Financial pressures may force more universities out of hospital business

Shifts in the healthcare industry have caused many universities to question the cost-effectiveness of maintaining their ties to hospitals, according to The Chronicle of Higher Education.

Recently, Nashville's Vanderbilt University Medical Center broke away from the university following a decision in 2014 to end the two institutions' legal and financial relationship. While every teaching hospital's circumstances are unique, the academic medical center model in general has several universal features that may provide insight into further splits, the article notes.

For example, post-Affordable Care Act the push for value-based care means teaching hospitals are under pressure to demonstrate that their care is cost-effective, but the transition has proven challenging for many academic medical centers. To cover overhead costs, many university hospitals charge more for care while developing relationships with community institutions to offer lower-cost services. However, this often creates its own problems in the form of complicating hospital operations, according to the article.

University hospitals with largely low-income patient populations are among those that struggle the most, according to the article. For example, University of Arizona's medical center lost $66 million in 2014 due to its payer mix while its facilities required an overhaul, leading to its acquisition by Banner Health.

Medical centers can comprise up to half of a university's total budget, and leaders have concerns about long-term viability even at profitable institutions. "Everyone wants the benefit of an academic medical center in their university," Atul Grover, M.D., Ph.D., executive vice president of the Association of American Medical Colleges, told the Chronicle. "But they're scared to death of what can happen in the free-market medical system."

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