Payment Reform and the Mission of Academic Medical Centers

U.S. academic medical centers (AMCs) are facing new challenges to their financial well-being. As payers seek to control health care costs, teaching hospitals and their medical staffs can anticipate continued payment reductions. Under the fee-for-service system, hospitals respond to payment cuts by increasing their volumes of admissions and ambulatory services while improving efficiency. Although costs per case may decline, overall costs do not. The inevitable result is a further reduction in per-case payments, and the cycle continues — with many undesirable consequences. Costs are inflated, and the quality and safety of care are eroded as the result of unnecessary or . . .