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How to Thrive in a Changing Health Care Environment

By Paul. B. Rothman, M.D.

Glass world

At Johns Hopkins Medicine, our vision, "Together, we will deliver the promise of medicine," is supported by our mission to improve the health of the community and the world by setting the standard of excellence in medical education, research and clinical care.

Over the next several years, this mission will be challenged because as an academic medical center (AMC), we are a high-cost provider of health care. A University HealthSystem Consortium research study found that the reasons for higher costs among AMCs include:

  • Standby costs. We can’t just employ cardiac transplant surgeons on Tuesdays and Wednesdays. We have to be able to deliver a high level of complex care seven days a week, 24 hours a day—a huge cost that a community hospital does not have. This round the clock care accounts for about 60 percent of the increased cost of academic medicine, versus community medicine.
  • About one-quarter of the added cost comes from the fact that we cross-subsidize our education and research missions from clinical revenues.
  • Teaching while we provide care requires us, by definition, to be a little less efficient. And spending time on research takes away time from caring directly for patients which generates additional revenue.
  • We take care of the sickest, most complex patients. The reconstruction of a hip after infection is much more resource-intensive than replacing a hip in a healthy patient.

These higher costs pose a challenge because we’re at a point where this country is focused on minimizing the cost of health care, and for good reason. But this trend to cut costs could threaten our clinical volumes. Today’s restricted insurance networks have the potential to take patients away from hospitals. In addition, new payment schemes that make patients pay more out of pocket to receive treatment at a prestigious academic medical center will impact whether patients choose us. If these measures lead to decreased clinical margins, it will challenge all three pieces of our mission, at a time of already-shaky federal funding for research.

So we have to adapt, especially here in Maryland, where an overhaul of the Medicare waiver system is going to change how hospitals in the state are reimbursed. To ensure we thrive in a changing health care environment, we need to:

  1. Grow strategically. It’s simple math. If the margins shrink, then we need a bigger footprint to attract more patients.
  2. Innovate. We need to find ways to lead in population health, keeping large numbers of people in our regions well. (After all, while we deliver a great deal of specialty care, a significant portion of our inpatients are admitted through the emergency room.)
  3. Ensure we diversify our revenue streams and care venues (international, ambulatory, insurance, online courses, etc.).
  4. Demonstrate greater value in the health care system. To improve value, we need to increase quality while reducing costs by providing care more efficiently.

These are the broad strokes and we are making tangible, significant progress with our five-year strategic plan, which specifically guides our business strategies and decisions in order to advance our legacy of innovation and excellence in patient care, research and innovation. Instead of sitting on the sidelines and waiting to see how reform plays out, we are finding ways to bend the cost curve in health care while at the same time ensuring a greater focus on education, research, quality and prevention. We are leading the change in medicine.