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Healthcare Reform Poses Challenges for Academic Medical Centers

Margaret Dick Tocknell, for HealthLeaders Media, March 22, 2012

About 70% of AMC leaders responding to the PwC survey identified as a revenue threat the potential reduction in IME funds. The president's budget proposal includes a 10% reduction in IME by 2013. Harkness says IME isn't the largest bucket in terms of dollar amounts, but AMCs recognize that IME funding is an easy target for policy makers who often contend that it isn't directly related to patient care.

In 2014 PPACA will begin reducing DSH payments. The first-year aggregate reduction of $500 million will grow to $4 billion in 2020. Some 61% of AMC leaders recognize this as a revenue threat. Also in 2014 millions of uninsured will migrate to private insurance or Medicaid. That means Medicaid revenues will increase and AMCs will need to attract their share of the newly insured patients to make up for declining DSH payments.

Brand Breakdown
Academic medical center brands are a conundrum. Although AMCs are among the most recognized and powerful in healthcare they often do not fare well in quality ratings. The report noted that when the Joint Commission ranked the top quality performers of 2010 few major AMCs were among the more than 400 hospitals ranked.

Harkness says she was surprised that only 49% of AMC leaders felt that not meeting new quality standards was a threat to their organization, especially since healthcare reform strengthens the link between quality standards and reimbursements. "AMCs will need to rely on more than past reputation," cautions the report.

Charges associated with care delivered by AMCs are also worrisome. AMCs may be perceived to be high-cost providers in an accountable care environment focused on lowering costs. Only 22% of consumers survey said they would pay more to be treated at an AMC.

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