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BALTIMORE, MD -- In the absence of appropriate national
policy, many of America's academic health centers could be in
jeopardy, the chancellor of the Duke University School of
Medicine warned on Friday.

"The bottom-line dollar and shareholder profit are driving
health care now," Dr. Ralph Snyderman said in an address
prepared for the annual meeting of the American Association for
the Advancement of Science. While this has resulted in
much-needed increases in efficiency, "it is also wreaking havoc
on the financial underpinnings of academic medicine, without
devising a suitable new foundation. Our ability to teach
medicine, to search for new medical advances, and to treat the
poor could be torn apart."

He said academic health centers bear the cost of these
functions, which assure the quality of our nation's health, but
competition with for-profit managed care companies is rapidly
diminishing the ability of the academic health center to
subsidize these activities.

To endure, academic health centers must find savvy ways to
compete with health maintenance organizations that don't have
these expenses, Snyderman said.

Survival means "creating a new model of academic medicine
for the 21st century that is at once more efficient, more
businesslike, and better able to meet the health care needs of
our people," he said.

But that won't be enough: "The American public must
understand that some crucial aspects of the academic health
center's mission -- important societal needs such as biomedical
research, charity care, medical education, treatment of severe
and rare diseases -- will never be supported by the competitive
forces of the economic medical marketplace which is focused on
cost and profit," Snyderman said.

"Even when academic medical centers become as efficient as
possible, they will appropriately require some degree of public
subsidy to help underwrite those essential aspects of their
health care mission which cannot be paid for in the health care
free market," he said.

Consisting of medical schools and affiliated teaching
hospitals, academic health centers are fundamentally different
from any other type of health care provider. In addition to
delivering routine and intermediate care, they provide
sophisticated complex care for patients who are referred with
the most difficult-to-treat and often rare illnesses. They also
teach medical students and other health professionals and
provide residency training, and they conduct a broad array of
research needed to improve health care. "This ranges from the
most basic inquiries into the molecular workings of the cell to
clinical research that introduces better treatments for
patients," Snyderman said in an interview in advance of his
presentation. In the past, these services were funded by a
combination of federal funding that substantially paid for
research and partially paid for indigent care and medical
training, plus private fee-for- service insurance premiums that
provided the cost of clinical care, plus some research and
training. But now, insurance payments have been drastically
slashed, and the outlook for Medicare/Medicaid funding and
future federal research support is unknown, Snyderman said.
What that means is university medical centers are forced to
compete in price for patients with lower-cost community
hospitals or managed-care and HMO clinics.

"American health care has shifted to a for-profit,
market-driven economic model. Seeking to control costs, this
new managed care system emphasizes primary care and limits
access to the more expensive specialty care that has been a
hallmark of academic health centers," Snyderman said in the
interview. "It, of course, does not support nor carry the
expenses of education and research. At the same time, insurers
are no longer willing to pay the additional premium that
academic health centers incur to pay for their research and
education missions.

"The health care market wants to use the products of an
academic health center without paying for them," he said. "It's
like demanding a pharmaceutical company spend millions to
develop a drug, then giving the product to generic companies at
no additional cost."

The only recourse academic health centers have now is to
find new ways of funding their missions. In the least, medical
centers can increase efficiency by reducing expenses. But more
than that, redesigning academic health centers will mean
creating novel alliances with for-profit business and industry
that will advance medicine as well as keep academic health
centers afloat, Snyderman said. It may also mean starting rival
managed care companies that will go head to head with low-
budget HMOs, he said.

But all these moves demand toeing an exquisite balance
between health care as a societal good and health care as a
business, Snyderman said. "These new associations require an
almost religious belief in the centrality of our mission to
teach, conduct research and provide the best patient care," he
said in the interview. "We must be protected by our
principles." Among the efforts Duke has made to "reinvent"
itself for the future are: Duke University Hospital underwent a
downsizing that cut expenses by $70 million over two years and
reduced its hospital work force by more than 1,000
positions.

Given concerns both nationally and at Duke of an oversupply
of medical specialists, the medical school has been
re-evaluating the size of its graduate training programs and is
beginning to decrease the number of specialist residency slots.
This could amount to as much as a 30 percent reduction over the
next four years.

The medical and nursing schools have initiated substantial
curricular changes to prepare students to practice
cost-effective medicine in community as well as hospital
settings.

In order to enhance its ability to compete for managed care
contracts and to facilitate strategic alliances with practices
and community hospitals throughout the Southeast region, the
medical center has made a shift from being a single
geographically-contained specialty care institution to a
comprehensive health care system. This new entity -- the Duke
University Medical Center and Health System -- includes not
only the traditional medical center but also a full range of
integrated external health care businesses.

Duke University Medical Center has formed a partnership with
NYL Care, a wholly- owned subsidiary of New York Life, and they
have established a managed care company, WellPath Community
Health Plans. "This joint venture between an academic health
center and a major health insurer should help us be a provider
of more effective managed care throughout our state and beyond.
It should also generate revenue for our academic missions,"
Snyderman said. To increase revenues and help underwrite the
costs of research, Duke has taken aggressive steps to
commercialize research discoveries where appropriate.

To make the medical center's clinical research capabilities
more accessible to the pharmaceutical industry and other
biotechnology firms, the Duke Clinical Research Institute was
created. Building upon the expertise of the Duke Cardiovascular
Databank, this new institute provides researchers at Duke and
worldwide with a variety of services, such as data management,
statistical analysis, technology assessment, outcomes
assessment, site monitoring, financial management, pharmacy
services, telephone randomization and study coordination.

"In short, academic health centers must undergo a rapid
transformation, one that enables them to maintain their
academic responsibilities while securing their revenues more
effectively in the free market," Snyderman said. "They must
move at once to redesign the size and scope of their education,
research, and health care efforts, adapting these core missions
to meet contemporary health needs."