Will Academic Medical Centers Accept the Value Challenge?

The accelerating push toward value-based healthcare is driving market disruption: hospital mergers and acquisitions, payers purchasing providers, and retail giants with health clinics proposing to merge with or buy insurance companies.

In this landscape of upheaval academic medical centers (AMCs), like other hospitals, must adapt or risk becoming obsolete. However, AMCs have unique characteristics that present unique challenges on their road toward value (to read more: (Tripartite) Mission Critical: Why Academic Medical Centers Must Innovate in Value-based Care).


Obstacles for Academic Medical Centers

  1. Fulfilling a Mission: AMCs’ three-pronged mission of education, research and care delivery can result in organizations with three separate silos, each with its own strategy, goals, culture and management approach. AMCs will have to break down the walls between these enterprises to develop shared goals that move them toward value. Active engagement of stakeholders across the institution will be necessary to formulate an aligned strategy. Changes in leadership structure and governance might be needed.

  2. Focus on Specialty Care: Because AMCs are on medicine’s cutting edge and often offer treatments unavailable elsewhere, they attract many complex, high-acuity patients. The result is an emphasis on specialty care and a reliance on the fee-for-service payment model that puts AMCs at a disadvantage as the market shifts toward value.

    AMCs must bolster their primary care offerings to compete. But as they do so, they must take into account the system-wide impact. The physician compensation package must be aligned with cost and quality goals and fairly share any surpluses achieved by meeting those targets with specialists.

  3. Cost Structure: Most AMCs have a higher cost base than their non-teaching counterparts, and this makes meeting payers’ growing demand for lower-cost care more challenging.

Leveraging clinics and extensivists can reduce costs by decreasing readmissions among patients with complex needs. Telemedicine and virtual care programs not only improve access to care but can lower its cost. Programs that reduce clinical variation, standardize care protocols and decrease unnecessary care help to contain costs and improve care quality.

Shifting to Value-based Care: AMCs will have to hone their population health management skills to achieve value. Many large AMCs have employee health plans they see as a testing ground. However, the number of lives and value opportunity may be insufficient compared with the investment required to transform care delivery models, institute care management programs, build data collection and analysis capabilities, and hone risk-management techniques.

Medicare Advantage offers AMCs another good entry point into risk-based contracting. It promises a bigger population base and provides the structure to reward value-based outcomes. Payment is risk adjusted, opportunity exists to manage medical costs compared with fee-for-service, and Medicare’s Star Rating program rewards high-quality service.

Partnering to Deliver Outcomes Faster

Transforming an AMC into an institution that is able to compete on value is an enormous, complex task with a steep learning curve and the potential for missteps along the way. Establishing a relationship with an operating partner that offers a proven model that addresses all points of the value chain can speed the transformation, prevent disruptive mistakes and realize value in a shorter timeframe.

The forces driving the push toward value are not going to let up. AMCs must transform if they are to continue to provide the services so vital to the country—not just care delivery but treatment and technology advances and health professional education and training.


Not sure where to start? Talk to one of our advisors.

Contact Us