The Value Proposition for Medical Education is Under Stress

The value proposition for medical education needs attention. For the nation’s 147 academic medical centers and 400 teaching hospitals, the path forward is dicey. 

For teaching hospitals that host residencies, it’s a straightforward budget issue: funding from Medicare and Medicaid for these 115,000 slots is shrinking and operating costs associated with hosting residency programs are increasing faster than revenues.

For academic medical centers, it’s more complicated. Their tri-fecta mission—training clinicians, conducting research and delivering patient care—is noble. But it makes for a complicated and expensive operating environment: Academic medical center (AMC) operating costs for patient care activities are 29% higher than the non-academics with whom they compete. 

Begging public officials for additional funding, convincing payers to pay a premium and securing gifts from wealthy donors only gets AMCs and teaching hospitals so far. A handful are thriving; many are struggling and all face enormous challenges.

Tweaks to the medical school curriculum, changes to resident work rules, improved efficiency in managing basic and applied research, enhanced effectiveness in philanthropy, advocacy in securing public funding and effectiveness in managing complex medical problems for the most at-risk populations are table stakes. Many are branching out into alternative health and Medicaid managed care. Some have created retail health and medical tourism programs to leverage their brands and secure new revenues. But the environment for medical education poses a daunting challenge:

•    Employers are pushing employees into high deductible insurance plans that drive lower income individuals to delay their preventive health needs.
•    Insurers are carving out tertiary and quartinary services unique to AMCs and using reference pricing to steer enrollees away from higher cost AMCs and teaching hospitals.
•    Physician performance comparisons are being tracked to their training programs exposing wide differences in their effectiveness.
•    Indirect medical education payments in Medicare and Medicaid are being cut.
•    The composition of the medical student population is changing—more women, ethnic diversity, pre-medical school academic backgrounds.
•    Debt is creating tension for the 83,000 med students causing would-be students to consider career alternatives. 
•    Residents are being asked to work longer hours.
•    The 160,000 faculty face questions about the value of tenure, pressure to adapt to new methods of payment and changes to their compensation to reward productivity, patient experiences, outcomes and efficiency.
•    Non-traditional clinical research organizations are siphoning off industry-funded studies from academic research institutions.
•    And non-academic competitors are amassing skills, technologies and capabilities that rival academic medicine.

In the Affordable Care Act, academic medicine gets scant attention. Its most significant boost was increased funding for the NIH, which the President’s proposed budget presented two weeks ago eliminates. 

The reality is this: medical education is competing in a new world order. It must compete for research dollars, talent and patients against organizations that are not encumbered by its rich mission and unusually complicated operating models. It must train future clinicians whose patient records will live in the cloud and be shared with patients themselves. Faculty must compete with large, clinically-integrated medical groups that capably manage risk with their compensation directly linked to the cost effectiveness of the treatments they administer. (In the current issue of Academic Medicine, a survey of medical residents by Ryskina et al found internal medicine residents received insufficient training about costs and benefits of care and only 26% knew where to find estimated costs for tests and treatments.) 

Medical education must embrace consumerism, lower operating costs, price services competitively and achieve scale that’s sustainable. It can ill afford to believe its own publicity nor presume that its competition is traditional.

In the new normal, medical education is in a precarious position: it serves a worthwhile purpose, but it operates at a competitive disadvantage. Boards and senior management must revisit sacred cows and take a fresh look at strategies, capital commitments, partnerships and competitive positioning based on hard facts.

Mission is important. Purpose is vital. But living to fight another day means medical education must slay its sacred cows and demonstrate measurable value that individuals, employers, policy-makers and payers acknowledge. It’s a stressful time in medical education.

Paul

PS This week, attention in DC will shift to the confirmation of Judge Gorsuch and continued speculation about GOP plans to re-visit their Repeal and Replace plans. But perhaps most relevant to healthcare insiders is the pending debt ceiling due to expire April 28th and the potential for a shutdown that could disable services that support Medicare, Medicaid and Veterans Health programs.