In the Point-Counterpoint section of this issue, Kastor discusses the pros and cons of a new, institute-based administrative structure that was developed at the Cleveland Clinic in 2008, ostensibly to improve the quality and efficiency of patient care.1,2 Distilled to the core, the imputed fundamental advantage of this new administrative system is that physicians (and presumably other health care providers) with similar clinical interests are brought together both administratively and physically under the leadership of an individual who is chosen because of his or her administrative skills rather than academic visibility. The institute leaders have financial responsibility and presumably accountability, reporting singularly to the chief of staff rather than to multiple individuals, such as a dean, the hospital director, or the practice plan leader. The chief of staff reports directly to the CEO, and the CEO has responsibility for the functioning of the Cleveland Clinic and reports directly to the board. Therefore, responsibility and accountability are focused, direct, and streamlined. This seems very much like a corporate structure rather than a traditional academic structure.
According to Kastor, the major challenge to implementing structural reform in academic health centers (AHCs) is the concern that many deans do not have an adequate span of authority to impose wholesale change. Kastor hypothesizes that, at many AHCs, the department chairs and center directors may resist ceding responsibility in this way; that is, they are committed to their traditional fiefdoms. He also postulates that changing from the traditional academic structure may make it difficult to recruit prominent individuals who are wedded to traditional organizational roles and models. Kastor opines that “the application of the institute system to most AHCs will range from difficult to impossible.”2
The real issue underlying this organizational transformation is not whether the institute model is better than the traditional model; instead, the issue is whether the traditional AHC structure is viable or whether it must evolve. If change is critical for success or survival, AHCs will certainly find a way to change or fall behind. The traditional academic model, in which the department and chair retain a great deal of autonomy and authority, and in which decision-making processes are legislative in nature, is too tedious and laborious to effectively compete in the health care market. The current health care market is demanding greater efficiencies, lower costs, and thus greater integration, as well as more transparency and accountability. Obviously, the Cleveland Clinic CEO felt the traditional model would not serve that institution well in the present climate and, therefore, developed an institute-based structure. Other AHCs will find other structures that make them more responsive.
The truth is that AHCs must change somehow. It is an uncomfortable reality that AHCs are large businesses with aggregate budgets, often reaching several billion dollars, for many colleges of medicine and their affiliated hospitals and practice plans. These businesses have three major products—patient care, research, and education. There is general consensus that the research and education missions require subsidization, and the revenue needed to support these missions will continue to be generated from clinical care. Revenues from clinical care float the entire operation at many AHCs. Consequently, the most successful AHCs usually have exceptionally successful clinical enterprises.
Clinical enterprises, however, are now being challenged to the core. The driver of change in health care is not “ObamaCare” but, rather, proposed changes in reimbursement that are being propagated both by government and private insurers to try to control unsustainable health care costs. As an example, when the Commonwealth of Kentucky realized that it could no longer sustain its Medicaid expenditures, it essentially reverted, almost overnight, directly to managed care. It is not the only state to do so. Changes in reimbursement practices that are being introduced to help control costs range from bundling methodologies to reengagement with traditional managed care; all accomplish their goals by pushing risks to providers. These new reimbursement models will reward “value”—quality versus costs. Improvements in both quality and efficiency will demand coordination and integration. Focusing on quality and efficiency requires organizational structures that facilitate cohesion and teamwork, and traditional organizational models will not suffice.
As businesses caught in the throes of change, AHCs must respond appropriately. First, they must understand their space (their role in the health care system) and define this through strategic planning. Are they predominately safety-net hospitals? Are they predominantly community facilities? Do they aspire to be regional or national referral centers? Second, they must understand critical success factors. If an AHC wishes to be a quaternary care provider, it must understand the size of the population it must cover in order to draw appropriate numbers of low-incidence cases to support the infrastructure, quality, and requisite geography. As an example, if a program wants to do 60 liver transplants, given the incidence of liver transplantation per million, it will have to cover a geography encompassing over four million people. The critical success factors for all medical centers will be a commitment to efficiency, quality, safety, and patient service. Finally, AHCs must develop implementation processes for the strategic plans and critical success factors they have identified. AHCs will have to develop organizational models to implement these strategies and develop service lines with appropriate emphasis on value. Implementation of change will require focused decision making, astute financial planning, and clear-cut accountability.
Therefore, it is clear that the issue is not institutes versus traditional organizational models. The real issue is whether the traditional model can serve AHCs at a time of tumultuous change or whether AHCs need to pursue new models to meet their needs. We agree with the Cleveland Clinic CEO that new administrative models that are more precise and clear about responsibility and accountability, and that engage leaders who have interests and capabilities in strategic planning and operations, are fundamentally critical. Some people will develop institutes, others will organize around so-called service lines, whereas others will come up with other constructs and names for them. These corporate-style structures must and will replace the loose amalgamation of the traditional AHC to develop the focus and cohesion to address the pressures of an evolving health care system. Because these new structures should lead to more successful clinical enterprises, they will, in fact, support the traditional academic missions of research and education more successfully than traditional organizational models can.
Other disclosures: None.
Ethical approval: Not applicable.