Today’s U.S. healthcare landscape is changing at an unprecedented pace. The numerous variables impacting the country’s providers, especially those affiliated with our nation’s universities, continue to create new pressures.
Within schools of medicine, those pressures combine in unique ways since these institutions simultaneously deliver patient care (from primary through quaternary care), teach and train our future physicians and other medical professionals, and engage in highly innovative basic and translational research that leads to groundbreaking discoveries that impact the health and management of diseases worldwide. The role these organizations play in the macro view of our nation’s ability to feed these key “missions” is increasingly threatened by a heightened uncertainty of funding sources, confounding and often duplicative regulations and compliance requirements, and by traditional academic structures and processes that compromise their ability to allocate limited resources most effectively to advance missions and maximize efficiency
While medical schools are usually tradition-rich, filled with legacy behaviors and a unique culture of their own, they also are a place where science, education and business rules can simultaneously collide to create a complex environment to manage investments and costs. Traditionally, medical schools are dependent on several key funding sources:
• Federal, state and local governmental grants, as well as non-profit organizations and foundations for research funding
• Reimbursement from patient care via their faculty practice plans and affiliated/owned hospitals and health systems
• Philanthropy, tuition and, for public institutions, state funds to help support teaching, research and other costs
These resources can exhibit high variability over relatively short periods of time. That variability is often beyond the control of medical schools. Consequently, it is imperative that schools manage these resources as efficiently as possible, and at the same time create consensus, consistency and transparency in the allocation of these limited resources to maximize achievement of their tripartite missions. As these changes in resources continue to emerge, it is incumbent that medical school senior leadership explore different approaches in management and administrative structures, authority and accountability in decision processes, assessment of performance, allocation of resources, and engagement with their affiliated health systems to maximize clinical performance. These new approaches, which can be addressed as “innovation from within,” will be essential for success across all missions as the various changes impacting medical schools quickly emerge. Below we describe three priorities and the innovations from within that will be essential for successfully addressing them in the context of these emerging environments.
1) Holistic Performance Management:
• Priority: The ability to view and track all sources and flow of funds to the broad array of programs across any given medical school can be quite challenging, if not impossible. This challenge is in large part due to the decentralized and relative autonomy of departments and the high variability of ways that they generate, have access to, and utilize resources across all missions. Consequently medical school deans and their finance administrations can be minimally involved in the numerous assessment and decision processes for clinical department investment, yet they are accountable at the university and trustee level for resource utilization, expense management, and overall performance of the school academically and financially. Thus schools are traditionally challenged to manage investments, expenses and performance in a holistic fashion.
• Innovation: Basic data around those key elements from all departments tracking both funded and unfunded activities across the organization need to be developed on a school-wide basis. Such data then allows production of a dynamic scorecard by which leaders can accurately ascertain and assess academic and clinical performance, and investment and expense at the individual faculty, department and overall school level. While challenging on both organizational and cultural fronts, implementation of such an approach allows for assessment and management resource allocation decision processes that schools have not traditionally done or been able to do. Scorecard information for investment, expenditures and productivity across all missions must be accurate and relevant in order to roll up the specifics for all faculty, programs and departments. Leadership—deans, chairs and finance departments—can then be collectively informed to make the consensus decisions in a holistic context that is best balances academic and clinical performance with financial stability.
2) Rationalizing research investments:
• Priority: Defining what research productivity means for institutions in today’s new reality of tougher competition for funding sources is key. While a variety of approaches exist, the choice to move from legacy “triple threat” models of balanced academic and clinical efforts to a newly aligned model in which investments can and do generate positive returns both academically and financially forces tough decisions. But these decisions are in the best interest of the overall research performance of the school. Additionally, the support infrastructures aligned with research are often duplicated across multiple levels such as individual labs, divisions, departments, dean’s office and the university, and typically display wide variation in competence and efficiency. These multiple levels of management, the wide disparities in local sources and allocation decisions that occur independent of institutional oversight and engagement, as well as legacy agreements that are inconsistent across the research enterprise, all create significant challenges to overall management and efforts to move to a more holistic approach in which resource allocation and investment can be made on a rational and transparent basis.
• Innovation: Shared service concepts applied to specific areas within the administrative functions can and do yield two specific benefits. First, they can provide the means to reduce duplication of similar and overlapping core functions across multiple departments, the school and the university. This can help increase performance through improved skill sets and standardization. Additionally, shared services can decrease the overall cost of the functions involved and become scale-able to demand. Thus areas such as research administration can be optimized to produce consistency for all involved while also lowering the total cost of the functions required.
3) Impact of quality management and clinical revenues upon medical school financial and programmatic support:
• Priority: 2018 and 2019 promise to begin a new reality for how Medicare will reimburse both outpatient and inpatient care in faculty practice plans and all hospital based health systems. Implementation of the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”) required quality performance will certainly impact medical schools with high dependence on clinical revenues of departments and/or deans’ academic support transfers from health systems that are tied to clinical reimbursement.
• Innovations: Medical schools can and should become more engaged in the MACRA plans for their institutions in two key areas:
o Understanding the quality measures being chosen by their institution, how they align with the teaching function of their organization, and how school resources can support the comprehension/application and performance on these measures by faculty physicians, other providers, and residents and fellows. Are the measures an area of leading practice for the organization? Can the school play a role in developing new curricula that support and prepare its faculty, students, residents and fellows for this new reality? How can deans, faculty practice leaders, clinical chairs and affiliated health systems partner to build competencies that directly protect or enhance revenues from patient care?
o Supporting providers to incorporate how best to deliver, monitor and influence patients to obtain a quality outcome goes beyond traditional medical science and will likely place emphasis on managing patient behaviors. These skills will quickly become a major variable in performing well in MACRA models, regardless of the one chosen. Curriculum addressing more emphasis on this dynamic will be an area of challenge to properly prepare providers to communicate and influence the choices before patients in their everyday lives. Preparation and training prior to implementation of MACRA, as well as ongoing data distribution to report on and enhance performance will be required.
These emerging priorities and approaches can and should become components within the strategic plans of our nation’s medical schools and teaching institutions. While they challenge and push legacy organizations to adapt, indeed to move away from the traditional assumptions of relative independence of departments and programs within the school, the choice is already before them now that NIH, CMS and other key distributors of funds have changed and are changing more quickly than in past decades.
These approaches will also create a new means for medical schools to play a more influential role within academic medical centers at-large.
The innovation from within mindset is already present within faculty ranks and key business leaders. Many of these approaches will be embraced and supported by affiliated health systems that directly or indirectly support the missions of the medical schools. Health systems that support the academic missions must be engaged in these approaches as well. The key elements to success will be garnering engagement, trust and confidence across medial school leadership to support innovation from within legacy cultures and decision rubric toward efficient, transparent consensus and dynamic processes that will promote advancement of missions and potentially new reward systems in the long term.
Academic institutions and medical schools in particular are in many ways unique in their structure and behaviors. Business models and hierarchies tend to put decision making at the top of a pyramid in roles such as the C-suite, (CEO, CFO, COO, etc.), which is the standard model for health systems. Medical schools are functionally inverted pyramids in which performance of the individual, and thus decisions and performance made by individuals in aggregate, are the traditional model that defines the academic performance and reputation of schools and AMCs. While individual performance must continue to be championed, it must likewise be measured and reviewed and become a critical component in a holistic decision process for investment and resource utilization.
The ability of medical schools and AMCs to review performance and make decisions on investment and support across the enterprise is a paradigm shift that is required for success in the current and emerging realities. Finding the keys to maintaining consensus and collective leadership decisions and support, recognizing where to adapt quickly, innovating and executing from within to achieve success in a different external environment—all are critical moves that will allow medical schools and AMCs to gain advantages and sustain themselves.
The views expressed herein are those of the author(s) and not necessarily the views of FTI Consulting, Inc., its management, its subsidiaries, its affiliates, or its other professionals.
Jerry Davis is a Managing Director in the FTI Consulting Corporate Finance & Restructuring segment and is based in Atlanta. Mr. Davis is a member of the FTI Consulting Health Solutions practice. He has extensive senior executive leadership experience within the large academic physician and multi-specialty practice environments. Mr. Davis’ expertise includes managing multiple business units of significant size and scope, as well as experience with the negotiation, mergers and acquisitions of physician practices, revenue cycle, operational improvement and information technology.
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