I EW S Wednesday, July 24, 1996 - The Michigan Daily " CONSULTANT: HOSPITALS MUST CHANGE WITH MARKETS -3 OPTIONS Continued from Page 1. the heels of an April announcement by the Medical Center that it would under- a three-year transformation, in which it plans to trim $200 million from its budget. Most of the monetary cuts will be made through staff reductions. The Medical Center has already distrib- uted 541 reduction-in-staff notices to its employees, with more to come. Many of the 541 employees will have an opportunity to fill the more than 200 open positions in the hospitals. Shields said the Medical Center could become a financial risk to the *niversity if the hospitals are not finan- cially successful. He said academ- ic medical cen- ters must respond to the marketplace. "You cannot sit still," he said. Shields pre- ented options her academic teaching hospi- tals around the country have elected to use in their restructur- ing processes in recent years. Shields said all the viable options necessi- *te some down- sizing of the ' work force. He said only half the beds the Medical Center currently uses will be nec- essary in five years. He cited the ever-increas- g move to out- atient treatment as a reason for the drop in bed use and the Linda Weatherbee, a resulting work keeper at the Medica force downsiz- other Medical Center ing. "It leads to laying off employees everywhere, Shields said. "But it's better than com- plete closing." Shields said utilization drops as 9uch as 69 percent in managed care markets and almost 20 percent of the population of Washtenaw County is currently enrolled in HMOs. Shields said increasing HMO enrollment in the area is another reason to restructure. "Hospitals will have to be low-cost to compete" Shields said. "The University is now the highest cost-per- case provider in its market. It must Weome the lowest-cost provider" Shields said the University must decrease business risks and increase business opportunity for the Medical Center while maintaining its academic relationship with the Medical School. Some options would allow the University to maintain complete con- trol over the Medical Center. One such option, according to Shields, would be for the University to restructure by strictly downsizing the Medical Center. He said it would require no new investment by the University and risks would be limited. Shields said the disadvantages of strict downsizing include creating a smaller revenue base and suffering a smaller flow of patients for teaching purposes. Shields said the University could also expand the Medical Center, thereby maintaining patient flow and possible business synergies. He said such expan- sion would create increased risks for the tance. If the University elected to expand the Medical Center through a merger with some corporate entity or by leasing to a proprietary company, Shields said University control of the hospitals would be diluted, although responbsibility for medical educa- tion and research missions could remain intact. Michael Staab, another attorney, also recommended combining the Medical Center and the Medical School under the leadership of one person, citing pos- sible tension between the divisions. "A lot of tension exists between the University hospital and the medical school," Staab said. "For the hospitals, patient care is number one. The research and academic mission of the medical school is secondary." Regent Andrea Fischer-Newman (R- Ann Arbor) said she was very con- cerned about possible degradation of the Medical School's reputation if the Medical Center were no longer University-controlled. Shields said merging with other health care systems would be advanta- geous for the University in that it could enlarge the system without dipping into University funds. The University could also elect to restructure the Medical Center as a not- for-profit corporation or public authori- ty. Shields said such a move would facilitate the hospitals' becoming a larg- er system, benefiting from referral pat- terns. He said the move would offer the University increased flexibility in deci- sion-making, while maintaining its commitment to medical education and research. Shields said common lingering prob- lems occur when an academic teaching hospital restructures as a non-for-profit corporation. He said the financial rela- tionship between the hospital and the school is not adequately defined, often creating tension .between the hospitals and the medical schools. Shields said the University could sell the Medical Center, alleviating its busi- ness risk and protecting current liquid assets. Shields said the disadvantages of a sale are numerous, including political resistance, losing control of assets, loss of charitable mission and difficulties involving a new employer for Medical School faculty. Shields said the University is in a much better position to initiate restruc- turing because, unlike many other insti- tutions, the University Medical Center is still fiscally s 0CI0 A sound. Other unlver Istes Shields did not seversl restrueturi recommend one t save the raadt specific course of action to the Movedtonot-ot-pr regents. However, Univ..ity . f lndier he said the pre- U y fW vailing trend for ry- restructuring of tniversi Ari academic teach- Uttveity id ing hospitals UIversaty of Loulst involves adminis-' rlty of Matyl trators setting up a U=i>ersity of Ch a system for spin- ning off hospitals d , IWIW b to corporate joint- Uvrt -. venturing, and :..' Med.:l:C:.t that such a corpo- :T:>:n Univergty rate system would probably be the Expatded Managei best option for the Johns Hoplins 1.1 University. Un P "The options < > are manifold. At Cut;$MWr.M some point we Qus Iliversity are going to have to make a choice," said Regent Rebecca McGowan (D-Ann Arbor). "We wanted to assure our- selves that we've looked at every aspect and are prepared to make a decision in the best interests of the hospital." Power said the presentation was time- ly in order to maintain the quality of the Medical Center. "We'll subject these processes to scrutiny and questioning," Power said. "Today provided us with a sense of context." Neal said the executive officers would spend the next six weeks weighing all the options to determine the ideal solu- tion. Neal said they would "look at all the models as they apply to Ann Arbor." Neal did not indicate a preference for any particular restructuring option, but did say that the Medical Center could not continue to operate under its current structure. "It's hard to imagine maintaining the current structure when our costs are much higher than other hospitals'," Neal said. "We have to ask ourselves, 'Should universities be in the business of oper- ating huge hospitals far larger than needed to operate a medical school?"' Neal said. The recent resignations of both Medical School Dean Giles Bole and Health System President John Forsyth present an opportune time for the University to review how the leadership of the Medical School and -the hospitals work. The University could combine both departments under the leadership of one person, an option Provost J. Bernard Machen said the University will consider. member of Local 1583 and a house- l Center, protested downsizing with employees and supporters on May 16. University, including more debt and obligations. He also said the move could cause a loss of focus on the University's academic mission, as remote facilities and primary-care activities would be of greater impor- PARK Canoe ren availe-----.. Parks&Recreation CIT yO F A NN AR B OR 3000 Fuller Rd Ann Arbor 99. 7 . Don't Panic!! If you think you're pregnant... call us-we listen, we care. PROBLEM PREGNANCY HELP 769-7283 Any time, any day, 24 hours. Fully confidential. Serving Students since 1970.