Consolidation has been one of the defining trends of the U.S. healthcare system in recent decades. Horizontal and in some cases vertical mergers between hospitals, clinics, insurers and pharmacies have changed how Americans receive care and what they pay for it.
Major transactions such as CVS’ $69 billion acquisition of Aetna are just the tip of the iceberg. To see the real impact of consolidation, consider that in 2016, for the first time, less than half of physicians owned their own practices, with many instead working for large hospital groups. Between 2003 and 2013, the number of system-affiliated hospitals also jumped 10 percent, to 63.2 percent.
These horizontal provider mergers have led to the growing integration of academic medical centers (AMCs) and community health centers (CMCs). Let’s look at how these two organizational types stack up and what their ongoing consolidation means for patients and providers, as well as for online MBA graduates considering career options in either setting.
What Is an Academic Medical Center?
AMCs are uniquely important resources in the healthcare system. In addition to providing a wide range of basic and specialized services for patients in their local communities, AMCs are also the primary sites for graduate medical education and cutting-edge research. They are affiliated with medical schools.
Compared to CMCs and other types of providers, AMCs have a small operational footprint. According to data from the American Association of Medical Colleges (AAMC), AAMC-affiliated teaching hospitals accounted for only 5 percent of all hospitals in 2014. However, they deliver a disproportionate amount of care for certain populations, including:
- Medicare and Medicaid patients
- Recipients of charity care
- Hospital transfer patient with complex needs
- Trauma and burn victims
In fact, AMCs provide the bulk of all regional standby services, such as those offered at Level 1 trauma and burn centers. To earn such designations, medical facilities must have physicians and practitioners from a diverse range of specialties available on site, as well as a demonstrated commitment to training and research ― all requirements that AMCs are especially well-suited to meet.
Researchers at AMCs have initiated numerous major medical breakthroughs throughout history, including the creation of the polio vaccine and the first use of gene therapy for cystic fibrosis. Without AMCs, there would be an enormous void in the medical research community, not to mention no infrastructure for graduate medical education that gives physicians crucial experience and exposure in treating a broad range of conditions.
Despite their centrality to the healthcare system, AMCs face considerable operational challenges, especially as many of them integrate with non-research institutions such as community hospitals/CMCs. Their administrators regularly deal with issues such as:
Reliance on public funding
AMCs depend on publicly funded programs to support their research initiatives and to pay for many of the services they render. The U.S. federal government is the largest contributor to research funding, which accounts for a significant portion of the typical AMC’s revenue. Meanwhile, Medicare contributes billions each year to graduate medical education.
Since both Medicare and Medicaid pay for a relatively high share of AMC patients, AMCs are vulnerable to any changes in these programs. For example, AMCs in states that have not yet expanded Medicaid under the Patient Protection and Affordable Care Act face much more budgetary pressure than their counterparts in jurisdictions that took the expansion.
High costs of care and low margins
AMCs have above-average costs for care due to their disproportionate share of uncompensated services they deliver and their staffing requirements. Many AMCs have historically charged privately insured patients more than other facilities, in part to cover these high overall operating costs.
Going forward, payer consolidation could jeopardize this practice since insurers may seek greater parity between rates at AMCs and community providers. That would put AMC margins under pressure, as private insurance is generally higher-margin than Medicaid or Medicare.
Transition to value-based reimbursement
As a whole, AMCs are not ranked highly under quality-related measures overseen by the Centers for Medicare and Medicaid Services (CMS). That’s an issue as CMS pushes more providers to participate in programs that reward quality measures through alternative payment models.
AMCs could face penalties for not reaching quality benchmarks. Standardization of their highly variable prices could also upend their current business and require restructuring of key departments like radiology.
What Is a Community Medical Center?
A CMC is a non-academic provider such as a community hospital. Compared to AMCs, CMCs are not as involved in graduate medical education, nor in federally funded research. Their patient populations also look different, with a higher share of privately insured individuals, and their staff members may be more generalist. Overall, they treat a greater volume of patients and may be more focused on efficiency than AMC counterparts.
The growing integration of CMCs and AMCs via mergers and acquisitions means that many providers must reconcile two distinct environments. CMCs and AMCs differ on everything from their respective roles in medical research to how they operate financially. Core components of the AMC model, such as institutional transfers and government subsidies, might not have the same salience in an integrated environment in which the CMC and AMC are technically the same unit.
Ultimately, the evolving relationship between AMCs and CMCs could turn many providers into highly siloed enterprises, with disconnected departments that struggle to share information or collaborate at the level necessary to meet new quality standards. Administrators have their work cut out for them.
How an Online MBA from GW Can Prepare You for New Challenges
Whether you work in an AMC or CMC, there are distinctive pros and cons associated with each. Given the consolidation trend, you may end up working in both environments at some point, which is why it pays to have comprehensive preparation. An online healthcare MBA from The George Washington University provides a combination of business and managerial expertise along with in-depth training in healthcare quality, regulations and operations. As a fully online track, it is ideal for working professionals seeking career advancement.
To learn more, visit the main program page, where you can answer a few quick questions to receive a copy of our free brochure.