The Existential Threat to our Mission: No Money…No Margin…Now what?

Dear Colleagues:

There has been so much written about the declining payments for healthcare services. Enclosed is an article that clearly frames this issue:

Some of you may work in a large Academic Medical Center as do I. Some may be in specialty practices, clinics or hospitals. Most of us will have different compensation plans and all of us will feel the moral dilemma of providing adequate patient care which may be inversely proportional to our own financial success. We all probably agree the Fee-for-Service is a dying model. So, what next?

I think this depends on your priorities and your circumstances. In my AMC system the mission is clear: Patient Care + Research + Education + Community Service. The only way to achieve these aims is with a Sustainable Financial model. This is becoming an increasingly difficult task. Here are some possible solutions, though I welcome your ideas:

Increase our work capacity and efficiency to generate more revenue
Reduce costs often with unpopular decisions for what we allow our physicians to do for patients
Reduce our compensation commensurate with reduction in payments
Limit our mission to the parts that are realistic to accomplish

Something’s got to give. Our compensation plan for our physicians has already changed. Our institution’s margin is threatened. I know of a similar institution that has put limits on patients with government insurance (Medicare and Medicaid) with the result being a positive margin. But, no doubt, non-governmental insurance payments will decline as well in the future.

My opinion is that it is difficult to avoid the conclusion that traditional AMCs with their multi-billion dollar revenues and low margins are an anachronism when it comes to structure and culture that is no longer sustainable in the face of these economic forces. I don’t think I am wrong if I suggest that lean management practices are not so easy to implement in such places.

What do you think?

Kind Regards,

Jon “JP” Warner MD

The CSS