UTSW Faces Down Academic Medical Center Headwinds

Even before the Affordable Care Act was passed, UT Southwestern already was preparing for a more austere healthcare landscape.

UTSW officials created a budget based on 90 percent of its revenue being equal to Medicare reimbursement. For more than two years, the academic medical center has been aligning expenses to meet that scenario.

The result, according to president Daniel Podolsky, is that UTSW has had three strong years of expense management and care-volume growth.

“There is an unprecedented amount of uncertainty in the healthcare system,” he said. “That requires an end to complacency. The new healthcare imperatives are accountability and transparency. Some things—process improvement, quality assurance, clinical teamwork—are becoming increasingly fundamental. You need to deliver better value and outcomes with a more efficient use of resources. This is also true in education and training, as well as how we do research.”

For the past couple of years, medical journals and think tanks have sounded an alarm about the fate of AMCs under delivery reform. The 2011 Texas legislature cut UTSW funding by $30 million a year, the biggest appropriation reduction faced by any higher-education institution in Texas. (The 2013 legislature restored $17 million of that.)

The slow economic recovery has made philanthropic giving more difficult. National Institutes of Health funding cuts and sequestration could reduce government-sponsored research by as much as 17.6 percent by 2017. UTSW has seen a 5 percent decrease in NIH funding, a reduction of  more than $22 million. Medicare and Medicaid funding has decreased, and funding for uncompensated care will be cut sharply under the ACA. AMCs provide 40 percent of uncompensated and 25 percent of Medicaid hospitalizations in the U.S.; UTSW provides $170 million in uncompensated care annually.

According to a 2012 analysis by consultant PwC, AMCs have average operating margins of about 5 percent. However, funding cuts could lower their reimbursement by as much as 10 percent in the near future.

“My fear had been that we won’t change fast enough,” Podolsky said. “We did not have pressures we have now. You could say in general there was a cultural ambience of academic medical centers that was very stable for a long time. We cannot afford simply to be stuck in historical models. Places that don’t change will become historical footnotes.”

The nation’s medical schools are on track to increase medical school enrollment 30 percent by 2016 compared with 2005, a goal called for by the Association of American Medical Colleges. The number of first-year medical students exceeded 20,000 for the first time in 2013.

UTSW is not one of those growing its enrollment. Podolsky said UTSW’s medical school is as large as it can be, given its current infrastructure. UTSW is the largest GME program in Texas, training more than 1,620 clinical residents annually, although it has four family practice programs.

The school trains a high percentage of specialty physicians.

According to a September study in Academic Medicine, the GME programs at UTSW and Baylor University Medical Center were ranked among the lowest U.S. producers of primary-care graduates at 10 percent and 8.8 percent, respectively.

Podolsky defends that approach.

“We would be failing as a medical school if we only prepared medical students for primary care,” he said. “For 10 to 11 of our specialty areas, we are the only one or two in the state. We have multiple stakeholders and multiple missions. We are a high importer of GME residents.”

According to the Texas Medical Association, Texas has physician shortages in 36 of the top 40 medical specialties, compared with the national average for each.

Podolsky said the medical school is planning to double the size of its physician assistant program, which he says is among the nation’s best.

Podolsky said graduate medical education duty-hour restrictions have created additional challenges to effectively training physicians.

Two studies in JAMA Internal Medicine in March found interns were making more mistakes and learning less because of regulations that teaching hospitals limit first-year trainees to 16-hour shifts. The increased number of shift changes was associated with more medical errors, and residents were required to do the same amount of work in fewer hours.

“There is a significant difference between direct patient simulated care,” he said. “There is a lot of data that suggests quality of care has not been affected, but quality of training has.”

Admissions to U.S. teaching hospitals are up by 50 percent and residencies are up by 10 percent between 1990 and 2010.

The 2011 legislature cut the GME formula funding by 31 percent, which was partially restored by a 15.5 percent increase during the 2013 session. Despite the cuts, UTSW has maintained the number of GME slots.

The Balanced Budget Act of 1997 capped the number of residency positions at each hospital for which Medicare would reimburse the institution. The law allowed teaching hospitals to train any number of physicians, but Medicare would reimburse each hospital only up to its allocated cap. This policy, with minor revisions, remains today.

When the cap was imposed, Texas was in a disadvantaged position and the states in the Northeast have a disproportionate share of GME slots. For example, New York has 77 GME slots for every 100,000 population, compared with 18 per 100,000 for Texas. Rhode Island has 61 GME slots per 100,000 despite only having one medical school. Texas has nine medical schools, with five more under development or discussion.

The formula does not account for population growth, guaranteeing that Texas will fall farther behind.

Texas retains about 80 percent of its medical residents, but only 35 of its medical school graduates who do their residencies elsewhere.

Podolsky said about 630 of its GME slots are funded above the Medicare cap, funded by its university hospitals, Parkland, Children’s Medical Center, and the Veterans Administration. There are additional above-the-cap UTSW residencies in Austin as well. He acknowledged that the current Medicare GME funding formula is “a source of tension” in medical education.

UTSW will be opening William P. Clements Jr. University Hospital in late 2014. The $800 million, 406-bed facility is being funded by bonds, clinical revenue and philanthropy. The former Texas governor gave UTSW $100 million, with the stipulation that it be used to create something “transformative.”

The facility, which will replace University Hospital-St. Paul, will have in-room monitors that will allow patients and caregivers to review charts and imaging such as X-rays, CT scans, and MRIs. Large screens will also allow patients to communicate virtually with providers and family.

“We will be on the very vanguard of using technology to improve care and the patient experience,” Podolsky said.

Steve Jacob is editor-at-large of D Healthcare Daily and author of the book Health Care in 2020: Where Uncertain Reform, Bad Habits, Too Few Doctors and Skyrocketing Costs Are Taking Us. He can be reached at steve.jacob@dmagazine.com.

One comment on “UTSW Faces Down Academic Medical Center Headwinds

  1. Great read! Appreciate the foresight that Doctor Podolsky and his team have had in adjusting how they as a #AMC operate with these changes in healthcare delivery and reimbursement. Thank you for being accountable and transparent. If we continue the focus on the quality training of our physicians, we all will benefit, no matter what type of reform gets enacted.

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