Maryland's Public System of Higher Education

The USM in 2010: 

Responding to the Challenges that Lie Ahead

Academic Health Centers

Changes in health care delivery and in certain federal health insurance programs have significant negative implications for the training of physicians and other health care professionals in Maryland and across the country.

In this country the training of physicians, dentists and other health care professionals is largely carried out in academic health centers (AHCs) that align education and research in the professional schools with patient care delivered in clinics, both on and off campus, and in affiliated hospitals. Revenue derived from this clinical care is used to support education and research programs.

In FY 1999 the UM School of Medicine, for example, derived nearly 40% of its revenue base (some $131.7 million) from patient care activities. At that, its percentage was below the 48% median level of reliance on clinical activities for public medical schools across the country. That the UM School was a bit less reliant on clinical revenue than others was due to its large sponsored research program. Direct State general fund support comprised less than 10% of its budget. (The University of Maryland, Baltimore, is the State's only public academic health center.)

Rapid changes in the way that health care is delivered, coupled with serious pressures on Medicare and Medicaid funding, have made dramatic changes in the bottom lines of AHCs. Medical care delivered in AHCs is more expensive than that delivered in community hospitals for three major reasons: 1) such centers tend to be located in urban areas and must care for a high percentage of the uninsured population; 2) patients treated at these centers tend to be much sicker than average (e.g., heart-lung transplants, very high risk pregnancies); and 3) these centers train health professionals so the faculty spend their time teaching as they see patients. To help offset these costs such AHCs have traditionally charged the paying community - those with excellent health insurance programs - higher rates. The AHCs have also benefited from special payments through the Medicare program to help offset the cost, both in terms of direct graduate medical education (DGME) and indirect medical education (IME), of their teaching missions.

In 1997, as part of the Balanced Budget Amendment (BBA), the President and Congress radically altered the Medicare payment schedule for DGME and IME. Moreover, both the federal government and the states implemented major changes in the Medicaid program. At the same time private employers increasingly switched to managed care health insurance for their employees, when they continued to provide such insurance, rather than fee for service. These managed care plans restrict choice of physician and hospital and offer "capitation payments for the number of covered lives," rather than fees for services.

As a result, operating losses have been mounting across the country. The American Association of Medical Colleges estimated that the 1997 BBA, when fully implemented in 2002, will result in an average loss of $45.8 million at each major teaching hospital and a staggering cumulative loss of $14.7 billion. The growing number of uninsured (estimated at 400,000 in Maryland) and the rapid penetration of managed care (now some 60% of covered lives in Maryland) add to the problem. Instead of providing income to offset the high cost of training health professionals, clinical programs are dragging down the bottom line.

The acute nursing shortage makes the problem worse as hospitals have to bear the increased cost of hiring agency nurses. Moreover the impending shortage of pharmacists will have a negative impact and increase the risk of medication errors.

USM Response

The University of Maryland, Baltimore will:

• Ensure that resources are available to meet the needs of Maryland's citizens for health care education, research and patient care now and in the future and that it is held accountable for its performance.
• Monitor federal, state and local policies affecting education, research and patient care delivery at AHCs.
• Explicitly recognize via funding guidelines and other budgetary mechanisms the contribution of clinical revenue to the University of Maryland, Baltimore's academic program and the threats to this revenue.
• Adopt policies which support entrepreneurship and revenue diversification.
• Support Mission Based Budgeting in the UM School of Medicine.
• Continue to focus on quality by recruiting and retaining outstanding faculty and staff; providing salaries and benefits that are competitive with peer institutions; and providing professional development opportunities in line with changing needs.