Will academic medical centers sink or swim?

Academic medical centers’ three-pronged mission — education, research and patient care — makes them uniquely vulnerable to financial pressures.

These institutions have thrived as centerpieces in the American healthcare landscape. Now they face their own kind of financial and governance distress.

Hospitals and health systems affiliated with medical schools face some of the highest costs across all healthcare institutions. Designed to deliver complex, specialized care, they are simultaneously saddled with the costs of supporting medical education and research.

Because many are based in urban areas, they often end up treating a disproportionate share of Medicaid or under- and uninsured patients for emergency, Level 1 trauma and psychiatric emergencies. Approximately 60 percent of AMCs’ business comes from Medicaid, Medicare and other government programs.

Consumerism intensifies these challenges even further. “Now there are added complications because there is more scrutiny on quality,” says Igor Belokrinitsky, partner at PwC Strategy&. “If you’re an AMC and you’re treating very complex patients, quality scores may not actually be very good.”

Demands for price transparency, combined with less than desirable quality ratings and higher mortality rates, may not cast AMCs in the best light. The traditional appeal of AMCs may diminish as more people view them as cost centers, choosing instead to seek routine care elsewhere.

“AMCs really need to articulate why they are superior places for patients to get medical care,” says Mr. Belokrinitsky.

There are several key areas where AMCs should focus their change efforts to adapt to the current healthcare landscape, according to Mr. Belokrinitsky and Richard Zall, chair of the healthcare department and partner in the corporate healthcare division of Proskauer, an international law firm based in New York City.

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