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chapter 2 FORCES CHANGE FOR Although much has been written on the pressures facing AHCs in the current environment, trends already under way will exert enormous pres- sure on how AHCs will carry out their roles in the future. Profoundly shifting public needs and demands, breathtakingly rapid changes in tech- nology, and unrelenting cost pressures will impose new demands on the entire health care system. AHCs face particularly intense scrutiny and high expectations for meeting these new and evolving demands because of their special roles in education, patient care, and research. As this chapter re- veals, these trends necessitate a reexamination of how AHCs carry out those roles to meet the public's health needs. The first section of the chapter describes the changing environment faced by AHCs and the resulting need for new capabilities. This is followed by a review of the challenges to change within AHCs, which, in combina- tion with the changes described, form the context within which the needed transformation of the AHC roles must occur. THE CHANGING ENVIRONMENT AND THE NEED FOR NEW CAPABILITIES Many different forces are driving changes in the environment in which AHCs function. The strongest of these forces can be grouped into three broad categories: (1) changing health care needs, (2) technological advances (including information and biomedical technologies), and (3) continued 30

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FORCES FOR CHANGE 31 cost pressures. These major forces necessitate new capabilities--indeed, as many would argue, a paradigm shift--in the health care system of the 21st century. Changing Health Care Needs The overall health care needs of people are changing in several ways. One is the shift in disease burden from acute to chronic care. Another is growing recognition of the influence of lifestyle and behavioral choices on health and illness. A third is other demographic shifts that will affect expec- tations and demands of the health care system. Chronic Care Needs During the 20th century, health care delivery focused on the treatment of acute illness, often by solo practitioners in offices and hospitals. In the 21st century, meeting the health needs and expectations of the population will require a focus on chronic rather than acute care. Chronic conditions are now the leading cause of illness, disability, and death in the United States, affecting almost half of the U.S. population and accounting for the majority of health care resources used (Hoffman et al., 1996; Foundation for Accountability and The Robert Wood Johnson Foundation, 2002). Indeed, chronic disease accounts for about 70 percent of all deaths in the United States (Hoffman et al., 1996). The major chronic disease killers are cardiovascular disease, cancer, diabetes, and chronic obstructive pulmo- nary disease (Centers for Disease Control and Prevention, 2001). Although a greater proportion of the over-65 population has chronic conditions rela- tive to other age groups, the majority of people with chronic conditions are under age 65 (Institute of Medicine, 2001b). Care for those with chronic conditions is one of the major drivers in the use of health resources. Costs for care of people with chronic disease ac- count for more than 60 percent of the nation's total medical care costs (National Center for Chronic Disease Prevention and Health Promotion, 1999). Compared with people with acute conditions, annual medical costs per person were more than double for people with one chronic condition and almost six times higher for those with two or more such conditions (The Robert Wood Johnson Foundation, 1996). People with chronic condi- tions also spend more out of their own pockets for health care. In 1996, average out-of-pocket spending for those without a chronic condition was $249, as compared with $1,134 for those with three or more such condi- tions (Hwang et al., 2001). People with chronic conditions make different demands on the health care system than those requiring acute care. They use more health care and

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32 ACADEMIC HEALTH CENTERS a wider variety of services, and higher costs are associated with their care (Hoffman et al., 1996; The Robert Wood Johnson Foundation, 1996). They use multiple specialist services and more home health care and nonhospital services, and they face greater need for coordination and com- munication along the continuum of care. The current health care delivery system is woefully inadequate in meeting these demands (Wagner et al., 2001; Anderson and Knickman, 2001). It has been estimated that fewer than half of patients with hypertension, depression, diabetes, and asthma are receiving appropriate treatment (Wagner et al., 2001). Lifestyle Influences on Health Behavioral risk factors, such as smoking, heavy drinking, and obesity, are known risk factors for illness and disease. Significant levels of illness and death are strongly correlated with behavior patterns that could be modified (McGinnis et al., 2002). Obesity is associated with a 36 percent increase in inpatient and outpatient spending (Grumbach, 1999). Cigarette smoking is the leading cause of preventable deaths in the United States. Between 1995 and 1999, smoking caused approximately 440,000 prema- ture deaths, and smoking-related medical expenditures totaled more than $75 billion in 1998 alone (Fellows et al., 2002). Although the impact of behavior on chronic conditions is known, people report not receiving the information they need to manage their illnesses successfully. For example, 40 percent of people with hypertension say they were not advised to limit salt intake or control their weight (Foundation for Accountability and The Robert Wood Johnson Foundation, 2002). Improving health status will require a better understanding of the de- terminants of health and illness and of how to educate people about and influence the lifestyle and behavioral choices that affect the prevalence and severity of chronic conditions. Such understanding is needed at the indi- vidual patient level, but stronger interventions are needed at the population level as well to achieve broader change. Other Demographic Shifts The population of the United States is slowly aging in both absolute and relative terms. About 13 percent of the population is currently over age 65; this proportion is estimated to increase to 20 percent by 2030 (National Center for Health Statistics, 1999). The aging of the baby boom generation in particular is expected to transform many aspects of society, although the effect on the health and welfare system will not be felt substantially until 2030, when the youngest members of that generation reach age 65 (Insti- tute for the Future, 2000).

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FORCES FOR CHANGE 33 The aging of the population, as well as a sharp drop in fertility rates during the 1960s and 1970s, will result in slower growth of the labor force in future years (Davis, 2002). It has been estimated that the number of workers per retiree will decline from about 4.75 in 2010 to about 2.75 in 2040 (American Health Care Association, 2002), with implications for funding levels for Social Security and Medicare. The shift in demographics will also result in an increasingly tight labor market that can be expected to exert upward pressure on the wages of health workers, increasing demand to improve productivity in health care (Davis, 2002). The population is also becoming more diverse. Although 73 percent of the U.S. population is Caucasian non-Hispanic, the Hispanic, Asian, Afri- can American, and Native American populations are all growing more rapidly than the population as a whole. By 2010, minority ethnic and racial groups will account for 32 percent of the nation's population (Institute for the Future, 2000). Among those 65 and older, approximately 14 percent are minorities; this proportion is expected to reach 50 percent by 2100 (Wolf, 2001). Hispanics are projected to be as large as all other minority groups combined (Wolf, 2001). The importance of these trends is that disparities in health remain for different population groups. For example, chronic conditions appear to differ in their prevalence among racial groups and low-income and disadvantaged populations (Foundation for Account- ability and The Robert Wood Johnson Foundation, 2002; Wolf, 2001). These general demographic shifts have at least three major implica- tions. First, the growing diversity of the population will result in increased variation in people's expectations of the health care system, creating de- mands for greater cultural sensitivity and competency in the system's design and from its practitioners. Second, the aging and diversity of the population will have significant implications for the availability, mix, and price of the health care workforce. Finally, the growth of the population covered by Medicare, combined with relatively fewer people paying into the system, is likely to force trade-offs to maintain financing, such as reducing benefits, raising taxes, or allowing larger deficits (Strunk and Ginsburg, 2002). Technological Advances As discussed here, the term "technological advances" encompasses a range of technology-based capabilities, including information technology; telecommunications and systems analysis; biotechnology, genomics, proteomics, and structural biology; and imaging and clinical applications. The effects of these advances will be profound, affecting what kind of care is provided to people, when it is provided, where it is provided, and by whom. The result is likely to be a redefinition of what constitutes health and medical care. The impacts of advances in two of these areas--informa-

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34 ACADEMIC HEALTH CENTERS tion and communications technology, and biotechnology--are reviewed below. Information and Communications Technology Inaccessible or poor-quality information has been identified as one of the health sector's most avoidable shortcomings (Detmer, 2003). Public health agencies are unable to share critical information quickly or pool data for analysis; treatment advances take too long to reach people, while un- proven procedures are widely used; variation in practice patterns means that the costs and outcomes of care that people experience depend on where they live rather than scientific evidence; and both patients and clinicians face conflicting and poor-quality information. Information and communications technologies (discussed here under the rubric of information technology for the sake of brevity) have the power to transform health and medical care. The information technologies ex- pected to have the greatest impact on health care are clinical information and decision support systems, the electronic medical record, and Internet- based health interactions (Institute for the Future, 2000). Applications of information technology in clinical care can range from simple automation of tasks that improve the speed of transactions to com- plex knowledge management that includes adaptive clinical decision sup- port systems (Institute of Medicine, 2001b). Information technology can affect clinical decision making by enabling real-time data to be available where clinical decisions are made. Individual patient data can be accessed, as well as comparative data and information about current evidence and best practice. Using information technology, virtual teams in different loca- tions can confer about a patient without ever meeting face to face, a capa- bility with the potential to improve efficiency and continuity of care. Infor- mation technology can also improve clinical efficiency by reducing errors and variations in practice. Computer-based physician order-entry systems have been shown to reduce medication errors by more than 50 percent (Doolan and Bates, 2002). Information technology can yield cost savings as well. For example, one estimate suggests that the clinical information sys- tem at Vanderbilt University Medical Center enabled $7 million in operat- ing savings in just 1 year by controlling drug costs and improving the flow of information, which made it possible to meet increases in patient volume without adding staff (Morrissey, 2002). Information technology can also allow people to become more in- volved in their own care through improved access to information. The Internet is a strong influence in encouraging such involvement (Kassirer, 2000; Kleinke, 2000; Starr, 2000), and the proportion of active users of the Internet among the U.S. population quadrupled between 1995 and 2000

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FORCES FOR CHANGE 35 (Starr, 2000). Through the Internet, patients are able to learn more about treatment options and connect with others experiencing the same problem to receive support for self-management or trade information (Fried et al., 2000). The Internet can be especially powerful for people with chronic conditions. It makes continuous monitoring possible by allowing patients and their clinicians to stay in touch on a regular basis without relying on face-to-face visits (Starr, 2000). Telemedicine will be able to expand be- yond its historical role of bringing services to rural populations as online consultations, especially with video and data links, become a reality, mak- ing care less place dependent (Starr, 2000). Information that may have been inaccessible or could come only from a physician can now be easily ac- cessed and printed by patients anytime, anywhere (Kleinke, 2000; Fried et al., 2000). Access to such resources allows patients to take a greater role in treatment decisions, and may necessitate different approaches when health professionals counsel their patients. Many believe that, despite concerns regarding security, privacy, and malpractice, the Internet is poised to be- come a major vehicle for health care (Kassirer, 2000). Information technology is expected to have a significant effect on mea- surement and surveillance as well. Information technology creates opportu- nities to analyze large amounts of data and to measure outcomes of care, especially at the population level. The ability to conduct better analyses of clinical performance and cost-effectiveness and to track changes over time can improve significantly. Information technology is also expected to sup- port enhanced surveillance so that disease outbreaks and bioterrorism can be detected quickly, and to create the opportunity to link public health and acute care delivery systems for improved response (Salinksy, 2002; Agency for Healthcare Research and Quality, 2002). Finally, information technology will have a major effect on overall work design in health care by influencing how the work is conducted, what roles and responsibilities are assumed, and how people work together. For example, information technology is likely to permit functions traditionally performed by physicians to be performed by other clinicians (Christensen et al., 2000; Weed and Weed, 1999). This change will in turn raise fundamen- tal issues regarding how human capital is deployed, influencing projections of the supply, mix, and distribution of needed labor. Past projections have often focused on the supply of physicians or the mix of specialists and generalists (see, for example, reports by the Council of Graduate Medical Education). Few studies have examined the roles of nonphysician clinicians, such as advanced nurse practitioners, nurse midwives, or physician assis- tants (Cooper et al., 1998; Grumbach and Coffman, 1998). Yet projections of workforce needs based on the assumption that work processes will re- main the same will be insufficient for assessing future needs.

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36 ACADEMIC HEALTH CENTERS Biotechnology Biotechnology offers great promise for improving health and prevent- ing disease. Biotechnology encompasses the use of cellular and molecular processes to solve problems or develop products (Biotechnology Industry Organization, 2003). In health care, it has been applied in the development of medicines, vaccines, diagnostic tools, and gene therapy. Among the most promising areas are genomics, with its potential to predict disease and improve diagnosis, and proteomics, or understanding of the complete set of proteins that make up a living organism. Knowing the genes and their proteins is one essential component of understanding physiology and ex- plaining disease (Fontanarosa and DeAngelis, 2002). The complexity pre- sented by 35,000 human genes and 100,000 proteins is enormous, but it is believed that the molecular basis of most human diseases will eventually be explained (Pollard, 2002). A related and emerging area is structural biol- ogy, which includes the study of biological macromolecules from a struc- tural perspective (National Institutes of Health, 2002). It comprises a num- ber of subdisciplines, such as x-ray diffraction, electron microscopy, computational biology, chemistry, and engineering. Advances in gene testing could make it possible to identify the potential for the development of a disease and to undertake early interventions to avoid, delay, or moderate symptoms (Myers et al., 2001). Preventive care would take on an entirely different meaning (Samuels, 2001). The ability to intervene early in a disease process, perhaps prior to the emergence of symptoms, would alter the very definition of medicine, health, and preven- tive care. Applied to pharmaceutical development, pharmacogenomics could make it possible to genetically engineer therapies and individualize the design of a drug to make it safer and more effective (Robertson et al., 2002). Expectations are high that diagnosis, treatment, and prevention will advance rapidly as a result of these advances. Moreover, biotechnology will converge with information technology to create several new areas for research not possible in the past. Bioengineer- ing, bioinformatics, computational biology, and nanotechnology are among such promising areas for future research. Clinical imaging is another promising area on the long list of biomedi- cal possibilities. Developments in established fields, such as light and elec- tron microscopy, and in new fields, such as scanning probe and magnetic resonance imaging microscopy, combine advances in hardware and com- puter algorithms to improve resolution and structural detail at the molecu- lar and cellular levels (Office of Extramural Research, 2002). In the area of neurological diseases, neuroscientists are applying new understandings in modern genetics and information derived from the se- quencing of the human genome to gain insight into the hundreds of disor- ders that afflict the nervous system, advancing the treatment of spinal cord

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FORCES FOR CHANGE 37 injury, acute stroke, multiple sclerosis, and Parkinson's disease. Progress in research on the channels, synapses, and circuit structures of the body at the atomic level offer the greatest opportunity for applying methods by which new drugs are targeted for the treatment of epilepsy, pain, movement disor- ders, and neuromuscular disorders (National Institute of Neurological Dis- orders and Stroke, 1999). Advances in imaging technology, such as positron emission tomography (PET) and functional magnetic resonance imaging (fMRI), have brought about a revolution in the study of cognition and behavior. As a result, the opportunity now exists to detect early changes in brain function and assist in understanding the mechanisms of such diseases as autism. The list could go on, but it is clear that these and other scientific advances will produce an explosion of knowledge that is just getting under way today. To derive the benefits of such advances, however, efforts at translating the knowledge gained from research into clinical practice need to be "substantially improved" (Frist, 2002, p. 1723). Clinical trials are important for translating research from the bench to the bedside, but a significant leap beyond clinical trials is required to transform health care practice to reflect the latest advances. Continued Cost Pressures Persistent cost pressures threaten all avenues of progress in health care. After a slowdown in the growth of health care expenditures for several years, recent trends suggest a faster rate of growth may be recurring (Ginsburg, 1999). In 2001, health care spending rose a nominal 8.7 per- cent, well above the average growth rate of 5.7 percent between 1993 and 2000. Adjusting for inflation, this figure represents a real rate of growth of 6.2 percent (Levit et al., 2003). The Centers for Medicare and Medicaid Services projects that health care spending will continue to grow through 2008 at an average annual rate of 6.8 percent, reaching $2.2 trillion or 16 percent of gross domestic product (Blumenthal, 2001). The growth in spending on health care is being reflected in premium costs for health insurance and increased out-of-pocket spending by pa- tients. Between 2000 and 2001, monthly premiums for employer-spon- sored health insurance rose 11 percent, up from an average increase of 8.3 percent in the prior year (Kaiser Family Foundation and Health Research and Educational Trust, 2001). Smaller firms (fewer than 200 workers) saw premium increases of 12.5 percent, compared with 10.2 percent for larger firms. This increase in premiums is the greatest since 1992, and the trend is expected to continue. In 2003, for example, the California Public Employ- ees' Retirement System is facing increases in excess of 20 percent (Con- sumer Reports, 2002).

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38 ACADEMIC HEALTH CENTERS Higher expenditures are also reflected in increased cost-sharing re- quirements for patients. Both deductibles and copayments have risen in all types of health plans provided to employees (Gabel et al., 2001). As health care expenditures rise, employers and payers are indicating their intention to increase consumer cost sharing (Robinson, 2002). Tiered pricing plans are one potential means of putting more decision making into the hands (and pockets) of consumers. The proportion of health plans offering a three-tier design for pharmaceuticals (varying out-of-pocket costs for ge- neric, brand-name, and nonformulary drugs) rose to 80 percent in 2000, up from 36 percent in 1998 (Mays et al., 2001). The same concept is being applied to hospital choice. Some health plans in selected markets are vary- ing consumer out-of-pocket payments for different hospitals that are tiered according to their costs. Consumers who choose to use AHCs, which are typically more expensive than other hospitals, may face higher out-of-pocket spending for that choice (Robinson, 2003; Yegian, 2003). Growing interest in defined contribution plans may also give consum- ers a greater role in deciding what coverage and services to buy. In defined contribution plans, an employer or other payer contributes a certain amount to the purchase of health insurance by employees or beneficiaries. Those who wish to purchase a more expensive package must pay the difference in cost out of their own pockets (Blumenthal, 2001). About 24 percent of all small firms and 13 percent of all large firms say they are very or somewhat likely to switch to a defined contribution plan over the next 5 years, com- pared with 20 percent and 16 percent, respectively, in the prior year (Kaiser Family Foundation and Health Research and Educational Trust, 2001). The degree to which consumers will accept increases in their out-of- pocket costs is unclear, and at some point a backlash could occur as people are forced to balance their desire and expectation for access to care, includ- ing the latest technologies, against the costs of care. Nonetheless, a return to the first-dollar coverage seen in prior years is unlikely. Compared with today's system, the system of the coming decades will likely be more con- sumer driven as patients take on greater responsibility for the costs of their care and are increasingly armed with information to make decisions about their care. Although the level and rate of increase in health care spending is a concern in and of itself, the concern widens when its impact on other pressing problems is considered. Persistent increases in expenditures threaten to exacerbate already serious problems of access. About 40 million people in the United States, or 17 percent of the population under age 65, are uninsured (Institute of Medicine, 2001a). The number of people with- out insurance has increased by about 1 million per year, even during years of economic prosperity (Holahan and Kim, 2000). As employer premiums increase, many observers note the potential for still further increases in the

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FORCES FOR CHANGE 39 number of uninsured (Strunk et al., 2001). Although access limitations are more severe for people with no insurance, even those with health insurance are concerned about their access to care because of copayments, deductibles, or insufficient coverage. Among five industrialized nations, the United States has the highest percentage of people who report having problems paying medical bills (Schoen et al., 2002). Increased costs make it difficult to maintain equitable access for vulnerable populations to basic as well as specialized services. Recognized and serious quality problems also make it clear that the resources being devoted to health care are not producing the desired results (Institute of Medicine, 2001b). Standard practices are increasingly being questioned. Arthroscopic surgery for arthritic knees and long-term hor- mone replacement therapy for women, for example, have recently been found to be ineffective and possibly even harmful for some patients (Moseley et al., 2002; Writing Group for the Women's Health Initiative Investiga- tors, 2002). Assumptions about the management of patients with atrial fibrillation that have been unquestioned for many years have been recently found to be "wanting" (Falk, 2002, p. 1883). Some patients receive services that provide no benefit, while others fail to receive services that could help. For example: Preventable medication errors alone were shown to harm approxi- mately 500 patients per year in a large teaching hospital (Chassin et al., 1998). Fully 45 percent of diabetics reported that they had not received three recommended annual checks (eye exam, foot exam, and blood pres- sure) (Davis, 2002). Only 50 percent of eligible adults above age 65 receive the recom- mended yearly influenza vaccine, and only 28 percent receive the indicated pneumococcal vaccine (James, 2001). Studies conducted between 1987 and 1997 suggest that about 20 percent of care for chronic conditions was provided without appropriate clinical indications (Becher and Chassin, 2001). Better ways of delivering care to people are needed so that care is safe, effective, patient-centered, timely, efficient, and equitable (Institute of Medi- cine, 2001b). Developing better models of care represents one piece of the puzzle in addressing the pressures on the costs of care. One study estimates that quality problems such as overuse, misuse, and waste represent 30 percent of the direct costs of health care, or about $390 billion in 2000, excluding the indirect costs of lost workdays (Midwest Business Group on Health et al., 2002). This estimate is consistent with those of other studies. If the wide variation that exists across the country in the use of medical

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40 ACADEMIC HEALTH CENTERS services were reduced, it has been estimated that Medicare spending could be decreased by about 29 percent (Wennberg et al., 2002). These various studies suggest that cost savings, to some degree, are possible. Given the pressures that employers, consumers, and other payers are now facing for the costs of care, additional funds are likely to be accompa- nied by calls for greater accountability and an understanding of the value being derived from current investments and the resource choices being made. Providers that rely on public sources of support are also likely to be affected by efforts to control spending. Needs and Expectations for the 21st Century Collectively, the trends described in this chapter are considered by some to represent a paradigm shift. The Institute for the Future (2000) views the paradigm shift in health care as the movement from a biomedical model to a model that employs a broader view of health. The biomedical model is characterized by a focus on the acute care episode, the individual patient and his or her disease, and the goal of curing the disease. In con- trast, the broader view of health will focus on managing chronic illness, attending to the needs of populations as well as individuals, and adapting to diseases with no cure. At the Duke Private Sector Conference of 2000 (Snyderman and Saito, 2000), Snyderman described a paradigm shift from a reactive to a proac- tive health care model. The reactive model is characterized by a focus on the treatment of disease at the time that a patient presents for treatment, an emphasis on sporadic interventions, physician-directed care based on experience, and care that is cost insensitive. In contrast, the proactive model will involve using an understanding of genetic susceptibility and behavioral risk to predict and prevent disease, taking interactive approaches to care, and emphasizing clinical decision making that is evi- dence based and cost sensitive. The Institute of Medicine's (2001b) report Crossing the Quality Chasm: A New Health System for the 21st Century describes a paradigm shift from what can be viewed as a provider-centered to a patient-centered system. The former is characterized by a focus on visits, professional autonomy, experience-based decision making, and secrecy. In contrast, the patient- centered system will focus on continuous healing relationships between patients and their care team, cooperation among clinicians, care that is driven by patient needs and values, evidence-based decision making, and transparency. The Blue Ridge Academic Health Group (1998a) describes a value- driven health system that is characterized by a focus on advancing health, as distinct from delivering medical services. This system has six dimensions:

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FORCES FOR CHANGE 41 (1) universal health coverage so that competition can be based on quality and efficiency; (2) management of population health through the allocation of public health resources and collaborations between public health and health care professionals; (3) identification, communication, and manage- ment of individual and population health risks before the onset of disease and associated treatment costs; (4) the participation of all health care deliv- ery organizations in a community or region in efforts to advance health, with contributions by AHCs to an improved understanding of population health through their research and education; (5) the measurement of perfor- mance by all health care organizations and accountability within the orga- nization and to the community for resource use; and (6) the presence of a robust information technology infrastructure to manage knowledge for delivery organizations, professionals, and patients, and to enable data col- lection and analysis, as well as access to available evidence. Some believe the current health system is overly focused on meeting the needs of a relatively small population of very sick patients. Because of this, it is vulnerable to disruption by technologies and other innovations that can offer cheaper, simpler, and more convenient means of care that will meet the relatively straightforward needs of the majority of the population (Christensen et al., 2000). Whether or not history will reveal this era as a paradigm shift, there is no question that the factors described in this chapter will have a significant impact. The combined effects of these factors will be especially powerful and can be expected to produce at least three broad trends for health care. First, patients will exert more direction and control over their care. Greater patient involvement in care associated with the management of chronic illness, combined with increased responsibility for the costs of care and greater access to information, will result in patients wanting and hav- ing greater direction over their care. Evidence for this trend can already be seen. Information about health care is one of the most common objects of searches on the Internet. People are seeking information on complementary and alternative medicine in record numbers, suggesting an openness and willingness to pursue alternative forms of therapy outside the mainstream health system (National Center for Complementary and Alternative Medi- cine, 2001). Over-the-counter home testing products are expanding rapidly into many different uses, presenting the opportunity for people to test themselves at home for conditions that may previously have required an office visit and a prescription, and permitting patients to become their own diagnosticians. Second, there will be greater interest in a more lifelong, integrative view of medicine and health. Managing chronic illness over an extended period of time requires more than just good medical care; it also requires an involved and educated patient, behavioral and lifestyle changes, and good

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42 ACADEMIC HEALTH CENTERS coordination between medical care and other services (often community- based) that can support health maintenance. Increasing costs of care and greater individual responsibility for those costs should foster greater inter- est in approaches for staying healthy among both patients and payers. A more integrated view will also be supported by interest in maximizing the benefits of scientific advances. Biomedical advances that offer opportunities for early intervention and prevention of disease will fail to provide their maximum benefit if they are not accessed until a patient exhibits symptoms and presents for treatment. Needs related to managing illness, controlling costs, and maximizing scientific advances will increase interest in both the medical and nonmedical determinants of health and illness. Third, there will be greater pressure to measure and understand value in health care. Increased patient decision making, especially in the face of rising costs, along with information technology that can support improved analysis and measurement, will result in increased demand to understand what does and does not work in health care. Greater pressure will be placed on applying what we know works and discontinuing what we know does not work. Improving value will require making care safer and reducing errors in all settings. As science continues to advance, there will be in- creased calls for understanding how to apply the resulting discoveries effec- tively. Having the scientific potential to reduce illness and improve health, as well as the information technology and tools to understand and apply the advances achieved, will make patients, payers, and policy makers impa- tient for the enhanced care thus enabled. CHALLENGES TO CHANGE WITHIN AHCS The changes described above affect all health care organizations and professionals. In addition, however, AHCs face a number of unique chal- lenges that also exert pressure for change. AHCs have traditionally funded their activities through a complex sys- tem of cross-subsidies that is being disrupted (Iglehart, 1994). About 90 percent of total AHC revenues is derived from clinical care; these revenues are used to cross-subsidize activities in research and education (The Com- monwealth Fund Task Force on Academic Health Centers, 1997b). Until the early 1990s, AHCs had a bounty of resources and were able to operate with relatively few concerns for efficiency (Beller, 2000; Galvin, 2002). In the mid- to late 1990s, however, the situation appeared to change, and AHCs began to experience increased financial pressures as rising costs of care constrained payments from both public and private payers. These pressures affected AHCs in particular, whose average costs are approxi- mately 25 to 30 percent higher than those of other hospitals (Blumenthal and Meyer, 1996; Kassirer, 1994). Payment constraints increased pressure

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FORCES FOR CHANGE 43 on faculty to generate clinical revenues, creating concerns that attention is being diverted from education and research (Beller, 2000; Blumenthal and Meyer, 1996; DeAngelis, 2000). AHCs also face challenges to the financial support they receive for each of their roles. Although AHCs have raised questions about the adequacy of funding for graduate medical education, some observers have questioned whether such subsidy should be provided at all (Newhouse and Wilensky, 2001; Gbadebo and Reinhardt, 2001). In terms of research funding, AHCs have expressed concerns about their ability to continue to sustain research activities that are not supported with external funds, including activities associated with conducting the preliminary work required to develop new ideas and seek grants, some capital expenses, and the institutional contribu- tion required by some funders (such as NIH), which are estimated to repre- sent 15 to 20 percent of a project's total expenses (The Commonwealth Fund Task Force on Academic Health Centers, 1999; Weissman, et al., 1999). AHCs have been major beneficiaries of the increases in federal support for health-related research, but it is not clear that historical rates of increase can be sustained into the future, and this situation could poten- tially affect the funding stream available to support AHC research activities (Korn, 2002). One recent report notes that between 1994 and 2000, the financial resources available to AHCs to support their core roles in education, re- search, and patient care diminished (Dobson et al., 2002). The aggregate total and operating margins of AHC hospitals were lower in 2000 than in any year since 1994, a decline attributed to decreases in payments from private providers and, especially for public AHCs, increases in uncompen- sated care. Analyses by the Medicare Payment Advisory Commission found that the decline in total hospital margins may have halted in 2002, although these analyses did not separate out the experience of AHC hospitals (Medi- care Payment Advisory Commission, 2003). Moreover, these analyses ex- amined the financial status of the hospital only. The complexity of the AHCs makes it difficult to get a clear sense of their overall financial status, since the experience of that of the hospital may not be representative of the whole AHC. For example, the Hospital of the University of Pennsylvania reported a 1999 operating margin of 11 percent, while the operating margin of its obligated group (the affiliates that share long-term debt) was 9 percent (Kane, 2001). Not all the challenges facing AHCs are financial, however. From an organizational perspective, AHCs tend to be large, complex entities that are loosely affiliated arrangements (see Chapter 1). As they face today's com- petitive marketplace and a rapidly changing delivery system, their size and organizational complexity make decision making slow and often cumber- some (Galvin, 2002). This is especially true for decisions that need to be

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44 ACADEMIC HEALTH CENTERS made at the level of the overall AHC enterprise (as opposed to the depart- mental level) (Iglehart, 1995). The size and complexity of AHCs also present an obstacle to partnering with other organizations (Galvin, 2002). AHCs have to respond to an exceptionally diverse number of constitu- encies. To carry out their many activities, they must satisfy patients, pur- chasers, faculty, employees, students, the broader research community, funders, accrediting agencies, state and federal policy makers, alumni, local communities, community-based facilities and providers, and other part- ners. They operate with one foot in the university and one foot in the competitive marketplace. They are providers of last resort for the uninsured who need care and have nowhere else to turn. They are also providers of last resort for the seriously ill who need the most sophisticated care and have exhausted all other possibilities. The ability of AHCs to respond to the forces for change influences the capabilities of the rest of the health system. If AHCs do not adapt their activities in education and research to meet changing needs and demands, it will be difficult for the broader health care system to have the trained professionals and knowledge needed to deliver care effectively. Thus, the whole health care system is influenced by the pace at which AHCs are able to adapt their roles to a changing set of demands and expectations placed on the nation's health care system. Certainly, the overall health system is affected by other factors in addition to the activities of AHCs, but the roles performed by AHCs are a major influence in building the health system's overall capacity to adapt to the changes that will affect health care in the coming decades. Despite the variation in AHCs, this committee believes there is suffi- cient commonality among them that a set of expectations can be defined for each of their roles. This does not mean that all AHCs will do the same thing or carry out activities in the same way. AHCs will still choose varying paths to balance their different roles in accordance with local needs and resource availability. But it is indeed possible and reasonable to clarify expectations for the AHC roles, and even advisable given the public dollars that support the AHCs' work.