"None of the HMOs we deal with has offered to pay us our share of these government funds," Stanford Health Services President Peter Van Etten said in an address to the House Ways and Means Subcommittee on Health last year. "If all of Stanford's Medicare recipients sign up for a Medicare HMO tomorrow, under present payment methodologies, Stanford would lose $40 million of revenue."
And, during the last two years anyway, the subject of Medicare cuts has made its way to the forefront of congressional budget discussions. Nearly all of those proposals have included cuts to medical education funding. Industry observers say those cuts are coming, it's just a matter of when and how much.
"It's a necessary correction," says Wanda Jones, an analyst at New Century Healthcare Institute in San Francisco. "We've been on a 30-year high with the introduction of Medicare in 1966. We've had our run. Now the public has to have its turn and say there are limits to what we will pay."
So, faced with HMO cost-capping and impending Medicare cuts, university hospitals are not far behind their community counterparts in the survival-of-the-fittest game.
Harvard's Massachusetts General and Brigham and Women's hospitals came together last year. Tulane University sold its hospital to Columbia/HCA. UCLA acquired Santa Monica Hospital.
"I have not gone to any place that is not in active discussions at some level with somebody regarding a new relationship," says Robert Dickler, senior vice president for health care affairs at the Association of American Medical Colleges. "It's in every academic center I know of ."
It's a conundrum that's stumped medical schools for years: We count on them to reach for the stars, to train the best and the brightest, to make the research breakthroughs that cure disease, fix broken parts, and keep people alive. But while their research is big, their patient market is small, and that doesn't work. Because the patient market brings in the money.
Stanford Health Services reports that it has cut more than $100 million from its budget over the last five years. UCSF, meanwhile, reported a net operating income of less than 0.5 percent in 1995, down from 7 percent in 1992.
"While the economics of the current managed care environment are affecting all health care providers, the very survival of teaching hospitals like UCSF and Stanford is threatened," UCSF Medical Center Director William Kerr said in a prepared statement issued in response to questions.
Industry watchers speculate that if the current proposal to marry Stanford's and UCSF's hospitals doesn't fly, both universities will likely start looking for other partners.
"Standing still will not pay off," says Jones. "They have to do something.
