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Commentary: Health Care Reform and Its Potential Impact on Academic Medical Centers

Karpf, Michael MD; Lofgren, Richard MD; Perman, Jay MD

doi: 10.1097/ACM.0b013e3181bae9a1

President Obama’s administration has committed to significant changes in the current health care system to address three issues: access, cost, and quality. Leaders at academic medical centers (AMCs) must acknowledge the root cause of the problems within the current system, recognize potential change initiatives, contemplate the changing role that AMCs will play in the health care system of the future, and begin to adapt and respond.

The underlying root cause of the problem with our health care system is excessive costs. Although many factors contribute to excess costs, the most important factor is overuse of expensive modalities. The administration will try to impact change by stressing preventive care, improving medical practice with the purpose of achieving greater value, and changing the reimbursement system from fee for service to other reimbursement approaches that provide greater incentives for more coordinated and integrated systems of care.

It is argued in this commentary that ultimately reform will lead to some form of a managed care model with limits on spending. Highly integrated health care systems will be in the best position to produce more efficient care that provides value. The authors posit that AMCs have the unique opportunity of shaping integration in many regions of the country and highlight efforts at the University of Kentucky to develop a health care system to serve the commonwealth. Change is inevitable. Being proactive rather than reactive may be important to secure the future of AMCs.

Dr. Karpf is executive vice president for health affairs, University of Kentucky, Lexington, Kentucky.

Dr. Lofgren is vice president for health care operations and chief clinical officer, UK HealthCare, Lexington, Kentucky.

Dr. Perman is vice president for clinical affairs and dean, College of Medicine, University of Kentucky, Lexington, Kentucky.

Correspondence should be addressed to Dr. Karpf, Office of the Executive Vice President for Health Affairs, 900 South Limestone, 317 Wethington Building, Lexington, KY 40536-0200; telephone: (859) 323-5126; fax: (859) 323-1918; e-mail: (

Health care reformotential Impact on Academic Medical is once again front and center on the public agenda. President Obama has committed to address three dominant health care issues: access, cost, and quality. Republicans have also voiced their concerns about the plight of the un- and underinsured and the detrimental impact of excessive health care costs on the competitiveness of American industry. Although there is considerable agreement on the need for change, there is substantial disagreement on the approach. Pressure is building for change, but there is no real sense of the pace. Will it be incremental or cataclysmic?

In the face of health care reform, leaders of academic medical centers (AMCs) must acknowledge the root cause of the problems within the current system, recognize potential change initiatives, contemplate and comprehend the changing role of AMCs, and begin to adapt to the eventuality of change.

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Encouraging Clinical Care Reform

Drivers of health care reform must be focused, plausible, implementable, and measurable. The initial levers for modifying the health care system under the Obama administration seem to include (1) an emphasis on prevention, (2) improving medical practice to achieve greater value, (3) changing the reimbursement system from fee for service to other approaches that create incentives for more integrated systems of care, (4) ensuring an adequate primary care workforce, (5) increasing transparency and accountability related to cost and outcomes, and (6) using information technology to accelerate the change process.

Each of these actions is admirable and “politically very correct,” but we face a lack of evidence supporting the potential for these approaches to meet the criteria for successful drivers of reform, and all require significant shifts in practice and culture. Preventive care, for example, is the right thing to do, but its benefits may take decades to emerge, and a number of prominent experts question its ability to decrease costs. Improving health outcomes and value is a function of coordinated and integrated care, which requires teamwork. Such coordination of care is also at the heart of payment systems favored by most experts, who agree that we must move away from a fee-for-service reimbursement approach, which clearly rewards use and fragmentation of services. Data are not available to show that pay-for-performance approaches have had any significant impact on important outcomes, such as mortality and morbidity and decreased costs.1

Proposed innovative reimbursement models that could potentially drive changes include (1) bundling of reimbursement for professional as well as hospital services, (2) increasing coordination through enhanced primary care as embodied in the concept of the “medical home,” and (3) continued modification and experimentation with capitation.

Broader bundling of costs increases the potential for coordination of care. Although bundling fees for a single surgical procedure including professional and hospital charges generates discreet but limited coordination, bundling costs of taking care of a diabetic over an expanded period of time potentially has substantially more impact in driving physicians and other providers into working together. Cost containment will not happen until doctors and hospitals either decide to work together or are forced to work together.

Many experts argue that empowered, effective primary care physicians must take the lead in new coordinated approaches to care. Many primary care advocates endorsed the concept of the “medical home” as a vehicle for strengthening the role of primary care. In this model, the primary care physician serves as an advocate for the patient over the continuum of all health care. All patient information cycles through the primary care physician who coordinates care. These patient advocates must have access to information that integrates health care data in real time to coordinate with all providers and insurers.

Operationally, these primary care doctors must spend time with their patients across the full continuum of care. Nonphysician providers working as part of a team are usually necessary to establish such a degree of functionality. In such an organization, primary care physicians need to be compensated for organizing care rather than just for delivering care in 15-minute increments in the office. Consequently, the proposed payment model for the medical home distills down to primary care capitation.

All the attempts that change payment modalities with an intent to reorganizing health care structures to emphasize efficiency and quality have several common elements: (1) all payments are value based even if the major goal is cost containment, (2) it is assumed that medical guidelines, standards, and quality measures will play important roles in management, (3) all of the systems require real-time electronic medical records (EMRs), and (4) most of the systems use nonphysician providers to deliver more routine care. Of note, although there are limited data supporting the positive results from less structured approaches to coordination, there is increasing evidence that large, well-established, organized systems such as Kaiser Permanente have a significant track record of performing efficiently and cost-effectively while delivering high-quality care.2,3

The Obama plan has placed considerable emphasis on the deployment of the EMR. This would seem to serve dual purposes. First, information technology would be used to better inform health care providers, coordinate care, and avoid duplications of services. The EMR will also enhance the real-time use of practice guidelines and standards. Second, the EMR as the Obama administration envisions it can be used as a monitoring device, which will force increased accountability. More extensive report cards on all providers are inevitable. We support increased levels of accountability.

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Returning to a Frome Fruste of Managed Care

As we contemplate the approaches outlined above focusing on prevention, quality, value, primary care, and new organizational operational models that stress efficiency and coordination utilizing electronic connectivity, it is impossible not to hear echoes of the managed care debate. We used to talk about “gatekeepers,” a term that was viewed pejoratively and rejected. We now have transformed these gatekeepers into patient advocates and medical home physicians who are the lynchpins of a new system focused on patient advocacy and health care value. This seems like quite a metamorphosis even if it is a virtuous transformation.

We seem to be headed to a health care system dominated by large organized providers supported by an electronic backbone and committed to explicit expectations in cost, quality, and service. Are we looking for a new variant of managed care? Maybe these organizations should be called “value care organizations.” If this is in fact the case, we should review and contemplate the pitfalls that derailed the managed care movement of the late 1990s. In particular, from our perspective, there are two issues that need to be carefully analyzed.

First, the integration and financial interdependency of providers is essential. Although common wisdom is that managed care failed, we disagree. Kaiser and other large fully integrated managed care organizations have survived and thrived. However, loosely organized entities, such as Independent Practice Associations, which did not have strong financial integration or significant fiscal impact on individual providers, have failed and essentially disappeared. So, if we are going to move toward anything that resembles an integrated system, it must be integrated tightly from administrative, operational, and, most importantly, financial perspectives.

Second, the concept of choice must be clearly understood. During the economic boom of the late 1990s, managed care was essentially emasculated when individuals feeling financially secure railed against having limited choice. Today, the Obama administration has made choice a cornerstone of its health care policy. Choice in health care can be viewed at three different levels.

At the broadest level, “choice” means having the option to pick from a broad menu of health plans and carriers. This type of choice should and must be preserved to maintain competition. We agree with Emanuel and Fuchs4 that health care costs should be transparent and impact the purchaser. In the late 1990s, many individuals signed up for managed care because that product was cheaper but were unwilling to accept the limitations that they inherently bought.

The next level of choice relates to access to providers. If individuals want total free-choice access to anyone, anywhere, anytime, which is essentially fee for service, they must pay for it. If they wish to have a more reasonably priced plan, they must realize that some of their choices will be limited. If we are going to move toward integrated, large health care entities, it should be obvious that totally open choice of provider will not be possible. Once an individual has chosen care from one organization, he or she is locked into the providers that are constituent members of that organization.

The third level of choice is the choice of diagnostic and therapeutic options. If we are going to move to evidence-based medicine, there will be standards of care that must accepted, followed, and imposed. Managed care was damaged in the late 1990s when some enrollees felt that they were entitled to demand services that were not covered. After one health maintenance organization (HMO) was sued for not covering a treatment desired by a patient,5 many HMOs became wary to deny potentially promising modalities that had come into vogue despite a lack of rigorous scientific justification. Evidence- and consensus-based medicine means that decisions will need to be made as to what works and what has not been adequately proven to work. We agree with the administration that an entity for defining standard of care is required to determine what will be covered on a routine basis.

If the Obama administration does continue to support choice as an untouchable value, they should define what they mean by “choice” so as not to confuse the debate. If they want coordinated systems of care, they must support organizations that have closed panels. If they want evidence- or consensus-based care, they have to understand the need for restrictions for some people who demand care that might be promising but not totally scientifically substantiated. The interface between standard of care and promising new approaches is clinical research. Appropriate promising modalities must be covered through clinical research trials and protocols. If the concept of choice is not explicitly discussed and defined, there likely will be confusion and a backlash as health care reforms take hold.

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Implications for AMCs

How should AMCs respond to the specter of change, not knowing its absolute direction and pace? Clearly, they will have to evaluate adaptations in all three of their missions. From an educational perspective, trainees must learn that the art of medicine requires using quantitative data in conjunction with patients’ wishes and values. They must accept the fact that they will be monitored and benchmarked. We need comprehensive physicians who understand their commitment to the patient as well as their responsibilities to be good stewards of public resources. Trainees will also have to be effective members of interdisciplinary teams and not autonomous operators. Sometimes they will lead, and at other times they will follow. To train these types of physicians, we clearly need to have faculty that share these values, attributes, and skills.

Health services research has to be emphasized. Much work will have to go into defining appropriate quality measures and particularly defining standards of care and clearly delineating evidence- or consensus-based practices. Health services research that defines and evaluates standards will have to use real-time data. We need to develop standards efficiently and test them and refine them iteratively. Mining the large databases that will be available because of the implementation of a ubiquitous EMR will be an important new focus for clinical research.

As providers of clinical care, AMCs, in our opinion, will have to anticipate significant change. There are at least three forces that are pushing for consolidation and coordination among providers. First, the economic downturn has challenged both hospitals and physicians in their ability to survive. More and more hospitals and physicians believe that they need to be associated with a larger entity that has substantial resources. Second, if fee for service is replaced by reimbursement systems that stress coordination and efficiency, larger health care organizations are much more likely to have the resources and expertise to implement comprehensive information systems and to have data analysis units that can be used to study and modify medical management. Data, analytic capabilities, and committed clinical leadership will be critical to define, advocate for, and implement significant change in medical practice. A third very powerful force—finances—will make it probable that many AMCs will look to join forces with other providers and develop service organizations that span significant geographies and serve substantial populations. Robertson and others6 at University HealthSystem Consortium have shown that AMCs, especially those committed to advanced subspecialty care, are financially dependent on the most complex, unusual, and rare cases. Complex patients by definition represent low-incidence medical problems. To attract an adequate volume of these types of patients, AMCs must cover a substantial population base.

What we are advocating is very different from what many AMCs tried to accomplish in the late 1990s, when primary care networks aimed to capture several hundred thousand covered lives to keep their hospitals full. Such a population generates many low-acuity patients but an inadequate number of complex cases. AMCs need to develop relationships that will give them access to a much larger population base to attract the appropriately complex patients while keeping less complex patients in low-cost local facilities.

If large systems emerge, AMCs will have three options: They can lead, they can follow, or they can remain aloof and be vendors of advanced subspecialty care to organized systems. We personally think that for long-term security there may be value in leading. AMCs do offer the intellectual capital necessary to do clinical research and to organize and analyze data to change medical management.

Relationships that AMCs establish with other providers must be mutually beneficial. There will be the need to help smaller providers survive economically by expanding their local medical capabilities and, therefore, allowing them to benefit from the partnership. If treated fairly, it will make sense for these smaller providers to channel their complex patients to the AMC.

How should AMCs respond and adapt? Different institutions will consider the issues that we have raised in view of their own circumstances, and settle on strategies that are specific for them. At the University of Kentucky, an executive vice president for health affairs (EVPHA) was established whose primary responsibility was to bring all the clinical activities under a single governance and operational structure. The development of our UK HealthCare system is described in detail elsewhere, but it is important to note that the EVPHA’s plans evolved into a strategic vision that created a network of health care partners.7–9

The emergence of UK HealthCare, a unified clinical enterprise, and the development of a networking strategy were actually reactive responses to failure—loss of faculty, market share, and clout. Moving forward, we are committed to solidifying our successes so as not to become vulnerable in the future. To that end, the leadership has tried to comprehend the core issues of the present health care reform debate. Our assessment is that we need to enhance and accelerate our commitment to efficiency, quality, and safety. Further, continued trust, respect, and mutually beneficial relationships with other providers in our coordinated network of care will be the keys to our success.

In conclusion, the health care system in the United States will change because it must. Issues of access, quality, and cost must be addressed. No one can predict how and how fast this will occur. If the economy does not improve and more and more people have difficulty with access, we will reach a tipping point at which more drastic change will be acceptable if not demanded. It is not clear what AMCs should do; we have made some suggestions and we have at least referenced what we are trying to do at the University of Kentucky. What is clear is that being trapped in the past will not work. We believe that being proactive will be important, but being flexible is critical. We personally look forward to change with great interest and much hope. It is difficult for us to fathom that we have the costliest health care system in the world, by far, but lag many developed countries in critical outcomes such as infant mortality and life expectancy. Hopefully, that will change as our health care system changes.

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© 2009 Association of American Medical Colleges