Practicing managed care in the academic medical center.

As the health care marketplace continues to evolve, academic medical centers (AMCS) need to operate in an environment increasingly dominated by managed care. Revenues generated from clinical care constitute the largest source of funding for AMCS.(1) To preserve this income stream, as well as to continue to recruit patients for teaching and research purposes, AMCS must attract managed care enrollment. Managed care reimburses for patient care at a lower rate than the AMC's historic payers and often puts the clinical enterprise at financial risk for the health care outcomes of patients.(2)

Success in delivering managed care requires understanding and confronting the contrasts between the culture, organization, and approach that has served the AMC very well in the past and the culture, organization, and approach that characterizes a successful provider of managed care to a patient population. Some of these contrasts are a result of the organization and structure of the AMC as it has traditionally functioned. Some contrasts are a result of the research mission most AMCS share. Finally, teaching itself requires approaches and priorities different from those of efficient managed care.

Contrasts Resulting from Organization and Orientation

Certain attributes of the AMC have developed to serve the community, train specialists, undertake research, provide health education, or meet other priorities. Some of these attributes mesh poorly with managed care (table 1, page 21).

Table 1. Contrasts Between the AMC and the MCO

Academic Medical Center             Managed Care

Tertiary care, specialty-based     Primary care-based
Court of last resort philosophy    Common things occur commonly
Entrepreneurial, invidivual        Systematic, common approach
approach
Standalone institution             Integrated health system
The intellectual challenge of      The business of medicine
medicine
Hospital-based, happens to need    Outpatient-based, happens to
outpatient facility                need some inpatient beds
Seeks adverse selection            Population-based, avoids
                                   adverse selection
No gatekeeping, no gatekeepers     Strong gatekeeping
Disease-based care                 Population-based care
Specialists provide continuity     Specialists provide consultation
of care
Thinks of each service as revenue  Thinks of each service as cost

Tertiary and specialty care-based versus primary care-based. In many markets, AMCS have played an important role as referral centers for highly specialized tertiary and quaternary care. The ratio of specialist to primary care faculty at these institutions reflects this role. The predominance of specialists, and their importance to the institution, means a majority of senior decision-making roles are likely to be filled by specialists. The ratio of primary care to specialty physicians for effective delivery of managed care more closely approximates 50-501; in such a group, decision making is likely to be more evenly shared between these two groups. An organization led by specialists may address primary care problems less effectively.

As AMCS move forward to recruit a larger primary care patient base, they may be constrained by an insufficient number of Amc-associated primary care physicians able to accommodate additional patients.

Specialists at the AMC have worked in an environment where relationships between primary care physicians and specialists are more distant than in community settings. A specialist may see patients from a large number of community sources. In the community setting, it is more typical for specialists to have a close working relationship with a small group of primary care physicians on whom they depend for referrals. The academic specialist will need time to adapt to the closer working relationship between primary care physicians and specialists that managed care requires.

A "court of last resort" orientation versus "common things occur commonly." Consonant with the AMC's role as provider of highly specialized services, the goal of the specialist at the AMC has been to never miss a diagnosis, as this is the patient's last chance to get the answer to his or her problem. This orientation encourages an exhaustive search for unusual disease.

The managed care organization focuses on the common problems of a population. As a result, the principle that most patients' disorders are common illnesses is the approach taken, rather than a process of ruling out the unusual. These contrasting orientations make sense. When the specialist is serving the referring physician community in evaluating highly unusual cases, the probability of unusual disorders is higher than when the specialist is serving the needs of a managed cared population of patients who use the AMC for all of their needs.

Under the circumstances, the specialist serving the needs of these two populations has a very difficult role. For the patient referred to the "ivory tower" from a community specialist who has already evaluated the patient, the specialist should appropriately take a "court of last resort" approach and consider and rule out exotic possibilities. If the next patient seen has been referred by a primary care physician in his AMC, the specialist's orientation must be different, as the prior probability of unusual conditions is substantially less. Switching between these two perspectives will not be easy, but the inability to do so will result in either excessive costs from unnecessary tests administered to the healthier patient group or missed diagnoses in patients referred to the "court of last resort."

Individualistic and entrepreneurial versus systematic and common. Power is shared in the AMC among department heads, the dean, the administrative leadership of the hospital, and the faculty practice organization. The orientation of the AMC has been toward entrepreneurial development of new technologies, new research ideas and funding sources, and new clinical delivery programs. This power sharing and entrepreneurial approach contrasts with the centralization of power and authority that characterizes more highly organized managed care organizations.[4] The MCO has a more narrow focus on patient care and economic success. In marketplaces such as California, many MCOs receive a substantial amount of their reimbursement in the form of single monthly sum payments per patient, as capitation. This payment approach encourages centralization of decision making.

Some physicians who have worked in the entrepreneurial environment of the AMC, with the freedom this brings, will find it difficult to have their work environment dictated to them by those in power in a more hierarchical MCO.

Standalone institution versus integrated health system. AMCs have operated independently from other delivery organizations in their marketplaces, including other AMCs. In fact, substantial duplication of tertiary and quaternary services has resulted in some markets where more than one AMC exists. MCOs are organizing into larger delivery systems with vertical and horizontal integration to achieve economies of scale, avoid duplication of services, and secure sufficient market presence to negotiate satisfactory contractual agreements.

Faced with consolidation of community providers and insurers into larger groups, the AMC has three main choices. The first is to integrate with an existing MCO, an approach that will result in considerable culture clash and risk reorienting priorities from teaching and/or research toward patient care or profit. A second choice is to create one's own integrated system by purchasing or building a substantial primary care base to secure the number of patients necessary to meet the institution's need for training, research, and continuation of important specialty programs. This approach is quite costly. The third alternative is to remain independent with a small primary care base, selling specialized services to MCOs in a highly competitive market in which the AMC is seldom the only provider of the service, so that AMCs in the region may be asked to bid competitively to secure the MCO's tertiary or quaternary referrals.

The intellectual challenge of medicine versus the business of medicine. The orientation of teachers and students in the AMC has been to learn the core of medical knowledge--the physiology and pathophysiology of disease and its treatment. Only when this is mastered are issues of costs and efficiency of care considered. (Some training programs are moving away from this approach by emphasizing medical decision making and evidence-based medicine.[5]) By contrast, the MCO will consider how to organize care most efficiently so that patients and their problems are managed with an eye to the needs of the insured population and the resources, both financial and otherwise, to meet those needs. In the AMC, the faculty or resident physician focuses on making sure that the individual patient with a mammographic finding suspicious for breast cancer gets referred for more definitive evaluation and on deciding what the proper diagnostic and therapeutic approach in that case should be. In the MCO, in addition to focusing on the individual patient's problem, the system may be studied; for example, by developing a methodical approach to ensuring that abnormal mammograms are always followed up promptly and that efficient and timely referral to the surgeon or surgery department occurs.

Hospital-based, though needing an outpatient facility, versus outpatient-based, needing some inpatient beds. Most AMCs are inextricably linked with teaching hospitals. As tertiary care-based organizations, they have emphasized inpatient care; in some institutions the outpatient facility has only recently become important. The AMC cannot ignore the fate of its teaching hospital, whose census is likely to be falling and whose structure and resultant costs are oriented toward the ability to deliver quaternary care. By contrast, the MCO is an outpatient-oriented organization that may have no associated hospital. In such cases, die MCO can negotiate with local hospitals to purchase the least expensive inpatient institution's beds for their patients' care on the "spot market."

Seeks adverse selection versus population-based, avoiding adverse selection. To meet the mission of service to community, teaching, and research the AMC has encouraged the ill and patients affected by unusual disease to seek them out. With the recent orientation toward primary care teaching, a broader patient population has been sought by many AMCs, but the focus on the sick remains. When the AMC is paid by a capitation that is not adjusted for adverse selection, an orientation toward recruiting the ill is very costly. If the AMC enrolls a disproportionate share of sicker patients, the adverse effects on the financial performance of managed care in the AMC will be felt quickly. Managed care insurers have not been much inclined to address the problem of adverse selection. They have advised the University of California at San Francisco (UCSF), where I was Medical Director for Managed Care, to increase enrollment so that adverse selection evens out over a larger population of healthy enrollees. In the case of UCSF, an unrealistically large number of patients would need to enroll to even out the frequency with which we have disproportionately enrolled patients with certain unusual and costly disorders.

By contrast, the MCO looks to meeting the needs of the local community and, by attracting a substantial proportion of the neighborhood, evens out the sick with the well so that the capitation payment will cover the costs of the population served.

No gatekeeping, no gatekeepers versus strong gatekeeping. Primary care at many AMCs is a relatively recent phenomenon. At UCSF, for example, formal training in primary care internal medicine began in 1978, but it was not until 1987 that the institution recruited a cadre of clinician teachers to spend the predominance of their time in patient care. Patients at UCSF have had free access to specialty care, and, until the increasing penetration of managed care into the system, most of specialists' referrals came from community physicians rather than the smaller group of primary care physicians affiliated with the AMC. By contrast, in the community specialists have relied upon a smaller group of primary care physicians who have referred patients to them, a model on which gatekeeping can more easily be built. Bringing a gatekeeper model into the AMC represents more substantial change in orientation for specialists than is true in the MCO as it has evolved, as they must work more closely with primary care physicians and act to a greater degree in a consultative role, rather than as providers of ongoing services.

Disease-based care versus population-based care. As the court of last resort for the community, the AMC has developed services to meet the needs of particular diseases. Furthermore, specialists have subspecialized in particular diseases or problems to serve the needs of a highly select number of patients. The result is that disease-based clinics--psoriasis clinics, lupus clinics and the like--have been organized in many AMCs to efficiently manage those aspects of patients' health care needs. Specialists serve the needs of a small number of the enrolled population--those needing cochlear implantation, suffering from retinal disease, etc. Such organization and highly specialized orientation contrasts with the population-based approach taken by the MCO. The AMC's disease-based orientation may serve the needs of a population less effectively; it is also likely to encourage patients adversely affected with such problems to selectively enroll with the AMC.

Specialists provide continuity of care versus specialists provide consultation. Many patients seen by specialists in the AMC have come for disease-based care or have been referred by community physicians for ongoing treatment. Because residents, students, and fellows are learning about the problems managed in the specialty, there is an orientation toward providing continuing care to the patient to allow trainees to see the full spectrum of disease that patients experience or, in the case of surgery, to see how patients fare not only in the immediate postrecovery period, but months or years after procedures were undertaken. By contrast, the MCO uses specialists primarily in consultation and restricts ongoing care to severe forms of disease processes or to particular disorders best suited for continuing care by specialists, such as infertility services or oncologic care. Reorienting specialty care toward a consultative role requires significant change--better communication, more advice, and less hands-on management of patients' problems. Such reorientation also conflicts with aspects of specialists' teaching mission.

Each service provided is a revenue versus each service is a cost. All organizations moving to capitated managed care face this challenge, but the AMC, with the large number of entrepreneurial providers rendering many different services and its democratic decision-making process, makes this transition all the more challenging. Until all who provide care in the AMC understand that, in a capitation model, the less done the further funds go to provide care for the rest of the enrolled population, the AMC will not do well financially in managed care.

Contrasts Resulting from the Focus on Research

The research orientation present in many AMCs creates a different orientation and set of priorities than in the effective MCO. Research is a central activity for many AMCs; resolving the conflicts between research and a managed care orientation in favor of managed care is therefore problematic, as it profoundly changes the mission of the AMC (table 2, above).

Table 2. Contrasts between the AMC's Research Orientation and the MCO

Teaching                    Managed Care

Investigate, promote, use    Investigational and experimental
new technology               treatment not covered

Research most prized          Clinical care most prized

Investigate, promote and use new technology versus investigational and experimental treatments not covered. Many of the research protocols undertaken in the AMC fund only part of the costs of the care rendered. Complications from investigational drugs increased frequency of physician visits, and more frequent laboratory tests are billed to the insurer. Managed care insurers have been more explicit than indemnity carriers in their reluctance to incur these increased costs.[6] When the AMC is capitated, it may find it difficult to absorb these increased costs. Furthermore, the existence of such protocols may encourage patients interested in enrolling in such investigational treatments to preferentially choose the AMC for their care, resulting in adverse selection for the AMC. By contrast, in the MCO, such investigational treatments will, in general, not be covered.

This raises a significant conflict for the physician in the AMC--in a time of shrinking funding for research, physicians will be unable to continue investigations that constitute part of the reason for the AMC's existence. Physicians' sense of responsibility to patients and interest in their clinical research projects will at times conflict with the financial health of the AMC. The AMC must apply the managed care insurer's rules about investigational treatment, as the limited capitation available to care for these managed care patients will not cover investigational services that are not part of patients' benefit packages. Faced with this situation, the individual physician may try to convince those overseeing managed care at his or her institution that the care is not investigational; the AMC, like the insurer, may choose to apply very rigid criteria so that no investigational approach is covered, or the AMC may choose to cover some meritorious investigational treatments (such as certain approaches to treating AIDS-related conditions, where FDA approval of medications may lag the standard of practice in the community). If the AMC chooses the latter approach, picking which investigational treatment to fund and which not will be difficult.

Research versus clinical care. AMCs have made enormous contributions to the advancement of medical science[7]; researchers who have made these contributions may enjoy greater status than those who provide patient care and teach. This differential in status may encourage those devoted to clinical care to seek ways to decrease their time in clinical care by taking on more teaching or by participating in research or administrative roles. These trends are counterproductive to increasing clinical care volume or to meeting patient needs for access or continuity of care. In the MCO, clinical care is the predominant, if not sole, activity. Status comes to those who provide high-quality and efficient health care.

Contrasts Resulting from an Orientation toward Teaching

Teaching is not the exclusive domain of the AMC; indeed, a number of managed care organizations do a substantial amount of postgraduate education. These MCOs will face the difficulties inherent in melding a focus on teaching with an orientation toward efficient managed care. However, teaching represents a relatively small part of most MCOs' overall focus. In the AMC, teaching is interwoven with all aspects of care delivery. The priorities of these two orientations contrast and will create additional problems for the AMC bent on efficient managed care (table 3, page 24).

Table 3. Contrasts between the AMC's
Teaching Orientation and the MCO

Teaching                     Managed Care

Trainee autonomy              Minimize unnecessary tests
Part time provides            Continuity of care
Specialists need
clinical material to teach    Specialists are consultants
Teach/learn/practice/what     Teach/learn/practice managed
is in textbooks               care
Specialty identification      Community of financially
                              interdependent providers
Formal consultation           Curbside consultation
Teaching requires "clinical   Patient are, customer satisfaction
material"                     are job #1

Trainee autonomy versus minimizing unnecessary tests and treatments. At UCSF, as at many AMCs, relative autonomy of decision making is prized by trainees, and faculty believe a degree of autonomy creates a milieu of responsibility and decision making that affords the greatest learning. In general, however, the trainee, by virtue of inexperience, will pursue a greater number of diagnoses, solicit more specialist input, or evaluate and treat more aggressively those problems that a more seasoned clinician would evaluate more frugally before embarking on a more extensive diagnostic process. The result is likely to be greater costs in the training situation.

Part-time providers versus continuity of care. Faculty who teach spend less time in patient care than clinicians in full-time practice. When faculty undertake research as well, continuity suffers further. Trainees devote a few years to an institution, so that continuity over time suffers. In their day-to-day and month-to-month rotations, trainees may rotate between hospitals and services, decreasing inpatient continuity as well. Because most training programs, even in primary care, require a greater proportion of inpatient work than clinicians undertake in MCOs, outpatient continuity suffers further. The layers of care providers in the AMC, from student to resident to fellow to faculty member, also interfere with the efficient flow of information between health care providers about patients' problems. Instead of a close ongoing working relationship between a primary care physician and a cardiologist in the MCO, for example, one of several residents in primary care supervised by one of several faculty members might communicate with one of several cardiology fellows supervised by one of several cardiologists. The risks of this environment may include higher costs because of duplication of services, lower service quality because of inefficient communication, and lack of continuity of care.

Teach, learn, and practice what is in the textbook versus teach, learn, and practice managed care. Trainees learn physiology, pathophysiology, and disease management as outlined in journals and texts. Efficient management of the common health problems of an enrolled population of patients has not had the emphasis that it has for the MCO. This is a layer of knowledge that must compete with an already overwhelming amount of information to be learned. The MCO is staffed by experienced clinicians who should have a level of knowledge of patient and disease management that more readily permits learning the additional challenge of efficient population-based care.

Specialty identification versus a community of financially interdependent providers. While trainees are learning their fields, the boundaries between disciplines will tend to be more solid, the sharing of knowledge between specialists less smooth, and the efficient flow of information hence impeded. In the MCO, with a smaller group of providers overall and fewer specialists, efficiency of communication is improved strictly from a numerical point of view. Specialists in the MCO are comfortable with their roles, so boundaries between specialists and between specialists and primary care providers will be less strictly maintained, so that collaborative management of patient problems will result.

Formal consultation versus curbside consultation. The relative permanence of the provider group in the MCO, and the smaller number of providers, allows for more informal consultation between disciplines. In the AMC, the large number of part-time providers and the high level of yearly turnover impedes informal, or "curbside" consultation, and encourages a more formal, more comprehensive, and more costly formal consultative relationship between specialists and primary care physicians. To the extent that the specialist, even when informally consulted, does not know the primary care physician well and hence may not know the extent that his or her advice will be understood and followed, he or she may suggest more frequent formal consultation or a more exhaustive approach to make sure the problem is well evaluated than would be true in the MCO.

Teaching requires "clinical material" versus patient care and customer satisfaction are job number one. While this orientation has changed substantially in most AMCs, it was the orientation from which many AMCs started. Early in their development, some MCOs may also not have seen customer satisfaction as a high priority, but this has changed more quickly, and, lacking the other funding sources the AMC has relied upon to soften the effect of changes in patient care referral and reimbursement, the MCO may feel a greater vulnerability and need to prioritize a customer-focused orientation in the competitive marketplace. (In fact the evidence from the Medical Outcomes Study would suggest that, even if an orientation toward customer satisfaction prevails in many MCOs, patients found many elements of quality of service preferable in the fee-for-service setting.[8])

Many in the AMC believe that, because patients come for the highly specialized services uniquely provided in the AMC or for the perceived high technical quality of care, they will be willing to tolerate some sacrifice in quality of service. Our experience at UCSF is that, when patients have chosen the AMC for all their health care needs, their expectation of quality of service changes significantly from what it was when they came infrequently for exotic problems.

Conclusions

For the AMC to successfully practice managed care requires an understanding of the structure and orientation of the efficient MCO, and recognition of the areas of substantial contrast between the MCO and the AMC. The AMC has developed over many years to serve as a resource to the community in managing highly specialized problems, as a site for training of specialists and more recently primary care providers, and as a research institution. The resulting organizational structure has served these missions very well. To change structure or orientation to meet the needs of managed care risks sacrificing some elements of the orientation that most effectively meets other priorities of the organization.

Different AMCs have and will address these problems differently. Creation of a separate group of physicians focused on providing primary and specialty care for managed care enrollees is a possibility that is being exploring at UCSF. Centralizing decision making in the hands of an individual or small group that has the authority to lead an enterprise that comprises school, medical center, and faculty organization is another change that will allow the AMC to respond more nimbly to market pressures.

Each AMC must look at its own historic orientation and market circumstances to determine how best to confront the contrasts between its approach and structure and what it would look like to efficiently deliver managed care. By understanding some of the contrasts and. explicitly addressing them, the AMC will be better able to operate in the managed care marketplace, while continuing its missions of patient care, teaching, and research. Furthermore, the individual primary care and specialist physicians in the AMC will need guidance to understand how managed care and the practice of academically based medicine differ, and what changes need to be made to work effectively in the managed care environment.

References

[1.] Iglehart, J. "Rapid Changes for Academic Medical Centers." New England Journal of Medicine 331(20):1391-5, Nov. 17, 1994. [2.] Iglehart, J. "The American Health Care System: Teaching Hospitals." New England Journal of Medicine 329(14):1052-6, Sept. 30, 1993. [3.] Weiner, J. "Forecasting the Effects of Health Reform on U.S. Physician Workforce Requirements: Evidence from HMO Staffing Patterns." JAMA 272(3):222-30, July 20, 1994. [4.] Rogers, M., and others. "Cultural and Organizational Implications of Academic Managed Care Networks." New England Journal of Medicine 331(20):1374-8, Nov. 17, 1994. [5.] The Evidence-Based Medicine Working Group. "Evidence-based Medicine: A New Approach to Teaching the Practice of Medicine." JAMA 268(17):2420-5, Nov. 4, 1992. [6.] Culbertson, R. "Academic Faculty Practices under Conditions of Managed Care: Policy Implications for Future Viability of Clinical Service and Education." In: Report to the Robert Wood Johnson Foundation, 1994: [7.] Anderson, G., and others. "The Pivotal Role of the Academic Health Center." Health Affairs 13(3):146-58, Fall 1994. [8.] Rubin, H., and others. "Patients' Ratings of Outpatient Visits in Different Practice Settings." JAMA 270(7):835-40, Aug. 18, 1993.

Terrigal Burn, MD, is Associate Medical Director, Health Plans, Palo Alto Medical Foundation, Palo Alto, Calif. He may be reached at 300 Homer Ave., Palo Alto, Calif. 94301, 415/321-4121, FAX [phone].