WSJ | Once Cash Cows, University Hospitals Now Source of Worry for Schools
http://www.wsj.com/articles/universities-get-second-opinion-on-their-hospitals-1429725107
Academic medical centers expected to become less profitable, leading schools to rethink health-care operations
Teaching hospitals have long been points of pride for major universities, and in recent years revenue from medical services has served as a lifeline for some schools that have struggled with falling state aid and pressure to slow tuition increases.
Now the marriages between universities and their cash-cow clinical operations are starting to fray as changes stemming from the 2010 health-care law threaten to make university hospitals less profitable.
Some schools are keeping a closer eye on their hospital operations to weather the coming storm, but others, including Vanderbilt University and Emory University, are distancing themselves from their medical centers and returning to their teaching roots.
“They’re totally different businesses,” Vanderbilt Chancellor Nicholas S. Zeppos said of the health-care and educational operations. “We can really focus our energy, attention and resources more on that timeless [educational] mission.”
ENLARGEUniversity-affiliated hospitals tend to charge more for their services than so-called community hospitals because they are also funding research and instruction and handling particularly complex cases. That makes them less attractive to the exchange-based insurance networks created under the Affordable Care Act.
Another factor raising costs: Most university hospitals are in urban areas and treat a high share of patients who are uninsured or covered by Medicaid.
Hospital—and therefore university—administrators have also been spooked by impending cuts to “disproportionate share” hospitals, which treat indigent patients, and uncertainty over how states will continue to fund Medicaid payments.
Academic medical centers have historically run operating margins of 3% to 5%, but McKinsey predicted in a 2013 report that those margins could drop by four to five percentage points by 2019, pushing some into the red.
http://www.wsj.com/articles/universities-get-second-opinion-on-their-hospitals-1429725107