Academic medical centers vie in changing market Hopkins, UM hospitals aim to keep costs low, maintain reputation

THE BALTIMORE SUN

The recent turmoil at Johns Hopkins Medical Institutions -- with three major administrative shake-ups in two years -- is a striking example of the struggle by the nation's 125 academic medical centers to compete in a marketplace of bewildering change.

At Hopkins and centers beyond, the challenge is keeping costs low while getting high enough revenues to pay for the training and research that have earned them their reputations.

Beset by high construction debt, with an unusually high level of patients who cannot pay, Columbia University is seeking to merge its hospital operations with Cornell or New York universities. In Boston, two competing Harvard-affiliated hospitals made plans to merge so quickly it took the university's medical school by surprise. Duke University Medical Center reduced its work force by 21 percent. Tulane sold an 80 percent share in its hospital to a for-profit chain.

For decades, elite centers such as Hopkins, Harvard and Duke have been subsidizing research and medical training from patient revenue. Now, dollar-conscious insurers are channeling patients to lower-cost hospitals, and "gatekeeper" physicians in managed-care plans steer patients away from expensive specialists.

"For managed care organizations, they like the fact that they can say, 'If you're really sick, you can go to Hopkins,' but they really want to send very few patients there," says Charles Brecher, professor of public and health administration at New York University.

Hopkins and the state's other academic medical center, the University of Maryland, have not seen a drop-off in patients -- although studies have found troubling trends at academic medical centers in such markets as Boston, Los Angeles/San Diego, Seattle and San Francisco.

Baltimore's university hospitals are recording healthy profits -- for 1995, more than $10 million at the University of Maryland's hospital and more than $26 million at Hopkins (including its Bayview facility).

But like their peers nationally, they've been running hard to stay in place.

In a series of moves announced in the past two weeks, Hopkins has placed its medical school and hospital under the control of a sin gle board and medical "czar." This came after a different reorganization plan announced in June.

Within the past few years, Hopkins has created Johns Hopkins HealthCare to coordinate business activities of the hospital and medical school. The number of managed-care contracts has gone from a handful three years ago to more than 50. Hopkins has named vice presidents for managed care and for marketing and strategic planning.

"Things have been evolving more rapidly than had been anticipated," says Daniel Nathans, interim president of the Johns Hopkins University. "Maybe that's because the health care market is evolving more rapidly than had been anticipated."

The challenge is not just to compete with lower-cost community hospitals, but to compete while adequately maintaining the other missions of the academic medical center: education and research. At a place such as Hopkins, which is looked to for clinical and laboratory innovation, that issue is particularly pointed.

'We don't need another Helix'

Hopkins' medical school dean, Michael E. Johns, acknowledges the need for marked reform at academic centers such as Hopkins, but he warns against becoming too much like other hospitals.

"If we just become another Helix," said Dr. Johns, referring to a network of Maryland hospitals, "you would destroy something that's terribly important -- not only to this nation, but to this world.

"We might as well shut down. We don't need another Helix."

While Hopkins has been signing full-service contracts with managed-care organizations, it also has been promoting its specialty care; for example, offering a "package price" on open-heart surgery.

"To me, the new marketing is not billboards and advertisements; it's proving the value of what we do," said Dr. Toby Gordon, Hopkins' vice president for planning and marketing.

For example, she said, a study conducted by university researchers found that the mortality rate on the "Whipple procedure," a complex pancreatic surgery, was about 2 percent at Hopkins, but 14 percent at other Maryland hospitals -- and Hopkins charges are lower, Dr. Gordon said.

Hopkins officials have made sure that health maintenance organizations across the state are aware of those figures and say they have seen a marked increase in patients who need the procedure being steered Hopkins' way.

Past practice

In the past, the health care market was shaped by traditional health insurance. Patients chose doctors, doctors ordered tests or scheduled operations, and insurance companies paid. Patients had lots of choices, but health costs zoomed at a rate well ahead of inflation.

The response was managed care: plans in which a primary doctor coordinated the patient's care, making decisions on referrals to a more-expensive specialist. The plans grew rapidly, from 67 million members nationally in 1990 to more than 110 million today. Patients may have been given less choice, but the skyrocketing costs were brought to earth -- from annual double-digit increases in medical costs in the 1970s and 1980s ++ to increases of just a few percent in the past two years.

Managed care has been tough on all hospitals, but academic medical centers across the country have had more difficulty dealing with the new marketplace for three reasons:

* The health marketplace is highly competitive, and managed-care insurers shop for price.

Academic medical centers, which have always charged more to cover training and research, find themselves at a competitive disadvantage. Dr. Donald E. Wilson, dean of the UM Medical School, estimates that training costs add 7 percent to the average bill at the University of Maryland Medical Center.

Generally in large cities, academic centers also bear more than their share of caring for the uninsured. Between them, Hopkins and UM provided one-third of Maryland's uncompensated care last year, which adds about another 10 percent to their rates.

'Not best at doing everything'

The university hospitals "may be the best at doing a certain procedure, but they're not necessarily the best at doing everything," says Dennis McIntyre, medical director for Aetna Health Plans of the Mid-Atlantic. "If you have someone with appendicitis, they can be cared for at a community hospital by a general surgeon."

Although they are currently negotiating a full-service contract, Aetna so far has used Hopkins only for complex procedures such as bone-marrow transplants. Hopkins says it will not sign contracts with a local HMO that steers patients from Hopkins and toward lower-cost community hospitals.

* Care has moved away from hospitals, squeezing revenue.

More surgery is being done on an outpatient basis than on an inpatient basis. An example is Hopkins' world-class Wilmer Eye Institute. According to Dr. James A. Block, president of the Johns Hopkins Hospital and Health System, Wilmer once had 120 inpatient beds; it now has 12, while serving more patients.

Nursing homes and "subacute care" facilities house patients who once spent more time recovering and rehabilitating in a hospital. Home health therapy has burgeoned.

Even when patients are admitted to hospitals, they are discharged more quickly, as insurers issue guidelines for how many days of hospitalization they will cover.

* The emphasis is shifting from the specialists of which Hopkins and its peers are so proud, toward basic care delivered in the community.

Managed care tries to get as much service as possible delivered by "primary care" physicians -- general practitioners, internists, family practitioners and pediatricians -- rather than by higher-cost specialists.

In contrast, academic medical centers such as Hopkins have built their reputations on specialty care. Now, to win managed care contracts, they need to assemble networks of primary-care doctors, distributed over a wide area, either by buying physician practices or by contracting for care.

Playing to its strengths

Hopkins, following its strategy of playing to its strengths, has community networks of more than 200 cardiologists and more than 100 eye doctors in the region -- who funnel difficult cases to Hopkins specialists in East Baltimore.

But Hopkins has also built a contract network of more than 400 primary-care doctors throughout the area. Suddenly, even Hopkins finds itself courting pediatricians in Cockeysville and general practitioners in Dundalk.

"The specialists have always been the premier status group," says Ronald C. Lippincott, director of the health policy and administration at the University of Baltimore. "Managed care is placing the primary care physician in a primary role. What Hopkins is doing is saying, 'Let's suit up and play the game.' "

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