How the UT Medical Center is dealing with a national funding crisis
by David Madison
If teaching hospitals were patients, they'd be on their way to the ER.
At UT Medical Center, reduced payments from the state's TennCare managed care program and cuts in federal Medicare spending have caused Knoxville's teaching hospital to hemorrhage money for the last few years. In fact, teaching hospitals everywhere are bleeding from wounds inflicted by the market pressures of managed care and the Balanced Budget Amendment of 1997.
Teaching hospitals continue to treat and cure patients. But financially strapped medical education facilities are being drained of life nationwide. At the UT Medical Center, medical education payments from Medicare and TennCare have dipped by $6 million since 1996. A recent appropriation from Congress may help stop some of the bleeding from Medicare cuts, but do nothing to stem losses from TennCare.
In order to avoid additional blows to its budget and remain competitive, the university has converted the state-owned hospital into an independent, non-profit institution. It's now under the management of University Health System, a non-profit organization created by the university. UT trustees hope the new set-up, which began in August, will give the hospital the financial flexibility it needs to get back in the black. At the same time, by leasing the hospital to UHS, the university can insulate itself against big losses if the health care business takes a turn for the worse.
Last summer, the university held hearings to assure hospital staff, medical school faculty and the general public that virtually nothing would change when UHS took over. Behind the scenes, however, the university set about making several changes at its Graduate School of Medicine. It instituted a hiring freeze, slashed the travel budget, and cut faculty salaries.
According to hospital and university officials, these cuts had nothing to do with the UHS take over, as UHS does not oversee the Graduate School of Medicine, which works in conjunction with the main campus of the UT med school in Memphis. UT-Knoxville continues to administer its own medical school programs, while UHS manages the giant working classroom that is UT Medical Center.
But as University Trustee Jim Haslam II puts it, "Whenever you have change, you have fear." So when pay to faculty was cut at the same time UHS moved in to begin running the hospital, worries about the Med Center's future began to circulate. And given the high cost of supporting the center's talented faculty, cutting-edge research, and top-flight facilities, it's easy to see why teaching hospitals like it are prone to fiscal trauma.
Add to this the colossal expense of caring for the uninsured and UT Med Center looks like a patient in trouble. It's not as sick as some teaching hospitals around the country, yet it's still not fully on the financial mend.
In a recent op-ed piece for the New York Times, Sen. Daniel Patrick Moynihan (D-N.Y.) describes the importance of teaching hospitals like this: "These institutions save more lives than... the Coast Guard, and indeed, in many ways, they are transforming life itself."
In more ways than one, teaching hospitals like the UT Med Center turn the clock of medicine. With research facilities and teams of specialists, they provide the latest, up-to-the-minute care for the most troubling and costly ailments. Breakthroughs made at teaching hospitals improve the way other hospitals care for their patients.
Teaching institutions are high tech, skill- and finesse-building boot camps for tomorrow's doctors. Congress recently recognized their value when it appropriated additional funds for teaching hospitals. The 1997 Balanced Budget Amendment trimmed funding for medical education and now Congress wants to give some back. The legislative package passed Nov. 18 calls for providing teaching hospitals with $600 million in Medicare payments over the next two years.
UT Med Center doesn't know how much of that money will make its way to Knoxville. And though Medicare cuts have hurt the Med Center, the real pain in recent years has come from cutbacks in TennCare funding.
In fact, managed care programs everywhere, whether publicly funded like TennCare or part of a private HMO, have put the pinch on teaching hospitals. For profit HMOs have an obvious motive for not wanting to support medical education: They're in business, they won't pay for anything they don't have to.
But as the New England Journal Medicine observes, "Even non-profit HMOs that retain a social mission have little spare money to finance medical education."
In Tennessee, the same can be said for TennCare, the state-run HMO. Over the past five years, TennCare has shrunk its medical education payments to the UT Med Center by $4.1 million. Of the 230,000 patients who seek care at the Med Center each year, approximately 27 percent are covered under TennCare.
UT Med Center also treats a significant number of other uninsured patients who are not covered by TennCare, says Mickey Bilbrey, president and CEO of UHS.
"We are expected by the public to staff and make those services at the ready, no mater if the people have the ability to pay. We don't do a wallet biopsy when they come in here," says Bilbrey, who before heading UHS, was the executive vice chancellor of the UT Medical Center.
Bilbrey says Knoxville's three other hospitals provide their share of charity care. But teaching hospitals like the Med Center attract a "disproportionate share" of non-paying patients.
"Whenever we talk about safety net providers, we always talk about teaching hospitals," says Kathy Wood-Dobbins with the Tennessee Primary Care Association.
And for providing not only a safety net, but the classrooms and laboratories where, as Sen. Moynihan says, medical educators are "transforming life itself," teaching hospitals are often punished with mounting debts.
At the University of Pennsylvania Medical Center, for example, the costs of operating a teaching hospital contributed to a whopping $198 million in losses last year.
Bilbrey estimates that without significant relief from Congress, the Balanced Budget Amendment of 1997 could cause the hospital and Graduate School of Medicine to lose as much as $28 million by 2002. That hasn't happened yet, but financial pressures have begun to threaten the amount of teaching being done at Knoxville's teaching hospital.
To make up for dips in funding to medical schools, teaching hospitals like the UT Med Center have asked faculty members to pitch in. In August, the university cut faculty teaching stipends at the Graduate School of Medicine. Now, faculty members must make up for the paycut by treating more patients. And according to a recently published study in the New England Journal of Medicine, "This survival strategy, though a necessary response to the new environment, intensifies the constraints on teaching."
The faculty who walk the halls of UT Medical Center with med students and residents in tow now feel pressure to spend more time practicing and less time teaching. In August when the pay cuts were announced, says a Med Center staffer contacted by Metro Pulse, certain faculty members suddenly became reluctant about taking on students.
None of the staff and faculty contacted by Metro Pulse wished to be quoted. And none could provide specifics about how salary cuts had affected teaching at the hospital.
As The New England Journal explains, "The negative effects on the teaching mission are largely anecdotal and hard to quantify... The complaint of too many demands on one's time, of course, is pervasive in medicine, as managed care compels doctors to see more patients in order to maintain their incomes. Yet the pressure seems greatest at academic institutions."
When the university spun off management of the UT Medical Center hospital, it was responding to another type of pressure present in academic medicine: the pressure to keep up with competing hospitals. By leasing the UT hospital to UHS, the university hoped to give the facility more fiscal agility by freeing it from state bureaucracy.
Projects like the current $12 million expansion of the Med Center's Emergency Department and Trauma Center have been expedited under UHS management. When the project is complete, the emergency room and Trauma Center—the only Level One trauma center in the area—will nearly triple in size.
UHS is also planning to add an outpatient surgery center. It's the only hospital in Knoxville that lacks such a facility, something UHS appears driven to change.
And for the privilege of improving the university's hospital, UHS will pay UT $50 million over the next 20 years. In addition to leasing the hospital, the non-profit assumed the university's $150 million debt on the facility and paid UT $25 million previously set aside to purchase new equipment.
The university trustees insisted on taking the $25 million out of an account accrued by the hospital through tax breaks. The trustees felt that without this money, the lease to UHS would short change Tennessee taxpayers, who technically own the hospital.
At least one university trustee, Roger Dickson, has suggested using the $25 million to set up a fund to support the Graduate School of Medicine. Dickson says he isn't "concrete" on the idea, but realizes how these days, medical schools need all they support they can get.
UHS board member Bill Rukeyser agrees. When he describes the current state of medical education, he envisions a violent sea.
"The Graduate School [of Medicine] and the hospital are huddled together in this row boat in a hurricane," says Rukeyser, sounding optimistic about the relationship between UHS and the university. "Now they can row together and make the ride somewhat better."
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