from the 37 experts, Kastor was unable to find a silver lining: “Given the challenges, several leaders with whom I spoke doubt that ACOs can readily be established at AMCs.”

Perhaps overly influenced by my experience at UCSF, I am more optimistic. I am continuously struck by the skills and passion of the faculty in my division, who see the challenge of providing high value care as an utterly worthy cause, are training the next generation of physicians to be better than we are, and are helping to rewrite the rules of the road – developing new computer systems, new training models, new quality improvement initiatives, even new promotional standards.

And they’re not just doing it for our division of hospital medicine. Increasingly, they are assuming leadership roles in the medical center, the department of medicine, the school of medicine, even other departments such as neurosurgery. Every day, I see our culture moving closer to that of an ACO. Sure, we may be further ahead in this regard than many other places (and it’s not like we’ve figured every last piece out), but this is proof of concept time; what I’ve witnessed tells me that this can be done.

To me, the lesson is that AMCs can transform themselves into value-producing entities, but they need to begin with small pilot units with engaged faculty and strong leaders, folks who believe that improving quality, safety and efficiency isn’t just important, it’s also interesting and cool. For those AMCs that lack a core group of faculty and leaders committed to this change, it will be a very long and bumpy road.

But I suspect we’ll get there. Transforming the AMC into a high-value-producing clinical machine will not be easy, but we’re awfully good at responding to our dominant systems of incentives. We built our old system in response to incentives that promoted research over clinical care, rewarded profligacy over efficiency, and provided no incentive for quality, safety, and patient-centeredness. As these incentives give way to new value-driven ones, I predict that Academic Medical Centers  (at least some of them) will do just fine – and forward thinking AMCs will not only survive in this environment, they’ll thrive. As Don Berwick and Jonathan Finkelstein recently observed:

“We think that the anxiety, demoralization, and sense of loss of control that afflict all too many healthcare professionals today directly come not from finding themselves to be participants in systems of care, but rather from finding themselves lacking the skills and knowledge to thrive as effective, proud, and well-oriented agents of change in those systems…. A physician equipped to help improve healthcare will be not demoralized, but optimistic; not helpless in the face of complexity, but empowered; not frightened by measurement, but made curious and more interested; not forced by culture to wear the mask of the lonely hero, but armed with the confidence to make a better contribution to the whole.”

There are many things that AMCs do uniquely well: deliver complex clinical care, educate trainees, perform cutting-edge research. The great AMC of the future will continue these traditions as they pertain to clinical medicine and basic science, while broadening its agenda to include quality and safety, cost-effective care, and new models of healthcare delivery. The functions that AMCs provide are crucial, and irreplaceable. Failure is not an option. So let’s get started.

11 thoughts on “Can Academic Medical Centers Become Accountable Care Organizations?

  1. Maggie-
    Good for the old “college try”. pun intended) But I see most Academic Medical Centers (AMCs) as being within severe bubbles with severe blinders on. Their likelyhood of transforming into Accountable Care Organizations (ACOs) is small.
    I use the University of Pennsylvania Medical Center in my own home town of Phildelphia as my example of “the bubble/blinded” academic medical institution-totally dedicated to high tech-high-cost bloated bio-medicine and hopelessly wedded to its funders.
    I hope that I am wrong!
    Dr. Rick Lippin

  2. Rick,
    I agree that many AMCs wouldn’t make it.
    But they are not all “bloated”– see the Dartmouth research on individual hospitals and you’ll find huge disparities.

  3. ACOs, like the PCMH, are fads, the latest desperate attempt to buy time and confuse the public. They will fail.
    Today was MATCH DAY, and about 1300 matched in family med, up 11% from last year. Completely, utterly inadequate. The system will continue to spiral down unless primary care gets a massive pay raise, which is not forthcoming. All else is mere rhetoric. Next case.

  4. I agree with Rick. Of course there are AMCs that are responsible, at least until they are coopted by self serving executives.
    But seriously Maggie, what is the ratio, 10 to 1, 20 to 1?
    The “1”s will expire in that ratio because the 10-20 will swallow them as easy targets.

  5. As this unfolds it will be interesting to see how it plays out in large cities with multiple AMCs, such as New York. Inevitably some will be better at it than others. I’m sure that some will be better at marketing it, too, whether they’re better at actually delivering the care or not.
    Like some other posters, I’m not as optimistic as Bob. A fair number of AMCs will implode under the financial strains, I think. Their department chairs will prefer hitting the iceberg and going down with the ship to altering course.

  6. Chris–
    I agree that it will be fascinating to see how this plays out in N.Y., as well as LA, Boston, etc.
    I would add that I’m not sure that Bob W. is that more optimistic than you or I are. I have spoken to him, and he’s a realist.
    He’s speaking from his experience at UCSF.
    Both the Dartmouth research and my experience interviewing a number of doctors at UCSF (on topics ranging from pediatricians diagnosing autism prematurely to unnecessary tests) suggests that UCSF is a thinking AMC
    Also, Bob W. isn’t going to bash academic medical centers in public by saying that the majority wouldn’t make good ACOs–though his post does ssuggest that most will have a very hard time.
    What I like most about his post is that it implies that this might cause a shake-out in AMCs– and cause a fair number (if not the majority) to change their priorities.
    This could mean a huge change in how med students, interns and residents are trained–even if only in new “pockets of value.”
    We need NEW pockets of value.
    I would predict change may be easier at med schools at public universities. Generally, they have less money, and so are not in a position to ignore CMS or its financial incentives.
    This could spread. (Over time I’m not hopeful about much changing in the Boston-D.C. corridor for years—particularly not at hospitals sitting on huge endowments. They have little reason to change.
    I’ve done quite a bit of research on Maimonides–(in Brooklyn)–partially in conjunction with the part 2 on C-sections and inductions that I haven’t yet posted.
    An impressive teaching hospital, both in terms of culture and patient-centered care.
    It’s located in a less than fashionable part of Brooklyn.
    Neverthless,it shows better outcomes, fewer infections than at many of Manhattan’s marquee academic medical centers.
    My daughter, who is having a baby this summer, has picked Maimonides. She lives in Brooklyn. Whe’s not in a very fashionable location, but stil about 30 minutes from her doctor/midwife and the hospital.
    She also checked out OB/Gyns and hospitals in Manhattan (also about 30 minutes away from their apt), but chose Maimonides.
    Did I mention that the CEO of Maimonides is a woman?
    This, of course, is no proof of excellence.
    So many very foolish women now turn up on Talk -TV.
    And I have to admit that, even in the late ‘Sixties, there were many silly young women– as well as many clueless young men.

  7. While anything is possible, I suppose, AMC’s are inherently high cost organizations. I was surprised to learn just today that at Duke University Health System, 25% of the clinical faculty do 75% of the clinical work done by faculty physicians with the rest focused primarily on research and teaching. In the future, it’s questionable how many faculty members who don’t see many patients Duke’s system can afford to carry without losing its ability to fulfill its research and teaching mission. To suddenly tell clinical faculty that the future rewards will flow to those who provide high quality, cost-effective patient care is like telling humanities professors at Harvard and Yale that the fastest route to tenure is going to be teaching excellence and high student satisfaction scores instead of the former research and publishing metrics.
    There is, of course, certain types of care that only AMC’s can handle well such as the sophisticated organ transplants, treatment of rare cancers and the like. My question is how much of the aggregate spending for hospital services, physician and clinical services, and prescription drugs is attributable to these complicated and sophisticated procedures? If it’s a small percentage, as I suspect it is, AMC’s are likely to serve as contractors to ACO’s when they’re needed rather than lead ACO’s. Under that scenario, much of the routine care will probably gravitate to community hospitals that can provide good quality care for a much lower cost. The only way I could see AMC’s being cost competitive across the broad spectrum of care is if they are paid separately by taxpayers for the fully allocated cost of their medical education function and by NIH and others, including philanthropy, for their research mission.

  8. Barry–
    You write: “To suddenly tell clinical faculty that the future rewards will flow to those who provide high quality, cost-effective patient care is like telling humanities professors at Harvard and Yale that the fastest route to tenure is going to be teaching excellence and high student satisfaction scores.”
    There was a time– when I was at Yale– when professors who were brilliant teachers received huge rewards. They were on the fast-track to tenure.
    I was a very good teacher as a grad student; this was a major reason that I was hired as a tenure- track professor at Yale.
    As a professor, I loved teaching, and so was good at it. As a result, I received a fellowship that gave me a year off. (I hadn’t yet published.)
    During the time I was at Yale, I was treated very well. I left for personal reasons that had to do with my family.
    As it turns out, I may well have been lucky. Things were just about to change–I left Yale in 1982.
    WhenI was there, in the English dept. great undergrad teachers were valued as much–or more–than “researchers.” (And, at the time, Yale’s English dept was ranked as the best in the country.)
    I think of Dick Broadhead, a wonderful teacher who taught 19th century American lit– Meilville, Hawthorne, etc.
    200 students–maybe more–would sign up for his lectures each year.
    Broadhead also wrote some very good literary criticsm (the “research” in the lit crit field), but he got tenure becuase he was such an extraordinary teacher.
    He went on to become president of Duke.
    I also think of Bart Giamatti. When I was an undergrad at Yale, I took his course on Spenser’s “Fairy Queen”– a very, very long 17th century poem that very few 19-year olds would read–unless Giamatti was teaching it.
    At least 100 undergrads were in the class.
    Giamatti also did some v. good lit crit, but his main reputation was as a teacher.
    He went on to become Yale’s president.
    (Btw, his son is Paul Giamatti, an outstanding actor.)
    I could go on. It is only since the 1980s, as universities became more and more corporate (and money-driven) that research became more important than teaching undegraduates.
    Sure,” publish or perish? was crucial in some fields in the late 1960s and 1970ss–particuarly in the sciences, where those who did reserach could bring in grants.
    But in the humanities the ability to teach undergarudates waa at least as important–sometimes more important– at the very best universities.
    (The parallel is the Mayo Clinic in Rochester, Minnesssota , where , traditionally,being an outstanding clinician when treating patients hss been much more important than being an internationally reoognized reseracher.)
    Back when I was attending Yale, and later teaching there (form the late 1960s to the early 1980s), the biggest departments at these universities (in terms of undergrad enrollments and number of professors) were always History and English lit. The humanities helped support the university, not by bringing in grants from Pfizer or GE, but by attracting students to their courses.
    Then, later in the 1980s, and particularly in the 1990s ,students (and more importantly, their parents) became much more intersted in students studying subjects that they hoped would make them rich: Econ, Poli Sci.
    For the U.S. as a whole, this hasn’t worked out very well.Think of the many econ majors who went to Wall Street in the late 1980s and 1990s. Lacking any understanding of economic history or human greed and fear(which they might have learned from Shakespeare). They helped create the stock market bubble. Those who went into banking helped blow up the real estate buble. bubble.
    Then there are the political science majors who grew up to become President Obama’s economic and foreign policy adviors.
    If only all of these folks had read more economic history. (And perhaps more Shakespeare.)
    We could also use more scientists. But science courses are hard.

  9. “Then, later in the 1980s, and particularly in the 1990s ,students (and more importantly, their parents) became much more intersted in students studying subjects that they hoped would make them rich”
    Maggie –
    What do you think caused that change in attitude? Could it have something to do with tuition costs that rose faster than general inflation for years? When I went through the University of Pennsylvania from 1963-1967, my whole four years cost $14K all in – tuition, room, board, books, incidentals, travel home for holidays, etc. When my son went through the same school from 1995-1999, the all in cost for four years was $140K. Now, it’s over $200K. During the same period, the increase in the Consumer Price Index was “only” 5-6 times. Most state universities, while cheaper, also saw their costs increase as fast as the private schools, albeit from a lower base. It’s hard to blame parents for wanting and expecting their children to be able to make it on their own financially as adults after spending that much money for four years of college. Even many students who receive substantial financial aid find themselves with large loans to repay after graduation.
    Despite the soaring cost of tuition, most of the highly selective schools claim that revenue from tuition, even if there were no financial aid, doesn’t, by itself, cover the full cost of operating the school. Many of the second tier private colleges charge as much or almost as much as the selective schools. I don’t know how they survive. The most interesting thing to me is that healthcare and higher education are the two areas of the economy that have the most government involvement in their financing – Medicare, Medicaid and the VA for healthcare and Pell grants and subsidized student loans for higher education. In both segments, costs per capita rose far faster than inflation elsewhere in the economy over an extended period of time. Maybe there’s a connection.

  10. Barry–
    The cost of college tuition climbed faster than inflation during the decades you discuss for a number of reasons:
    1) A great many universities needed to make major capital improvements: both classroom buildings and dorms were crumbling, and as you know making improvements on old buildings is very expensive, especially if your are trying to “restore” the original architecure.
    Improvements also meant installing air-conditiong (often central air),and better heating systems in these older buildings. Very expensive. But people had become accustomed to AC in their homes, their cars, in stores . . .
    2) Endowments at major universities took a beating in the 73-74 crash, and in the years that followed it was very difficult to make money in stocks. The market wouldn’t take off until 82, even then it woud take years to make up for the losses of the earlyl 1970s.
    The people managing the money at many universities were well-intentioned–but amateurs. They were not sophisticated enough to diversify the way you needed to in order to make money in the 1970s by investing in currencies, foreign investments, real estate, oil, etc.
    3) Education is labor- intensive. Traditionally, professors had received very low salaries. (When I started at Yale as a tenure-track professor, with a Ph.D. I earned $13,000 a year. Even when I left my salary was still very low; I soon doubled it by becoming a financial journalist.)
    Somewhere in the early 1980s, academic salaries began to rise. The feeling was that someone with a Ph.D. should earn as much as, say a mid-level manager in a corporation–or a newspaper or magazine editor.
    In the past, professors traditionally drove very old cars (or VW “bugs”), lived in very modest homes, spent little on entertainment. It was almost a monastic culture. Many didn’t marry until they were in their 40s. (The vast majority were, of course, men.)
    This would alll change. Today tenured academics can earn six-figure salaries (though the range is wide, depending on the universitiy.)
    And of course, the cost of providing health care for
    a large university faculty has soared.
    Meanwhile,teaching continues to be labor-intensive, especially at the upper levels, with one teacher per 18-24 students in a seminar.
    This is one reason that the ccost of a univerity education climibed, along with health care–both are labor intensive.
    The other similarity is that demand for both health care and for a college degree rose. By the 1980s, it was becoming apparent that a college degree was expected in a great many fields. A college education, like health care, came to be seen as a necessity.
    Finally colleges and universities were expected to provide financial aid for the many working-class studens who were now applying to college. Most colleges waned a more diversified student population, which meant finding money for tuition, room and board for many minority students whose parents had no money.
    I don’t think that gov’t involvement really had anythign to do with the rise in the cost of tuition–In fact, in the 1980s, federal aid in the form of Pell grants, etc., began to dry up. (Though this did put a greater burden on the university itself to come up with scholarship money.)
    As for the notion that parents and their children became much more concerned about majoring in a subject that might lead to an investement banker’s salary because the cost of tuition had risen, that really wasn’t the case at many of the most expensive universities.
    A great many parents of Yale students could easily afford the tuition. These students were not graduating burnened with debt. I had a full scholarship, inclulding room & board–and I wasn’t unique. No debt when I graduated.
    But by the 1980s, cultural priorities had changed. The 1980s was labeled the “Greed Decade” for a reason. As CEO salaries took off expectations in other fields rose in tandem.
    This is when doctors began to feel like pikers if they weren’t making a half million.
    The media encouraged the notion that college was all about increasing your income by “ranking” universities accoding to how much the typical students earned upon graduation.
    The notion that a college education was about reading great works of the past (philosophy, history, literature) learning to think critically and analytically, learng to write well–all of that faded.
    Also, when I went to college, students did not expect to be able to afford what their parents had when they graduated from college. In your twenties, you lived in a small apartment, usually with someone else, in a run-down neighborhood. You might or might not have a used car. You bought furniture at a used furniture store. Your mother gave you some dishes . .
    Today, someone who is twenty-five is much mmore likely to expect to havev his or her own apartment in a relatively nice building, to have a car that is new or nearly new, to be able to afford a vacation in the Caribbean, to have new furniture, all sorts of kitchen appliances, etc.
    In other words, an upper-middle class kid expects to step into something appoximating his parents’ life style when he is 22.
    Finally, I would point out that the change in what swtudents study is all tied up with changes in U.S. culture.
    My daughter went to
    college in Canada (Montreal–McGill) at the end of the 1990s and there, English and history were still huge majors (and very very good departments.)
    Canadians are just less money-driven. . .
    Her best friend there was the child of two real estate attorneys who earned about 1/4 of what her father and step-mother (both attornies) earn here.
    The best friend is now in a Ph.D. program studying child psychology.
    Money is always so relative, so much about expectations. . . .
    Unfrotunately, in the 1980s, those sky-rocketing CEO salaries raised the bar in terms of expectations and contentment for many people.

  11. Maggie –
    That’s probably the best and most thorough explanation of the reasons for why college tuition increased so much over the last 30-40 years that I’ve seen. It’s also well beyond the call of duty. Thanks very much. I’ve also bemoaned the secular increase in expectations over the last 30 years or so, not just among young people starting out but across much of the population. What passed for a solid middle class lifestyle when I was growing up in the 1950’s would practically be considered poverty today, it sometimes seems.
    I’m not sure I would attribute as much of the rising expectations phenomenon to the sharp increase in CEO compensation as you do but I can see why many perceive it as inequitable. One contributing factor to the surge in executive compensation since the early 1990’s was a law passed by Congress that limited the corporate tax deductibility of management compensation to $1 million per year per individual unless it was based on performance. That led to including more stock options and restricted stock awards and less cash salary in the compensation package. Meanwhile, corporate boards didn’t contemplate the extent to which the stock market would take off making these pay packages richer than they intended. By then, when most Boards determined that they wanted or needed to pay their senior leadership at the 50th percentile or the top quartile for their industry peer group, consultants would come in and tell them what it would take to achieve that goal. The end result was to lock in a much richer pay package for senior executives in a broad range of industries compared to what was standard in the 1970’s and earlier.
    Regarding Wall Street pay, particularly for investment bankers, I remember reading an article around 1986, after NYC apartment prices had increased sharply during the prior few years where an investment banker made the following comment (paraphrasing): In the late 1970’s, I made $100,000 per year which was the equivalent of half an apartment (in a nice building in a desirable Manhattan neighborhood). Now, I’m making $500,000 and it’s still half an apartment. So, I guess in his mind, his compensation hadn’t increased at all in terms of what it could buy at least with respect to Manhattan housing.