Innovative Approaches to Care at Academic Medical Centers

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No sector of the healthcare industry has been spared from the effects of healthcare reform over the past several years. Because of the high-cost, innovative care that academic medical centers provide, these facilities have been singled out as particularly vulnerable to nationwide changes in healthcare delivery.

What are academic medical centers?

Academic medical centers (AMCs) are hospitals that have integrated with medical schools to provide primary education for medical students and residents. These medical centers also conduct frequent medical, academic, and commercial research with their patient populations to pioneer the most cutting-edge treatments.

According to Definitive Healthcare's Hospitals & IDNs database, there are roughly 210 hospitals classified as AMCs in the United States. Most of them are large, non-profit acute care facilities, with an average of 507 staffed beds and 27,267 annual discharges according to data from 2018. In addition to being larger facilities, AMCs have a much higher average case mix compared to all hospital types - 2.05 and 1.40, respectively.

Top academic medical centers by number of staffed beds

Rank Hospital Name Definitive ID Number of Staffed Beds Number of Discharges Net Patient Revenue
1. Jackson Memorial Hospital 845 1,622 57,870 $1,206,542,643
2. Cleveland Clinic Main Campus 3120 1,285 51,373 $5,164,424,360
3. Barnes-Jewish Hospital 2442 1,272 49,494 $2,028,038,828
4. UPMC Presbyterian 3439 1,175 48,307 $1,937,259,793
5. Mayo Clinic Hospital - Saint Marys Campus 2191 1,115 58,001 $2,584,637,894
6. Atrium Health Carolinas Medical Center 3003 1,112 62,650 $2,381,069,141
7. UAB Hospital 71 1,100 53,894 $1,785,283,427
8. The Johns Hopkins Hospital 1914 1,003 42,755 $2,121,133,683
9. Beaumont Hospital - Royal Oak 2066 998 61,758 $1,556,007,086
10. Memorial Hermann - Texas Medical Center 4018 994 45,540 $1,691,807,422

Fig 1 Data from Definitive Healthcare's Hospitals & IDNs database, sourced from annual hospital reporting in calendar year 2018 (most recent available). Accessed May 2020.

Challenges facing academic medical centers

In addition to emphasizing medical education and research, AMCs primarily treat underserved communities—with many patients who are uninsured, underinsured, and experiencing poverty. This type of care provision often comes at significant cost to a hospital's financial performance. However, Definitive Healthcare data shows that, while AMCs face some disadvantages on this front, new strategies may be able to help.

Lower-income patient populations are at higher risk of developing chronic illnesses and delaying care - resulting in complications and unfavorable care outcomes. This trend generally puts downward pressure on hospital finances, and data shows that AMCs have been suffering declining margins compared to the national median.

Rising healthcare costs and healthcare consumerization have contributed to the financial decline of AMCs. According to a study from PricewaterhouseCooper, half of surveyed patients said they would not pay more for specialized care offered by AMCs and similar medical centers. In response, many academic institutions and healthcare organizations are consolidating in order to lower overhead costs and remain operational.

In addition to operating and care costs, medical research and education are also significant investments and must often be subsidized by income from clinical operations - further decreasing margins. As far back as 2000, analysts have pointed out the struggles of academic medical centers to remain operational.

Comparing average financial metrics at Academic Medical Centers to all hospitals

Metric AMCs All Hospitals
Operating Profit Margin -7.86% -15.35%
Net Patient Revenue $1,236,551,719 $187,778,307
Bad Debt Ratio 5.18% 8.71%
Case Mix Index (2018) 2.05 1.40
Medicare Payor Mix (2018) 26.44% 41.58%
Medicaid Payor Mix (2018) 11.87% 9.58%
Private/Other Payor Mix (2018) 62.05% 50.55%

Fig 2 Data from Definitive Healthcare's Hospitals & IDNs database, sourced from annual hospital reporting in calendar year 2018 (most recent available). "Bad debt ratio" refers to bad debt to net patient revenue ratio. Accessed May 2020.

Academic medical centers develop new operational strategies

Though research and education often carry significant costs, they also yield impressive benefits when properly leveraged. A strong clinical reputation—not driven by quality scores alone, but by innovative clinicians acting as pioneers in their field—can make an AMC a destination medical center for patients seeking specialty care.

The CEO of Banner University Medical Center (BUMC), an AMC in Arizona, described their unique approach. Hospital leaders at BUMC  reorganized their clinical departments into “institutes” - interdisciplinary groups of providers that focus entirely on specific conditions.

The idea is to unify personnel from multiple areas of the hospital to coordinate care for a single illness, rather than keeping physicians, educators, and researchers in distinct silos. This approach is a major undertaking, and the hospital had to hire a team of data analysts and engineers to oversee the transition. BUMC is still operating via specialized institutes, indicating that it may be a promising solution.

Affiliations and partnerships have been another common method among AMCs to strengthen their positions, just as they have been for other types of hospitals. Providers at an AMC performing better than competing facilities in the area in a certain service line can be an ideal partner by offering their expertise at other hospitals—even if it isn’t the most dominant hospital overall. 

Though some financial indicators for AMCs as a whole look bleak, it’s unlikely that the overall number of AMCs is going to see a significant decline. Despite some unfavorable performance metrics, most AMCs are simply too vital as both community providers and training grounds for future physicians. These facilities will continue to be in high demand as the healthcare staffing shortage progresses.

Learn more

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