American College of Physicians: Internal Medicine — Doctors for Adults ®


Managed care and academia join to build 'teaching HMOs'

From the April 1995 ACP Observer, copyright 1995 by the American College of Physicians.

By Deborah Gesensway

Last year, Bob Daugherty, MD, an internist and dean at the University of Nevada School of Medicine, looked at the growing penetration of managed care around boomtown Las Vegas and decided it was time academic medicine played catch-up with the rest of the American health care system.

As a result, one of the major teaching sites for his internal medicine residents is now the state's largest HMO, Sierra Health Services, a for-profit HMO with more than 500 physicians and nearly 130,000 members.

"We're interested in [developing] a 'teaching HMO' because we think managed care is here and we need to train people to work in that kind of an atmosphere," Dr. Daugherty said. For the HMO, meanwhile, a prime motivation to affiliate with the medical school is marketing. It is betting that patients will be attracted to an HMO that has close ties to the university's physicians and facilities. "They think this gives them a one-up on the competition," Dr. Daugherty said.

From Los Angeles to Boston, academic medical centers and managed care organizations, which until now generally have kept their distance from one another, are beginning to take a new look at how they interrelate. For academic health centers facing financial problems because of the cost-conscious decisions of health care purchasers and plans, a strategy that includes linking up with profitable managed care companies is beginning to look more attractive. For managed care plans concerned about the long-term outlook for recruiting and retaining well-trained physicians, a collaboration with academic health centers is looking like a better investment.

"I don't believe I would want to be the CEO of an academic health center 10 years from now that didn't have a great big HMO that was part of the academic health center-for reasons of care, for reasons of educational site, for reasons of case mix and for reasons of research," said Thomas S. Inui, FACP, professor and chairman of the department of ambulatory care and prevention, a joint department of Harvard Medical School and the Harvard Community Health Plan (HCHP). Regarding HMOs, he tells academic medical centers: "Make one. Buy one. Or get into a joint venture with one."

Half of all physicians nationwide may now be involved in providing care through managed care organizations, but very few of today's medical students and residents are being trained in any sort of managed care setting.

Managed care organizations, meanwhile, continue to report difficulty recruiting enough primary care physicians to serve their systems. They also complain that many of their new hires require substantial on- the-job training to be able to understand and practice managed care. In Nevada, for example, Sierra says it generally takes 18 to 24 months to train doctors just out of traditional primary care residencies to practice effectively in an HMO setting, Dr. Daugherty said.

At the same time, academic health centers are struggling with how to continue their money-draining missions of teaching and of caring for special populations at a time when income shifted from formerly lucrative patient services is dwindling. They continue to lose access to patients, as most HMOs refuse to sign contracts with academic health centers for anything but the most specialized tertiary- and quaternary-care services. Add to their balance sheet Congress' threats to cut Medicare funding, and many academic health centers are wondering about their very survival.

"I think it's safe to say that all hospitals are going to get squeezed, and academic hospitals are going to get squeezed even worse," said Arnold M. Epstein, MD, an internist in Harvard Medical School's department of health care policy.

Going with the (cash) flow

In stark contrast to the money crunch being felt by academic medical centers are the record-breaking profits being recorded by the growing number of for-profit managed care plans.

"People have a tendency to say [medical schools] ought to stay away from for-profits. But I think, that's the marketplace, and that's what we have to be in," Nevada's Dr. Daugherty said. "I figure we need as many partners to help us as we can get." The medical school has had difficulty competing for the patients it needs for its training programs, he said, and benefits from the managed care organization's marketing and competitiveness.

The University of Nevada-Sierra Health Systems partnership is not a formal merger or joint venture, at least not yet, Dr. Daugherty said. "We have decided to take this one step at a time." The first step is an internal medicine residency program. A small pilot project began this year, and starting in July, six residents will be permanently based in several of Sierra's Las Vegas primary care sites. The two organizations are talking about joint recruitment of faculty. They plan to make a rotation through the HMO a requirement for junior-year medical students starting in a couple of years. Together, the medical school and the HMO are developing a managed care-oriented physician assistant program and are setting up a joint geriatrics fellowship to be based in the HMO, which has a Medicare risk contract.

Throughout the country, other academic health centers responding to the same pressures are developing survival strategies that include managed care but look much different from Nevada's arrangement. Some are building their own integrated service networks and aim to compete on price and quality for patients against the for-profit and not-for-profit HMOs. Others are attempting to differentiate themselves as essential community providers with which HMOs will have to contract for particular services. Others are downsizing, re-engineering and generally restructuring their operations to become more efficient and more productive. Still others are selling part of their operations to for-profit hospital and managed care companies.

"There is no real organized approach to this," said David F. Altman, FACP, associate vice president for education policy at the Association of American Medical Colleges (AAMC). "The anecdotes and stories I'm hearing are telling me it's happening all over the country."

At the UCLA Medical Center, department of medicine Chairman Alan M. Fogelman, FACP, has spent the last few years completely reorganizing his department to adjust to the fact that in Los Angeles, traditional fee-for-service medicine now accounts for a scant 5% of the market. Because there are so many different models of managed care, Dr. Fogelman's thought was that simply developing a joint venture with one type--such as Kaiser Permanente, with whom UCLA has had some teaching arrangements and joint programs over the years--would not be the best way to serve the training needs of his students. Instead, his idea has been essentially to beat other group practices at their own game--to turn the general internal medicine department into its own group practice efficient enough to attract patients in many different kinds of managed care plans.

"In order to teach managed care, we felt we had to practice managed care," Dr. Fogelman said. To build his group, Dr. Fogelman went out and recruited 25 general internist-educators, all of whom have committed to 32 hours a week of direct patient contact in addition to their teaching responsibilities. All will be on board as of July 1, he said.

This represents a dramatic change from the way the department functioned in the past. Until now, general internists at UCLA were expected to see patients only one to three half-days a week. Why 32 hours now? "No managed care company will give you a contract if your primary care doctors are not available 32 hours a week to see patients," Dr. Fogelman said. "Now we are able to get the contracts. ...We've been successful both financially and pedigogically."

Explained Dr. Fogelman, "The primary motivation is teaching. If I don't have the patients, I can't teach. And if I don't have patients who are in health plans that are similar to what the residents are going to see in the community in managed care, then they are not going to learn. And at the same time, since [no health plan] is going to subsidize this, the group has to be economically self-sufficient." UCLA receives a subsidy from the state of California for medical teaching, which Dr. Fogelman says is essential. But, he adds, "We've accepted the fact that we have to meet marketplace prices. But the fact of the matter is that there's profit in [delivering health care]. Look at the for-profit companies. What we're doing is trying to provide service better than them, equally as efficient, and the profit goes into education instead of into the pockets of the organization or the shareholders."

Uneasy bedfellows

Efforts like those in Las Vegas and Los Angeles represent a dramatic turnaround from just a few years ago, when most academic health centers were not the slightest bit interested in throwing in with managed care organizations. Other than a handful of residency program arrangements-such as those between the University of California at Davis and Kaiser Permanente in Northern California, and Case Western Reserve School of Medicine and Henry Ford Health System in Detroit-medical schools and HMOs have been wary of each other's philosophies and priorities.

Events of the early '90s drove managed care and academic health centers even further apart; the newly popular HMOs began exercising their selective contracting freedom and dropped contracts with academic hospitals as one strategy for prevailing in their increasingly competitive marketplaces. According to a recent AAMC-sponsored study conducted by Lewin-VHI, the average cost of care per admission in 1991 was about $6,000 in teaching hospitals, compared to about $4,400 in non-teaching hospitals. Why would an economy-minded health plan send its patients to a teaching hospital when it could send them for all but the most specialized of services to a less-costly community hospital? All of a sudden, academic health centers realized they needed to pay some attention to the managed care phenomenon.

Last spring they came together in a special symposium sponsored jointly by the AAMC and the Group Health Association of America, the organization that represents HMOs. Participants explored the variety of ways HMOs and academic health centers might work together to increase the number of physicians trained to practice in managed care settings. But there are many hurdles to be overcome, including disagreement about sources of funding for education, concerns about academic freedom, debates about who should determine curricula and on what basis, and worries about meshing two completely different cultures, one more bottom-line and service oriented than the other.

There is, as well, a concern that academic physicians continue to look down on HMO doctors. "Twenty years ago [HMO doctors] were pariahs," Dr. Altman said. "Has that changed so much? The necessity has changed. The physicians have changed. But I think there is always this inherent suspicion that they are not of the same quality."

As someone who, in his own words, "lives at the overlap between the two," Harvard's Dr. Inui says he finds the debate about different organizational cultures overstated. "You find me a dean who says he isn't driven by bottom-line pressures in an era when virtually 50% of a school's operating revenues are from clinical practice."

The quality question may be overplayed. The few HMOs interested in becoming "academic HMOs"--just like the 20% or so of U.S. hospitals that had committed themselves to teaching over the years--many think are likely to be the ones on the cutting edge of the quality improvement movement in health care today.

So, while academic medical centers may be seeking managed care connections in order to continue their basic mission--educating the health care providers of the future-HMOs may be interested in the increased contact because it supports their basic mission-giving their members the best care at the lowest price.

Academic medicine's future--a reading list

Much has been written recently about the struggles of academic medical centers trying to survive in a health care environment characterized by managed care. The following is a far-from-complete reading list of recent articles on the future of the academic health center:

  • The health policy journal Health Affairs has featured articles periodically on the role of the academic health center and the problems it faces in light of managed care. Some include: "The Pivotal Role of the Academic Health Center" by Gerard Anderson, Earl Steinberg and Robert Heyssel (Summer 1994) and "Academic Medical Centers and Managed Care: Uneasy Partners," by Peter D. Fox and Jeff Wasserman (Spring 1993).
  • The New England Journal of Medicine's Nov. 17, 1994, issue (Vol. 331, No. 20) contains a series of articles about academic medical centers and managed care. These include one by Mark C. Rogers, Ralph Snyderman and Elizabeth L. Rogers of Duke University Hospital called "Cultural and Organizational Implications of Academic Managed-Care Networks"; the first part of John K. Iglehart's two-part article "Rapid Changes for Academic Medical Centers" and an editorial by journal Editor Jerome P. Kassirer titled "Academic Medical Centers Under Siege." The second part of Mr. Iglehart's article is in the Feb. 9, 1995, issue (Vol. 332, No. 6).
  • The February 1995 Academic Medicine (Vol. 70, No. 2) includes AAMC President Jordan J. Cohen on "Finding the Silver Lining Without the Golden Eggs"; Stuart Bondurant's "Health Care Reform Continues: Themes for Academic Medicine" and a commentary by Gerald S. Lazarus, dean of the University of California at Davis School of Medicine. The August 1994 issue (Vol. 69, No. 8) contained an article called "The 'Teaching HMO': A New Academic Partner," by Gordon T. Moore, Thomas S. Inui, John M. Ludden and Stephen C. Schoenbaum of the Harvard Community Health Plan/Harvard Medical School partnership.
  • HHS' Bureau of Health Professions has produced an annotated reference list booklet titled "Managed Care: Educating Medical Students and Residents in Primary Care and Preventive Medicine." For a copy, contact the bureau at the Parklawn Building, Room 9A-27, 5600 Fishers Lane, Rockville, Md. 20857; 301-443-6190, fax 301-443-8890.

To partner or not to partner? What's in it for...

...academic health centers?
  • Access to patients, outpatient care sites and primary care mentors needed by today's medical students and residents.
  • A way to reconnect the mission of the academic health center with its basic goal of serving the needs of the community. Explains Mark Young, MD, associate chairman of the department of medicine and chief of general internal medicine at Henry Ford Health System, which has a formal affiliation with Case Western Reserve School of Medicine: "There's a community voice that is being expressed in some way through activities of managed care. The community wants cost-effectiveness and prevention. And medical schools are allegedly in the business of training doctors to meet the needs of the community."
  • Improved health services research. Managed care organizations are the potential sources of funding and sites for all sorts of necessary research into innovative ways of providing health care. Take for example, trials of advance nurse case management, Dr. Young said. "The government might not fund this, but it's in the interest of managed care to look at different ways of providing care, and health services researchers at medical schools would like to be able to evaluate this king of thing."

Some influence over the quality of the care HMOs are delivering to a growing number of Americans.

...managed care organizations?
  • A marketing advantage. The public's general perception that academic physicians offer the best quality medicine can be a dual-edged sword, however, said Arnold M. Epstein, MD, and internist at Boston's Brigham and Women's Hospital and the department of health care policy at Harvard Medical School. This is because an "academic HMO" may just end up attracting the community's sickest--and costliest--patients.
  • Access to and influence over research on quality improvement and cost-effectiveness. Dr. Young said he strongly believes that an HMO can benefit--at little added cost--from the research strengths of an academic medical center, specifically by the evaluation information that research can provide.
  • Access to capital and expertise to build electronic information systems needed to compete.
  • The theoretical advantage of being able to "grow your own" providers, even when these physicians are free to leave and take jobs elsewhere.
  • An answer to critics who charge HMOs, particularly those with not-for-profit status, with not fulfilling their contributions to the community.
  • Some influence over the competencies taught medical students.

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