Hopkins embraces the market ethic


From now on, Johns Hopkins means business.

Hopkins' survival as a successful research and educational institution depends upon its success as a commercial enterprise.

This tricky balancing act is the impetus behind a major organizational reform announced last week by trustees.

"I am most explicit about the success of Johns Hopkins Medicine as a commercial enterprise, as a health care delivery operation," said Morris W. Offit, chairman of the university board of trustees.

The trustees' action is a strong endorsement of the marketplace mind-set of Hopkins Hospital and Health System President James A. Block. It is also a culture shock for many School of Medicine doctors and scientists, who have traditionally seen themselves as above the business fray.

Relentless pressure from health insurers and competition with other hospitals are forcing Hopkins to change.

Trustees envision a medical center without walls, stripped of divisions between hospital and medical school. Satellite clinics will sprout throughout the region, bringing Hopkins medicine to patients who live far from Baltimore.

It won't just be renowned specialists performing transplants, but an expanded cast that includes family doctors relieving sore throats. Doctors will be as likely to be appointed professors at the medical school for their ability to treat patients as for their scholarship.

This business strategy could dilute the research concentration of the medical school faculty, as some Hopkins doctors fear. But Hopkins trustees and officials said this approach is the only way to pay for the operation of the medical school.

From the trustees' perspective, there's no better person to oversee Hopkins medicine now than Dr. Daniel Nathans, acting president of the university and an ardent supporter of reform.

This Nobel-winning scientist will head the new governing organization created by the trustees to streamline business-related decision making, unify the often conflicting hospital and School of Medicine and bring together in a single office the men who lead them, Dr. Block and Dr. Michael E. Johns, dean of the school.

Dr. Nathans' sterling credentials as a research scientist, a Nobel prize in 1978 for his work on mapping DNA, and his more than 30-year Hopkins career give him immediate credibility with the doctors and scientists whose cooperation is essential to Hopkins' business ventures.

The unyielding demands of health maintenance organizations for cheaper medicine, combined with proposals for deep cuts in government support of medical research, is driving some high-cost academic medical centers toward financial ruin.

But Hopkins is not in the precarious financial condition of some centers. And, under Dr. Block, who became president in 1992, Hopkins has a plan for the future.

Fresh measures

Hopkins must improve its ability to control costs, expand into the suburbs and forge links with other hospitals and doctors, he believes. Just last week, Hopkins and Hopkins' Bayview Medical Center formed an alliance with seven other hospitals from Anne Arundel to Carroll and Harford counties, the largest such network in Maryland.

A "re-engineering" program to make Hopkins more efficient already is paying off, Dr. Block asserts in a June progress report dubbed "A New Role for a New Age." Examples include:

* Cutting $21 million in hospital operating costs.

* Reducing the cost of coronary artery bypass grafts from $24,000 to $18,000 and decreasing the average length of stay in the hospital from 10 to fewer than seven days.

* Lowering the cost of kidney transplant surgery from $80,000 to $50,000.

But Dr. Block's most ambitious effort requires additional spending and is provoking the most internal controversy: development of a Hopkins-run health system that ultimately will reach into neighboring states.

When the system is complete, it will join hundreds of community doctors and several satellite centers, like the new one at Greenspring Station in Lutherville, with Hopkins' facilities in Baltimore and its 1,000-member physician faculty.

With this system, Hopkins hopes to win more HMO contracts, thus securing more patients and more revenue.

Extending reach

This effort rankles some faculty physicians who question spending big sums of money to recruit the community doctors needed to extend Hopkins' reach outside the inner city.

Some doctors have expressed particular concern over Hopkins'

negotiations to acquire a 60-doctor Towson medical group -- which could cost as much as $23 million.

Investing so heavily in a health system, with no guarantee of success, might seem risky for an institution that's currently profitable. But danger lurks in a health system in which HMOs increasingly control the flow of patients and determine which hospitals they enter.

Academic health centers like Hopkins face competitive disadvantages because they bear the burden of teaching costs and big charity-care loads. HMOs warn that Hopkins Hospital is too pricey for many procedures.

CIGNA HealthCare Mid-Atlantic sends subscribers to Hopkins for complex procedures, such as organ transplants. But for lesser medical problems, such as gallbladder and appendix procedures, "we end up looking at hospitals that can deliver routine services, with equal outcomes, at a substantially lower .. price," said Tracy Bahl, vice president and general manager.

Yet Hopkins is much better off than many other academic medical centers.

Former Hopkins professor Richard Frank, a health economist at the Harvard University School of Public Health, said there's a glut of academic medical centers around Boston.

"They are all essentially sitting around a table, looking around, knowing they're not all going to exist in 10 years," he said. "It reminds you what it must have been like in Pittsburgh in the steel industries in the 1970s."

Trying to marshal their resources, more and more academic medical centers are putting historically independent medical schools and hospitals under one leader. Hopkins has moved toward this by making the university president chairman of the new governing organization. The University of Maryland Medical System maintains a similar structure for its hospital and medical school.

"There's been an enormous effort over the years to create a partnership," said Dr. Stephen C. Schimpff, UM Medical System's executive vice president.

Hopkins' reorganization was applauded by outside observers. "I think it's an excellent start," said Dr. C. McCollister Evarts, who heads the Pennsylvania State University's academic medical center in Hershey, Pa.

Double threat

But Dr. Evarts said medical schools must reform, too. Hopkins' medical school, like many in the nation, faces a double threat: HMOs' increased reliance on generalists rather than specialists and looming cuts in federal research funds.

To survive, Dr. Evarts says, schools must embrace the market ethic and welcome community doctors, who are the first point of contact for HMO subscribers.

"This will require profound changes in the culture, structure and behavior of the faculty," he said in a lecture a few months ago to Hopkins physicians.

Dr. Johns has not instituted such drastic changes at Hopkins, but evidently is considering them.

In a recent essay in Hopkins Medical News, he said that reform might force Hopkins to reduce the number of medical students, now about 465.

And during a Duke University conference last year, Dr. Johns spoke of the need for reforming academic medical centers.

"I think that we will need to seriously consider downsizing core academic faculty," Dr. Johns said. "Probably tenure would have to go away, and we might have to begin to look at rolling contracts for different lengths of time based on different academic ranks."

New partnership

At Hopkins, the partnership between the medical school and hospital is still new. It began two years ago when Drs. Dean and Block -- two men often at odds -- met during what Dr. Block terms a "historic retreat" in St. Michaels on the Eastern Shore.

But the agreements hammered out there did not end the institutional conflicts. The trustees acted Monday to give the university president a decisive vote in any disputes.

They believe the way to preserve what has made Hopkins great is to make Hopkins a great business.

In their "vision," the trustees said, Johns Hopkins Medicine will be a "competitive health care delivery system that maintains Hopkins' pre-eminence in teaching, the delivery of health care and discovery."

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