May 18, 2022

New Blue Ridge Academic Health Group report outlines challenging economic outlook for academic health centers

Recommendations for academic health centers in addressing a challenging economic outlook are set out in a new report issued by the Blue Ridge Academic Health Group.

Recommendations for academic health centers in addressing a challenging economic outlook are set out in a new report issued by the Blue Ridge Academic Health Group (BRAHG).

BRAHG is co-chaired by Jeff Balser, MD, PhD, President and CEO of Vanderbilt University Medical Center and Dean of Vanderbilt University School of Medicine, and Jonathan Lewin, MD, executive vice president for health affairs at Emory University, executive director of the Woodruff Health Sciences Center and CEO of Emory Healthcare.

The group consists of leaders of academic health centers (AHCs) and experts in health policy. They study and report on issues of importance to improving the health care system, with a focus on the role of AHCs.

The new report stresses that, as the nation seeks to limit the growth of health care spending, the financial productivity of AHCs is increasingly in question. As things stand, diminishing clinical operating margins at AHCs could threaten both the global course of biomedical research and investment in the next generation of clinicians and researchers.

According to the report, at a typical AHC, research funding from extramural sources currently covers only somewhere between 66% and 80% of the cost of research.

And with research funding gaps continuing to grow, educational funding at AHCs is also coming up short.

“To sustain these academic activities, AHCs have come to rely increasingly on patient services revenue,” Balser said. “Now, with clinical reimbursements increasingly in question, innovation around financial matters will be required of AHCs.”

The report, titled “Financially Sustaining the Academic Enterprise,” also includes recommendations addressed to policy makers.

“The contributions made by our nation’s academic health centers are significant to the health of our society as a whole,” Balser said. “Leaders from several of the nation’s leading AHCs were eager to gather and formulate recommendations that can help us all, as academic health centers, navigate the financial challenges.”

Added Lewin, “Sustaining a successful and robust academic enterprise will require creativity and teamwork from academic lead­ers and policy makers. AHCs continue to provide critical research and clinical infrastructure, illustrating the core differentiating features and importance of our collective mission.”

According to the report, strains on clinical margins at AHCs stem from increased costs from labor workforce shortages (exacerbated under COVID); a payer mix that, as the nation ages, is shifting away from commercial payers and toward Medicare; lower commercial rate increases; and a disproportionate share of uninsured and underinsured patients.

The report recommends new, more transparent funds flow models and economic incentives for departments, divisions and individual faculty to improve financial performance.

The massive transfer of patient services earnings to an AHC’s academic enterprise can create a funding web so layered and complex “that the amounts, pur­pose, or time period of funding transfers may not be fully clear to the recipients and/or sender,” the report states, adding, “It is not uncommon for the details of funds flow models to be opaque to senior leaders at an AHC.”

More transparent funds flow models and consistent, thoroughgoing measurement of performance can allow AHCs to align incentives and use them to motivate improved performance at all organizational levels.

The report also recommends that AHCs take a closer look at the academic investments used to recruit top academic talent.

Also, before reaching for clinical enterprise expansion as a cure-all, AHCs should closely examine risks and benefits.

On the public policy side, “Government reimbursement for research must come much closer to covering the actual costs of research,” the report states.

Unless accompanied by funding provisions to protect and foster medical research and education at AHCs, the talked about expansion of government health care reim­bursement models to the entire general public would undermine U.S. medical research and education.