Academic medical centers left behind as universities break away

As academic medical centers become less profitable, some universities are distancing themselves from their medical centers, according to The Wall Street Journal.

There are a number of factors taking a toll on university hospitals' finances. Academic medical centers fund research and handle some of the most complex medical cases, causing them to typically charge more for care than community hospitals. Those high prices have kept many of the health insurance companies offering coverage on the Patient Protection and Affordable Care Act exchanges from including academic medical centers in their networks.

It is likely academic medical centers are going to continue to become less profitable as well. As part of the PPACA, payments to disproportionate share hospitals — those that treat a high percentage of indigent patients — will be reduced. This is a cause for concern for university administrators, as many university hospitals are located in urban areas and treat a high number of uninsured and Medicaid patients.

Due to the financial troubles looming over academic medical centers, some universities are beginning to distance themselves from their medical operations, according to the report.

Vanderbilt University in Nashville, Tenn., is one of the schools moving away from healthcare. In November 2014, the university announced it would be making its hospital a free-standing entity. Although the university is still affiliated with the medical center, the change gave the university more financial flexibility and eliminated a significant amount of its financial exposure.

Regarding the decision to spin off its medical center, Vanderbilt Chancellor Nicholas S. Zeppos told The Wall Street Journal the change has allowed the university to focus its "energy, attention and resources more on that timeless [educational] mission."

Breaking away from their medical centers can have a positive effect on universities. For instance, after Phoenix-based Banner Health acquired University of Arizona's hospitals, clinics and insurance company, Moody's Investors Service raised the university's outlook to stable from negative.

However, other schools are taking a different route than Vanderbilt and University of Arizona. Aiming to reduce costs by better aligning clinical operations with research, Loma Linda University is planning to put its schools, hospital system and physician practices under a single governance structure, according to the report. "We are choosing to glue this whole thing together" to find efficiencies, Richard Hart, MD, president of Loma Linda University Health told The Wall Street Journal.

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