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Evolution of an academic medical center to an academic health system
THE AMERICAN UROLOGICAL ASSOCIATION LECTURE
Evolution of an Academic Medical Center to an Academic Health System David B Skinner, MD, FACS be able to use the air rights over the adjacent FDR East River Drive as the only likely available site for building a new facility. While planning was underway, the appointment of a new Chief Financial Officer led to the unpleasant discovery that the hospital was losing more than $1 million per week by early 1988. The urgency of correcting the financial problem became paramount during that year. The decision was made that maintaining and improving quality would be the principal factor in making decisions concerning correcting the deficit and expanding clinical programs. The first step in the corrective action plan was to determine true costs for management of each patient and diagnosis—that had not been done before. Charges had been the basis for making financial calculations and the difference between charges and costs turned out to be extraordinary. Once costs were known and shared with the medical and nursing staff, decisions about cost cutting or program enlargement to increase revenues were based first and foremost on the question “Will this proposal improve quality of patient care?” If so, will the decision to take a particular action improve the accessibility to this improved care to more patients, and finally can this proposal be accomplished at an affordable cost. With full participation of an informed medical and nursing staff, the deficit was reduced by more than onehalf within 1 year by 1989, and a balanced budget was achieved by 1991. Throughout this time, careful attention was paid to monitoring quality in a variety of ways, including independent patient satisfaction surveys quarterly and the usual monitoring of outcomes. In the 3 years during which costs were reduced by $75 million, quality actually improved by all measurements. The inevitable conclusion is that quality care is less expensive and depends on achieving the correct diagnosis and effective treatment with the fewest tests and least intervention.1 This requires close cooperation among physicians and hospital personnel to reduce the errors, duplications, and delays that are so expensive. New York State regulators introduced an all payor
In late 1987, I was invited to and accepted an appointment as the President and Chief Executive Officer (CEO) of the Society of the New York Hospital. The New York Hospital adjacent to the East River on the Upper East Side of Manhattan is the second oldest hospital in the United States and the oldest in New York State, having been founded by Royal Charter from King George III before the Revolutionary War. During the past 90 years, the hospital was the principal teaching hospital of Cornell University Medical College and the two institutions shared a single campus and facility for nearly 60 years. The New York Hospital-Cornell Medical Center was widely regarded as one of the premiere academic medical centers in the world. In the 1980s, the medical center had fallen into difficult times, especially related to the well-publicized deaths of Ms. Libby Zion and Mr. Andy Warhol. The hospital facility had been opened in the 1930s and had not been renovated. Permission to replace the hospital had been denied by the State Department of Health in the Certificate of Need process. More than 800 of the 1,070 beds were in 30-plus bed wards divided into fourroom cubicles and with just a single male and female toilet on each floor. The hospital had been without a Chief Financial Officer for several months so that the exact financial status was uncertain when I assumed the CEO position. In spite of these difficulties, the quality of the medical and nursing staff remained superb and they displayed great loyalty to the institution. At the time of my recruitment, the need for a new inpatient facility was obvious, and planning for the replacement facility began during my first week in office. Fortunately, the leadership of the medical center, particularly Drs. Robert Buchanan, Hugh Luckey, and David Thompson, negotiated with the city in the early 1970s for the hospital to Received September 26, 2001; Accepted October 18, 2001. From the Departments of Cardiothoracic Surgery and Surgery, Weill Medical College of Cornell University and New York-Presbyterian Hospital and Healthcare System, New York, NY. Correspondence address: David B Skinner, MD, FACS, Weill Medical College of Cornell University, New York-Presbyterian Hospital and Healthcare System, 525 East 68th St, New York, NY 10021.
© 2002 by the American College of Surgeons Published by Elsevier Science Inc.
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DRG reimbursement system in 1987, for which the hospital was not prepared. Planning for a replacement facility continued with the knowledge that it could not be launched until the deficits were corrected. A study was completed to determine from where patients came to the New York Hospital. It was learned that only five nearby zip code areas in Manhattan and Queens provided a market share of 20% or more in each to the hospital. Several retreats, including the entire medical staff leadership, senior hospital managers, and board members were held to establish future plans. Board leadership made it clear that we could not proceed in replacing the hospital unless a broad-based plan for the future was developed and approved. By 1990 there was consensus about the factors needed for our academic medical center to compete in the managed care and capitation environment. Full services, from primary to tertiary care, had to be provided. For this, more primary care physicians were needed. The departmentally based Faculty Practice Plan needed to become centralized. The relationship between practitioners and hospital leadership had to be strengthened. The central mission of medical education had to be based broadly for economic reasons. Most importantly, the concept emerged that the medical center should become the core of a regional network including multiple community hospitals and ambulatory centers. Work began on establishing the New York Hospital Network. Concurrently plans evolved and decisions were made regarding the much needed replacement inpatient facility. A Certificate of Need was submitted for a hospital built on a three-block long platform over the East River Drive, and connecting on land at the site of the Payne Whitney Psychiatric Clinic, which was demolished. A Certificate of Need for a project costing up to $1 billion was approved by the state in 1991 and detailed architectural and engineering plans were developed. Groundbreaking took place in May 1993, and construction of a 770-bed facility progressed without interruption. The number of inpatient beds was 300 less than in the old facility and was established somewhat arbitrarily, with some believing that much greater downsizing would be required and others believing that the reduction in beds was too radical. After a master contract and subcontracts were negotiated, a final budget of $880 million for the replacement New York Hospital was approved by the Board of Governors and the State of New York. Weather and labor conditions were favorable and the new facility,
named for Board Chairman Maurice R Greenberg and Mrs. Greenberg, was opened 4 years after the groundbreaking, in July 1997. The final cost proved to be about $730 million, or $150 million under budget, and the project was completed 8 months ahead of schedule. By the summer of 1997 all old inpatient units had been closed, and patients were transferred and admitted to the new Greenberg Pavilion. In parallel with the construction, the New York Hospital Network was developed. Review of existing affiliations between the New York Hospital and others made it clear that neither party benefited appreciably from a loose affiliation, and there was dissatisfaction on each side. The new network was developed on the concept that there would be a corporate linkage among the partners so that the commitment of a network hospital Board and medical staff was permanent and enthusiastic, and business among partners in the network could be done without violating antitrust restrictions. During the early 1990s, a number of hospitals in the metropolitan area agreed to become corporately linked to the parent New York Hospital through a mechanism called sponsorship. This called for the resignation and appointment or reappointment of the existing Boards and CEOs, and a requirement that members of the medical staff would seek Cornell University Medical College appointments over a five-year period, and relinquish appointments at other medical schools. Day-to-day management and financial responsibility for each network hospital remained with the local community. The theme of the network and each of the transactions, which led to a sponsored relationship with New York-Cornell, was an emphasis on high-quality provision of patient care. The network was a formal professional relationship among a corporately linked series of hospitals, physicians, and health care providers. It provided for the eventual integration of systems of care and a future managed care system. It functioned as a commonwealth of health care providers.2 Among the earliest partners becoming corporately linked in the network were the former Booth Memorial Hospital in Queens, Methodist Hospital and Community Hospital in Brooklyn, and United Hospital of Port Chester in Westchester County. They changed their names to the New York Hospital Medical Center of Queens, the New York Methodist Hospital, the New York Community Hospital of Brooklyn, and the New York United Hospital, respectively. After several years, growth of the network slowed as
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we encountered the presence of our long-time academic medical center competitor, Columbia-Presbyterian Hospital, successfully making affiliations in portions of Westchester County and the adjacent metropolitan areas in Connecticut and New Jersey. Columbia-Presbyterian had completed the construction of its new inpatient facility, the Milstein Pavilion, but was experiencing financial difficulties similar to those that New York Hospital had encountered in the 1980s. The possibility of a merger between ColumbiaPresbyterian and New York-Cornell was discussed in 1993 after Dr. William T Speck became the new President and CEO of Presbyterian Hospital. The idea of a merger was not new; archives revealed similar discussions at intervals of approximately a decade since the 1930s. Similarly, the two medical schools, Columbia and Cornell, had several far advanced discussions concerning merging the medical schools, so the clinical faculties were aware of the potential and had previously expressed interest in such a combination. But, in 1993, the Boards of the two hospitals were unable to proceed with merger discussions because of concern by the New York Hospital Board of Governors for the continuing annual deficits at Presbyterian Hospital, and the concern by the Board of Trustees at Presbyterian Hospital as to whether New York Hospital would be able to handle the financing for the Greenberg Pavilion under construction. Informal discussions continued between the two hospital presidents, and by 1995 Presbyterian Hospital, using many of the steps previously taken by the New York Hospital, had achieved a balanced budget, and more than half of the $360 million target for capital fundraising had been achieved by the New York Hospital Board. By the spring of 1996, new leadership on each Board, Messrs. Dan Burke and John Mack at Presbyterian and John McGillicuddy and Frank Bennack at New York Hospital, met with the two hospital presidents. The similarities and commonality between the two leading academic medical centers in New York was obvious. Columbia-Presbyterian had the same limited geographic draw of patients that New York Hospital had confronted. A comparison of centers of excellence at each facility revealed that almost without exception strengths on one faculty were greater at one than the other so that merging into a single clinical institution would upgrade the overall quality of care that could be provided to a larger population. For example, one center excelled at
complicated reoperative coronary artery surgery and the other center had a national leadership position in heart transplantation. One center had a world-class burn treatment unit that did not exist at the other center. One center was a designated trauma center and the other was not. There were many examples of upgrading overall quality if the two centers came together and shared common standards of care. After two 1-hour meetings of the board leadership and presidents, agreement was reached that a full asset merger of equals should be undertaken with the new facility to be called the New York Presbyterian Hospital and the two presidents sharing executive responsibility, with Dr. Skinner as CEO and Dr. Speck being called President and Chief Operating Officer. Beginning in the summer of 1996 until December 1997, the details for achieving the merger were planned and implemented. Once again quality became the major determination of the decisions. The Royal Charter from King George III was retired by the New York Hospital Board of Governors, and the longstanding independence and traditions of the Presbyterian Hospital Board were relinquished. During 1997, the two hospitals remained separate, but the Boards began meeting together and Presbyterian was invited to share in the oversight and ownership of the network, which became the New York-Presbyterian Healthcare System. On December 31, 1997, the final legal hurdle was passed and the New York-Presbyterian Hospital became certified as a single provider of health care by New York State. During 1998, the Boards were fully merged into a single Board with co-chairs, Messrs. McGillicuddy and Burke, and co-chairs of the multiple Board committees. All meetings were held together. Hospital management was quickly rearranged with a single officer holding each job. There was a single CEO, Chief Operating Officer, Chief Financial Officer, Chief Information Officer, and single heads of all major management departments across the two campuses. Dr. Barbara DeBuono, former New York State Health Commissioner, was recruited to serve as President of the New York-Presbyterian Health Care System, answering to the CEO of the New YorkPresbyterian Hospital. Dr. Michael Berman was recruited from the Chair of Pediatrics at the University of Maryland to serve as Medical Director for the merged hospital and would later become Hospital Director after Dr. Speck’s departure. Mr. John Lavan became Chief Financial Officer, Mr. Guy Scalzi became Chief Infor-
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mation Officer, and Mr. Louis F (Fritz) Reuter, IV became Executive Vice President for Merger Affairs, or a “merger maven,” reporting directly to the CEO. By that time, a number of hospital services were provided and shared with a number of the network partners. The management of these services was placed under Mr. Reuter’s direction for the entire system and included information systems; legal affairs; human resources; real estate and facilities; marketing; community, government, and public affairs; and international affairs. So, Dr. Skinner as CEO and Dr. Speck as President and Chief Operating Officer had four direct reports for finance, medical affairs, the health care system, and corporate services. All of this was accomplished within the first year of the merger. When the merger was first agreed on, Dr. Skinner agreed to serve as CEO, but expressed his intention to retire as planned a decade earlier, by the year 2000. It was assumed that Dr. Speck would then assume the position of CEO. By 1999, Dr. Speck requested that the Board make a final and definite decision that he would become the successor CEO by the end of the following year. The merged board was unwilling to make that commitment at that time, so Dr. Speck decided to seek other opportunities by the middle of 1999, and Dr. Skinner restated his decision to retire as CEO in 2000. A search committee was appointed and carried out its duties during the latter part of 1999 and successfully recruited Dr. Herbert Pardes, former Dean of the Columbia University College of Physicians and Surgeons, to succeed Dr. Skinner in 2000. Although administrative integration and resolution of single heads of departments was accomplished successfully during the first year, clinical department integration proceeded more slowly. It was decided early on that forcing the issue of single department chiefs for the two campuses would not improve quality of patient care, so all chiefs from both campuses were informed that they would retain their positions, but were asked to designate programs (rather than departments) that could be integrated and improve patient care by applying the same protocols and quality standards on both campuses. In the smaller specialties, it was agreed that some clinical faculty would receive appointments at both medical schools, which continued to remain separate. Pursuit of clinical integration of programs was based on a conviction that quality of care would improve if best practices were adopted on each campus, that costs of
service could be reduced by eliminating redundancy, that competitiveness with other institutions would improve, that the value of patient care would be increased, that the New York-Presbyterian Hospital clinical faculty could more readily set top standards for programs, and that eventually market share would increase. There were several strong assets to enable clinical program integration. These included the integration of the governance and management of the institution; a single vision for the Board and leadership; a full asset merger of equal partners as a guiding concept; the large network in one organization of hospitals, nursing homes, rehabilitation facilities, and other providers; and the asset of two world-class medical schools and two world-class faculties. On the other hand, the traditions of the two worldclass medical schools and faculties were quite different and created liabilities. The cost of academic medical centers was clearly greater than that of community hospitals, and the increased costs from the merger of two such centers had to be resolved. The Faculty Practice Plans and physician compensation from the two medical schools were different and raised problems for clinical integration. Lessons were quickly learned as to how program integration could proceed. First and foremost, there was no effort made to combine whole clinical departments. Introduction of new programs to include both campuses, such as a new liver transplant or pancreas transplant program, provided an easy way to integrate a program. Programs that were quite strong on one campus and acknowledged to be weak on the other also proved easy to integrate, with overall improvement to the standards of the stronger program. More difficult were programs that had different views of their mission, ie, research versus clinical. Most difficult and not worth trying was the integration of programs in which both were strong, had a tradition of competition, and had strong leadership. Because integration of clinical programs required cooperation from the medical schools, the universities set up a structure whereby the two deans and their staffs met together frequently to assist in resolving issues between the hospital and the two schools. A goal was established to have 20 integrated programs merged by the end of 1999, with certification of the integration done by an independent process established by the Board. The first integration occurred when the medical leadership on each campus agreed to a single Medical Board leading the merged institution with unified medical staff
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bylaws. This was accomplished within the first year. Identical patient satisfaction surveys were carried out on both campuses and assisted in identifying successes and problem areas. Considerable investment was made in teleconferencing between the two campuses. When clinical trials were established, they were introduced on both campuses and leadership from each campus participated. It was decided to seek Joint Commission on Accreditation of Healthcare Organizations (JCAHO) accreditation as a single merged institution, and the survey for this was established for late 1999. This forced the rapid integration of policy and procedure manuals across the campuses, and, in fact, after a week-long survey by seven surveyors, the Joint Commission did accredit us as a single institution in December of 1999 with a high score. Integration for JCAHO purposes was somewhat complicated by the fact that there were five campuses within the New York-Presbyterian Hospital. Besides the main Presbyterian and New York hospital campuses, the Presbyterian Hospital had a Babies and Children’s Hospital unit with initially separate policies and procedures, a several hundred-bed community hospital (Allen Pavilion) at a remote location at the northern tip of Manhattan, and the New York-Cornell Center had a large psychiatric inpatient division in White Plains, some miles away from Manhattan. All of these participated in the Joint Commission review, and were and are included in the certification of the integrated hospital. By mid-1999, a number of integrated programs were fully developed, including transplantation services, behavioral health, children’s health, pediatric cardiology and pediatric surgery, plastic surgery, dermatology, oral surgery, and pediatric otolaryngology. Radiology programs were merged and expanded networkwide. Other programs with clinical integration well underway were the neurosciences, oncology, women’s health, geriatrics, pathology, rehabilitation, and cardiovascular diseases. A number of clinical medical support services integrated rather quickly, including pharmacy, home care, operating room management, patient case management, the emergency programs, respiratory therapy, ambulatory care, quality control, infection control, cardiac catheterization, medical records, and clinical nutrition. All of these accepted joint procedures, protocols, and standards for service. After Dr. Speck’s departure in mid-1999, the search for a successor CEO began, and the Board requested that a formal assessment be done as to the success or failure of
the merger. This was precipitated in part by the failure of several other prominent mergers of academic centers across the United States. Financially, the merger was a success. The annual budget of the merged hospital was more than $1.5 billion, the budget of the corporately integrated network was approximately $3 billion, and the entire health system budget approached $4 billion. Even though these are large numbers, the merged hospital and its partners retained a balanced budget. Besides monies saved by synergies from elimination of duplication, the merged institution was successful in increasing its market share in the New York metropolitan area by approximately 3% per year. The strength of the corporately integrated network led to success in negotiations for managed care and other contracts. Financially, the hospital, in July of 1997, before completion of the merger, had net unrestricted assets of $545 million. A year later, taking full advantage of the synergies, market share increase, and successful contract negotiations, the net unrestricted assets had risen $100 million to $655 million. Formal review of evidence concerning the success or failure of the merger led to the conclusion in late 1999 that the merger was working well. Direct merger synergies created $42 million of financial improvement in the first year and a half of the merger. The New York-Presbyterian Hospital was able to absorb Balanced Budget Act Medicare revenue cuts in 1997–98 and maintain a balanced budget while other academic centers around the country were reporting large losses. A reengineering adaptation plan for the merged hospital achieved a $32-million financial improvement annually beginning in 1999. Network-generated revenues based on referral of complicated patients added $99 million to marginal gains in the first year. Besides the financial improvements, other factors pointed to a successful merger. A single responsible management leadership was achieved across both campuses with a balance of leadership from each of the original institutions. The loss of management executives was modest in number. No clinical chiefs resigned from either center. By 1999, the single unified Medical Board was working well, and the Governing Board and its committees were fully integrated. By 2000, the Board was functioning smoothly with a single chairman in place and single chairs of all committees. Members of the two original separate Boards were working well together. By the end of 1999, more than 20 clinical and medical support services had been certified
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as being fully integrated. New programs successfully introduced included a liver diseases program featuring transplantation, diabetes programs, obesity therapy, gamma knife procedures for neurosurgery, cancer prevention programs, a new epilepsy center, and an expanded pediatric cardiology program. A new microsurgical program was introduced on both campuses. By emphasizing program integration instead of departmental mergers, the “silo” effect of departmental status was diminished. As early as 1996, the New York-Cornell medical and hospital leadership introduced a restructuring around the concept of “disease clusters.” In this concept, all physicians who treated particular diseases such as breast cancer or coronary artery disease regardless of specialty were brought together geographically, programmatically, and economically to provide integrated patient care, eliminating interdepartmental competition. This required financial and medical integration. The Medical Board of the New York Hospital initially authorized six such disease clusters, including heart disease, vascular disease, neural diseases, oncology, gastroenterology, and adolescent medicine. Five of these six were well underway by the time of the merger. Advantages of this approach allowed for marked efficiencies in patient care throughput, linking ambulatory and inpatient care, determining the need for specialists by those participating in the disease cluster rather than by independent department chairs, enabling capitation contracting with fund distribution determined by the specialists, offering incentives for efficiency and savings, introducing an effective tool for marketing centers of excellence, providing an excellent basis for education in the several disciplines and quality control, and focusing on a multidisciplinary approach to diseases. As it became clear that such a cluster approach would be an effective answer to avoiding forced departmental integration, Dr. Michael Berman, initially as Medical Director and later appointed Hospital Director in mid-1999, assumed responsibility for developing this concept further. The title was changed from “Disease Clusters” to “Service Lines,” and has been a major factor in the continuing success of the merger since Drs. Pardes and Berman assumed leadership roles. As the concept of a health system evolved, the affiliated hospitals of the former Presbyterian Hospital and the sponsored institutions of the New York Hospital joined together in the New York-Presbyterian Health-
care System. By 1999 there were 15 corporate members of the system and 14 affiliated members who did not have the corporate sponsorship status. A new Board for the System was created that shared Board responsibility between New York-Presbyterian Hospital Trustees and Trustees of the corporately sponsored members. Dr. Arthur Klein replaced Dr. Barbara DeBuono as the president of the Network answering to the newly implemented Board. This Board had responsibility for network-wide services and programs such as marketing, planning, membership, physician relations, managed care, direct contracting, and business consolidation. With the combination of the previous New York Hospital Network and the Presbyterian Hospital affiliates, by 1999 the New York-Presbyterian Health Care System was providing health care for more than 20% of the total population in the New York metropolitan region. More than 14,000 doctors were working within the system, and those with academic interests became members of the faculties of either Cornell or Columbia. The deans of the two medical schools became active in expanding and overseeing educational and research programs throughout the network, and an extensive clinical trials program based on this large clinical volume was successfully established. With the extensive medical revenue cuts nationally from the Balanced Budget Act of 1997, and at the state level through Medicaid cuts, it became clear that the status quo in the health care system was changing. For the past 50 years, US academic medical centers have been at the pinnacle of world medicine. But growing costs and failures to impact on the overall health of the public led to challenges and reductions in support for academic medical centers by federal, state, and insurance payors by the end of the 1990s. The future and perhaps survival of the academic medical center became dependent on becoming more relevant to the society at large. This led to strengthening the concept of an academic health system, as opposed to an academic center in which the role of the medical center is the education and provision of highly educated physicians to work within the academic health system, the provision of research to provide innovations in care for the benefit of the community, and a change in the perspective of quality to emphasize the improvement of health in an entire community instead of the achievement of individual successes by high technology. So, an academic health system became defined as a vertically and horizontally inte-
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grated health care delivery system for the purpose and mission to improve measurably the health of a defined population, as opposed to the traditional role of the academic medical center, whose purpose was research, education, and delivery of excellent care to individual patients. The New York-Presbyterian Health Care System became a natural vehicle for implementing this change in focus. An academic health system is defined as one or more academic medical centers, one or more medical schools, a network of community hospitals, ambulatory care sites, nursing homes, home health programs, rehabilitation facilities, and multiple physicians covering all aspects of medical care. The New York-Presbyterian Health Care System, by 1999, had evolved into a system meeting these definitions and able to function as such. Besides the two medical schools, multiple campuses of New York-Presbyterian Hospital, and the 24 integrated or affiliated community hospitals, there were 13 associated nursing homes, several outpatient and inpatient rehabilitation centers, 8 home health agencies, more than 100 ambulatory care sites scattered throughout the metropolitan area, and a variety of other health-related practitioners and facilities. With the leadership of the hospital public health experts and the Columbia University School of Public Health and the Cornell University Department of Public Health, steps have been taken to implement and document change in health practice in New York City. The initial several studies have been completed and many more are underway. For example, data were collected from the emergency and discharge treatment programs for patients suffering from acute heart attacks. The initial survey indicated that the most recommended medications were used only about half the time and some inappropriate medications were being given. During the next year, intensive educational programs were carried out at the institutions within the network, and the survey was then repeated a year later. There was marked improvement in the pattern of treatment for acute heart attack patients. Translating this to
known survival rates, approximately 45 citizens of the New York area survived because of this network-wide change in treatment that might not have happened without the intervention.3 Similarly, a survey and then educational intervention across the network were conducted on the use of thrombolytic drugs for acute thrombotic events. The time from arrival at the emergency door until drug injection was studied, and it showed a wide variability across the network. After educational intervention, this time was dramatically shortened across the system. Many such efforts to improve outcomes on a community-wide basis are underway using the New York-Presbyterian Health Care System as a laboratory and vehicle for such studies and outcomes. For more than a decade, the problems encountered by New York-Cornell Medical Center and ColumbiaPresbyterian Medical Center have been addressed individually and successfully. The merger of these two institutions and the creation of a broad metropolitan-wide health system has facilitated and enhanced the success of these efforts and led to a gradual switch in emphasis from that of the individual hospital and practitioner to the successes that can be achieved by a large number of academic and community physicians and hospitals working together for a common purpose. At this point, one can say that the adventure has started and the work to date has been well done, but much of it is a work in progress and the ultimate achievements and success or failure of this effort have yet to be determined.
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REFERENCES 1. Skinner DB. Are cost considerations contradictory to quality? Ann Thorac Surg 1995;60:1498–1499. 2. Skinner D. Lessons learned from the evolution of an academic health care network and integrated delivery system. In: E Ginsberg, ed. Urban medical centers: balancing academic and patient care functions. Boulder, CO: Westview Press; 1996:22–33. 3. Callahan M, Alfalla D, Klein A, Heinrich G. Improving the care for patients with acute myocardial infarction across an academic hospital network. Society of General Internal Medicine (SGIM) Annual Meeting; April 1999.
Evolution of an Academic Medical Center to an Academic Health System David B Skinner, MD, FACS be able to use the air rights over the adjacent FDR East River Drive as the only likely available site for building a new facility. While planning was underway, the appointment of a new Chief Financial Officer led to the unpleasant discovery that the hospital was losing more than $1 million per week by early 1988. The urgency of correcting the financial problem became paramount during that year. The decision was made that maintaining and improving quality would be the principal factor in making decisions concerning correcting the deficit and expanding clinical programs. The first step in the corrective action plan was to determine true costs for management of each patient and diagnosis—that had not been done before. Charges had been the basis for making financial calculations and the difference between charges and costs turned out to be extraordinary. Once costs were known and shared with the medical and nursing staff, decisions about cost cutting or program enlargement to increase revenues were based first and foremost on the question “Will this proposal improve quality of patient care?” If so, will the decision to take a particular action improve the accessibility to this improved care to more patients, and finally can this proposal be accomplished at an affordable cost. With full participation of an informed medical and nursing staff, the deficit was reduced by more than onehalf within 1 year by 1989, and a balanced budget was achieved by 1991. Throughout this time, careful attention was paid to monitoring quality in a variety of ways, including independent patient satisfaction surveys quarterly and the usual monitoring of outcomes. In the 3 years during which costs were reduced by $75 million, quality actually improved by all measurements. The inevitable conclusion is that quality care is less expensive and depends on achieving the correct diagnosis and effective treatment with the fewest tests and least intervention.1 This requires close cooperation among physicians and hospital personnel to reduce the errors, duplications, and delays that are so expensive. New York State regulators introduced an all payor
In late 1987, I was invited to and accepted an appointment as the President and Chief Executive Officer (CEO) of the Society of the New York Hospital. The New York Hospital adjacent to the East River on the Upper East Side of Manhattan is the second oldest hospital in the United States and the oldest in New York State, having been founded by Royal Charter from King George III before the Revolutionary War. During the past 90 years, the hospital was the principal teaching hospital of Cornell University Medical College and the two institutions shared a single campus and facility for nearly 60 years. The New York Hospital-Cornell Medical Center was widely regarded as one of the premiere academic medical centers in the world. In the 1980s, the medical center had fallen into difficult times, especially related to the well-publicized deaths of Ms. Libby Zion and Mr. Andy Warhol. The hospital facility had been opened in the 1930s and had not been renovated. Permission to replace the hospital had been denied by the State Department of Health in the Certificate of Need process. More than 800 of the 1,070 beds were in 30-plus bed wards divided into fourroom cubicles and with just a single male and female toilet on each floor. The hospital had been without a Chief Financial Officer for several months so that the exact financial status was uncertain when I assumed the CEO position. In spite of these difficulties, the quality of the medical and nursing staff remained superb and they displayed great loyalty to the institution. At the time of my recruitment, the need for a new inpatient facility was obvious, and planning for the replacement facility began during my first week in office. Fortunately, the leadership of the medical center, particularly Drs. Robert Buchanan, Hugh Luckey, and David Thompson, negotiated with the city in the early 1970s for the hospital to Received September 26, 2001; Accepted October 18, 2001. From the Departments of Cardiothoracic Surgery and Surgery, Weill Medical College of Cornell University and New York-Presbyterian Hospital and Healthcare System, New York, NY. Correspondence address: David B Skinner, MD, FACS, Weill Medical College of Cornell University, New York-Presbyterian Hospital and Healthcare System, 525 East 68th St, New York, NY 10021.
© 2002 by the American College of Surgeons Published by Elsevier Science Inc.
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ISSN 1072-7515/02/$21.00 PII S1072-7515(01)01129-2
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DRG reimbursement system in 1987, for which the hospital was not prepared. Planning for a replacement facility continued with the knowledge that it could not be launched until the deficits were corrected. A study was completed to determine from where patients came to the New York Hospital. It was learned that only five nearby zip code areas in Manhattan and Queens provided a market share of 20% or more in each to the hospital. Several retreats, including the entire medical staff leadership, senior hospital managers, and board members were held to establish future plans. Board leadership made it clear that we could not proceed in replacing the hospital unless a broad-based plan for the future was developed and approved. By 1990 there was consensus about the factors needed for our academic medical center to compete in the managed care and capitation environment. Full services, from primary to tertiary care, had to be provided. For this, more primary care physicians were needed. The departmentally based Faculty Practice Plan needed to become centralized. The relationship between practitioners and hospital leadership had to be strengthened. The central mission of medical education had to be based broadly for economic reasons. Most importantly, the concept emerged that the medical center should become the core of a regional network including multiple community hospitals and ambulatory centers. Work began on establishing the New York Hospital Network. Concurrently plans evolved and decisions were made regarding the much needed replacement inpatient facility. A Certificate of Need was submitted for a hospital built on a three-block long platform over the East River Drive, and connecting on land at the site of the Payne Whitney Psychiatric Clinic, which was demolished. A Certificate of Need for a project costing up to $1 billion was approved by the state in 1991 and detailed architectural and engineering plans were developed. Groundbreaking took place in May 1993, and construction of a 770-bed facility progressed without interruption. The number of inpatient beds was 300 less than in the old facility and was established somewhat arbitrarily, with some believing that much greater downsizing would be required and others believing that the reduction in beds was too radical. After a master contract and subcontracts were negotiated, a final budget of $880 million for the replacement New York Hospital was approved by the Board of Governors and the State of New York. Weather and labor conditions were favorable and the new facility,
named for Board Chairman Maurice R Greenberg and Mrs. Greenberg, was opened 4 years after the groundbreaking, in July 1997. The final cost proved to be about $730 million, or $150 million under budget, and the project was completed 8 months ahead of schedule. By the summer of 1997 all old inpatient units had been closed, and patients were transferred and admitted to the new Greenberg Pavilion. In parallel with the construction, the New York Hospital Network was developed. Review of existing affiliations between the New York Hospital and others made it clear that neither party benefited appreciably from a loose affiliation, and there was dissatisfaction on each side. The new network was developed on the concept that there would be a corporate linkage among the partners so that the commitment of a network hospital Board and medical staff was permanent and enthusiastic, and business among partners in the network could be done without violating antitrust restrictions. During the early 1990s, a number of hospitals in the metropolitan area agreed to become corporately linked to the parent New York Hospital through a mechanism called sponsorship. This called for the resignation and appointment or reappointment of the existing Boards and CEOs, and a requirement that members of the medical staff would seek Cornell University Medical College appointments over a five-year period, and relinquish appointments at other medical schools. Day-to-day management and financial responsibility for each network hospital remained with the local community. The theme of the network and each of the transactions, which led to a sponsored relationship with New York-Cornell, was an emphasis on high-quality provision of patient care. The network was a formal professional relationship among a corporately linked series of hospitals, physicians, and health care providers. It provided for the eventual integration of systems of care and a future managed care system. It functioned as a commonwealth of health care providers.2 Among the earliest partners becoming corporately linked in the network were the former Booth Memorial Hospital in Queens, Methodist Hospital and Community Hospital in Brooklyn, and United Hospital of Port Chester in Westchester County. They changed their names to the New York Hospital Medical Center of Queens, the New York Methodist Hospital, the New York Community Hospital of Brooklyn, and the New York United Hospital, respectively. After several years, growth of the network slowed as
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we encountered the presence of our long-time academic medical center competitor, Columbia-Presbyterian Hospital, successfully making affiliations in portions of Westchester County and the adjacent metropolitan areas in Connecticut and New Jersey. Columbia-Presbyterian had completed the construction of its new inpatient facility, the Milstein Pavilion, but was experiencing financial difficulties similar to those that New York Hospital had encountered in the 1980s. The possibility of a merger between ColumbiaPresbyterian and New York-Cornell was discussed in 1993 after Dr. William T Speck became the new President and CEO of Presbyterian Hospital. The idea of a merger was not new; archives revealed similar discussions at intervals of approximately a decade since the 1930s. Similarly, the two medical schools, Columbia and Cornell, had several far advanced discussions concerning merging the medical schools, so the clinical faculties were aware of the potential and had previously expressed interest in such a combination. But, in 1993, the Boards of the two hospitals were unable to proceed with merger discussions because of concern by the New York Hospital Board of Governors for the continuing annual deficits at Presbyterian Hospital, and the concern by the Board of Trustees at Presbyterian Hospital as to whether New York Hospital would be able to handle the financing for the Greenberg Pavilion under construction. Informal discussions continued between the two hospital presidents, and by 1995 Presbyterian Hospital, using many of the steps previously taken by the New York Hospital, had achieved a balanced budget, and more than half of the $360 million target for capital fundraising had been achieved by the New York Hospital Board. By the spring of 1996, new leadership on each Board, Messrs. Dan Burke and John Mack at Presbyterian and John McGillicuddy and Frank Bennack at New York Hospital, met with the two hospital presidents. The similarities and commonality between the two leading academic medical centers in New York was obvious. Columbia-Presbyterian had the same limited geographic draw of patients that New York Hospital had confronted. A comparison of centers of excellence at each facility revealed that almost without exception strengths on one faculty were greater at one than the other so that merging into a single clinical institution would upgrade the overall quality of care that could be provided to a larger population. For example, one center excelled at
complicated reoperative coronary artery surgery and the other center had a national leadership position in heart transplantation. One center had a world-class burn treatment unit that did not exist at the other center. One center was a designated trauma center and the other was not. There were many examples of upgrading overall quality if the two centers came together and shared common standards of care. After two 1-hour meetings of the board leadership and presidents, agreement was reached that a full asset merger of equals should be undertaken with the new facility to be called the New York Presbyterian Hospital and the two presidents sharing executive responsibility, with Dr. Skinner as CEO and Dr. Speck being called President and Chief Operating Officer. Beginning in the summer of 1996 until December 1997, the details for achieving the merger were planned and implemented. Once again quality became the major determination of the decisions. The Royal Charter from King George III was retired by the New York Hospital Board of Governors, and the longstanding independence and traditions of the Presbyterian Hospital Board were relinquished. During 1997, the two hospitals remained separate, but the Boards began meeting together and Presbyterian was invited to share in the oversight and ownership of the network, which became the New York-Presbyterian Healthcare System. On December 31, 1997, the final legal hurdle was passed and the New York-Presbyterian Hospital became certified as a single provider of health care by New York State. During 1998, the Boards were fully merged into a single Board with co-chairs, Messrs. McGillicuddy and Burke, and co-chairs of the multiple Board committees. All meetings were held together. Hospital management was quickly rearranged with a single officer holding each job. There was a single CEO, Chief Operating Officer, Chief Financial Officer, Chief Information Officer, and single heads of all major management departments across the two campuses. Dr. Barbara DeBuono, former New York State Health Commissioner, was recruited to serve as President of the New York-Presbyterian Health Care System, answering to the CEO of the New YorkPresbyterian Hospital. Dr. Michael Berman was recruited from the Chair of Pediatrics at the University of Maryland to serve as Medical Director for the merged hospital and would later become Hospital Director after Dr. Speck’s departure. Mr. John Lavan became Chief Financial Officer, Mr. Guy Scalzi became Chief Infor-
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mation Officer, and Mr. Louis F (Fritz) Reuter, IV became Executive Vice President for Merger Affairs, or a “merger maven,” reporting directly to the CEO. By that time, a number of hospital services were provided and shared with a number of the network partners. The management of these services was placed under Mr. Reuter’s direction for the entire system and included information systems; legal affairs; human resources; real estate and facilities; marketing; community, government, and public affairs; and international affairs. So, Dr. Skinner as CEO and Dr. Speck as President and Chief Operating Officer had four direct reports for finance, medical affairs, the health care system, and corporate services. All of this was accomplished within the first year of the merger. When the merger was first agreed on, Dr. Skinner agreed to serve as CEO, but expressed his intention to retire as planned a decade earlier, by the year 2000. It was assumed that Dr. Speck would then assume the position of CEO. By 1999, Dr. Speck requested that the Board make a final and definite decision that he would become the successor CEO by the end of the following year. The merged board was unwilling to make that commitment at that time, so Dr. Speck decided to seek other opportunities by the middle of 1999, and Dr. Skinner restated his decision to retire as CEO in 2000. A search committee was appointed and carried out its duties during the latter part of 1999 and successfully recruited Dr. Herbert Pardes, former Dean of the Columbia University College of Physicians and Surgeons, to succeed Dr. Skinner in 2000. Although administrative integration and resolution of single heads of departments was accomplished successfully during the first year, clinical department integration proceeded more slowly. It was decided early on that forcing the issue of single department chiefs for the two campuses would not improve quality of patient care, so all chiefs from both campuses were informed that they would retain their positions, but were asked to designate programs (rather than departments) that could be integrated and improve patient care by applying the same protocols and quality standards on both campuses. In the smaller specialties, it was agreed that some clinical faculty would receive appointments at both medical schools, which continued to remain separate. Pursuit of clinical integration of programs was based on a conviction that quality of care would improve if best practices were adopted on each campus, that costs of
service could be reduced by eliminating redundancy, that competitiveness with other institutions would improve, that the value of patient care would be increased, that the New York-Presbyterian Hospital clinical faculty could more readily set top standards for programs, and that eventually market share would increase. There were several strong assets to enable clinical program integration. These included the integration of the governance and management of the institution; a single vision for the Board and leadership; a full asset merger of equal partners as a guiding concept; the large network in one organization of hospitals, nursing homes, rehabilitation facilities, and other providers; and the asset of two world-class medical schools and two world-class faculties. On the other hand, the traditions of the two worldclass medical schools and faculties were quite different and created liabilities. The cost of academic medical centers was clearly greater than that of community hospitals, and the increased costs from the merger of two such centers had to be resolved. The Faculty Practice Plans and physician compensation from the two medical schools were different and raised problems for clinical integration. Lessons were quickly learned as to how program integration could proceed. First and foremost, there was no effort made to combine whole clinical departments. Introduction of new programs to include both campuses, such as a new liver transplant or pancreas transplant program, provided an easy way to integrate a program. Programs that were quite strong on one campus and acknowledged to be weak on the other also proved easy to integrate, with overall improvement to the standards of the stronger program. More difficult were programs that had different views of their mission, ie, research versus clinical. Most difficult and not worth trying was the integration of programs in which both were strong, had a tradition of competition, and had strong leadership. Because integration of clinical programs required cooperation from the medical schools, the universities set up a structure whereby the two deans and their staffs met together frequently to assist in resolving issues between the hospital and the two schools. A goal was established to have 20 integrated programs merged by the end of 1999, with certification of the integration done by an independent process established by the Board. The first integration occurred when the medical leadership on each campus agreed to a single Medical Board leading the merged institution with unified medical staff
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bylaws. This was accomplished within the first year. Identical patient satisfaction surveys were carried out on both campuses and assisted in identifying successes and problem areas. Considerable investment was made in teleconferencing between the two campuses. When clinical trials were established, they were introduced on both campuses and leadership from each campus participated. It was decided to seek Joint Commission on Accreditation of Healthcare Organizations (JCAHO) accreditation as a single merged institution, and the survey for this was established for late 1999. This forced the rapid integration of policy and procedure manuals across the campuses, and, in fact, after a week-long survey by seven surveyors, the Joint Commission did accredit us as a single institution in December of 1999 with a high score. Integration for JCAHO purposes was somewhat complicated by the fact that there were five campuses within the New York-Presbyterian Hospital. Besides the main Presbyterian and New York hospital campuses, the Presbyterian Hospital had a Babies and Children’s Hospital unit with initially separate policies and procedures, a several hundred-bed community hospital (Allen Pavilion) at a remote location at the northern tip of Manhattan, and the New York-Cornell Center had a large psychiatric inpatient division in White Plains, some miles away from Manhattan. All of these participated in the Joint Commission review, and were and are included in the certification of the integrated hospital. By mid-1999, a number of integrated programs were fully developed, including transplantation services, behavioral health, children’s health, pediatric cardiology and pediatric surgery, plastic surgery, dermatology, oral surgery, and pediatric otolaryngology. Radiology programs were merged and expanded networkwide. Other programs with clinical integration well underway were the neurosciences, oncology, women’s health, geriatrics, pathology, rehabilitation, and cardiovascular diseases. A number of clinical medical support services integrated rather quickly, including pharmacy, home care, operating room management, patient case management, the emergency programs, respiratory therapy, ambulatory care, quality control, infection control, cardiac catheterization, medical records, and clinical nutrition. All of these accepted joint procedures, protocols, and standards for service. After Dr. Speck’s departure in mid-1999, the search for a successor CEO began, and the Board requested that a formal assessment be done as to the success or failure of
the merger. This was precipitated in part by the failure of several other prominent mergers of academic centers across the United States. Financially, the merger was a success. The annual budget of the merged hospital was more than $1.5 billion, the budget of the corporately integrated network was approximately $3 billion, and the entire health system budget approached $4 billion. Even though these are large numbers, the merged hospital and its partners retained a balanced budget. Besides monies saved by synergies from elimination of duplication, the merged institution was successful in increasing its market share in the New York metropolitan area by approximately 3% per year. The strength of the corporately integrated network led to success in negotiations for managed care and other contracts. Financially, the hospital, in July of 1997, before completion of the merger, had net unrestricted assets of $545 million. A year later, taking full advantage of the synergies, market share increase, and successful contract negotiations, the net unrestricted assets had risen $100 million to $655 million. Formal review of evidence concerning the success or failure of the merger led to the conclusion in late 1999 that the merger was working well. Direct merger synergies created $42 million of financial improvement in the first year and a half of the merger. The New York-Presbyterian Hospital was able to absorb Balanced Budget Act Medicare revenue cuts in 1997–98 and maintain a balanced budget while other academic centers around the country were reporting large losses. A reengineering adaptation plan for the merged hospital achieved a $32-million financial improvement annually beginning in 1999. Network-generated revenues based on referral of complicated patients added $99 million to marginal gains in the first year. Besides the financial improvements, other factors pointed to a successful merger. A single responsible management leadership was achieved across both campuses with a balance of leadership from each of the original institutions. The loss of management executives was modest in number. No clinical chiefs resigned from either center. By 1999, the single unified Medical Board was working well, and the Governing Board and its committees were fully integrated. By 2000, the Board was functioning smoothly with a single chairman in place and single chairs of all committees. Members of the two original separate Boards were working well together. By the end of 1999, more than 20 clinical and medical support services had been certified
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as being fully integrated. New programs successfully introduced included a liver diseases program featuring transplantation, diabetes programs, obesity therapy, gamma knife procedures for neurosurgery, cancer prevention programs, a new epilepsy center, and an expanded pediatric cardiology program. A new microsurgical program was introduced on both campuses. By emphasizing program integration instead of departmental mergers, the “silo” effect of departmental status was diminished. As early as 1996, the New York-Cornell medical and hospital leadership introduced a restructuring around the concept of “disease clusters.” In this concept, all physicians who treated particular diseases such as breast cancer or coronary artery disease regardless of specialty were brought together geographically, programmatically, and economically to provide integrated patient care, eliminating interdepartmental competition. This required financial and medical integration. The Medical Board of the New York Hospital initially authorized six such disease clusters, including heart disease, vascular disease, neural diseases, oncology, gastroenterology, and adolescent medicine. Five of these six were well underway by the time of the merger. Advantages of this approach allowed for marked efficiencies in patient care throughput, linking ambulatory and inpatient care, determining the need for specialists by those participating in the disease cluster rather than by independent department chairs, enabling capitation contracting with fund distribution determined by the specialists, offering incentives for efficiency and savings, introducing an effective tool for marketing centers of excellence, providing an excellent basis for education in the several disciplines and quality control, and focusing on a multidisciplinary approach to diseases. As it became clear that such a cluster approach would be an effective answer to avoiding forced departmental integration, Dr. Michael Berman, initially as Medical Director and later appointed Hospital Director in mid-1999, assumed responsibility for developing this concept further. The title was changed from “Disease Clusters” to “Service Lines,” and has been a major factor in the continuing success of the merger since Drs. Pardes and Berman assumed leadership roles. As the concept of a health system evolved, the affiliated hospitals of the former Presbyterian Hospital and the sponsored institutions of the New York Hospital joined together in the New York-Presbyterian Health-
care System. By 1999 there were 15 corporate members of the system and 14 affiliated members who did not have the corporate sponsorship status. A new Board for the System was created that shared Board responsibility between New York-Presbyterian Hospital Trustees and Trustees of the corporately sponsored members. Dr. Arthur Klein replaced Dr. Barbara DeBuono as the president of the Network answering to the newly implemented Board. This Board had responsibility for network-wide services and programs such as marketing, planning, membership, physician relations, managed care, direct contracting, and business consolidation. With the combination of the previous New York Hospital Network and the Presbyterian Hospital affiliates, by 1999 the New York-Presbyterian Health Care System was providing health care for more than 20% of the total population in the New York metropolitan region. More than 14,000 doctors were working within the system, and those with academic interests became members of the faculties of either Cornell or Columbia. The deans of the two medical schools became active in expanding and overseeing educational and research programs throughout the network, and an extensive clinical trials program based on this large clinical volume was successfully established. With the extensive medical revenue cuts nationally from the Balanced Budget Act of 1997, and at the state level through Medicaid cuts, it became clear that the status quo in the health care system was changing. For the past 50 years, US academic medical centers have been at the pinnacle of world medicine. But growing costs and failures to impact on the overall health of the public led to challenges and reductions in support for academic medical centers by federal, state, and insurance payors by the end of the 1990s. The future and perhaps survival of the academic medical center became dependent on becoming more relevant to the society at large. This led to strengthening the concept of an academic health system, as opposed to an academic center in which the role of the medical center is the education and provision of highly educated physicians to work within the academic health system, the provision of research to provide innovations in care for the benefit of the community, and a change in the perspective of quality to emphasize the improvement of health in an entire community instead of the achievement of individual successes by high technology. So, an academic health system became defined as a vertically and horizontally inte-
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grated health care delivery system for the purpose and mission to improve measurably the health of a defined population, as opposed to the traditional role of the academic medical center, whose purpose was research, education, and delivery of excellent care to individual patients. The New York-Presbyterian Health Care System became a natural vehicle for implementing this change in focus. An academic health system is defined as one or more academic medical centers, one or more medical schools, a network of community hospitals, ambulatory care sites, nursing homes, home health programs, rehabilitation facilities, and multiple physicians covering all aspects of medical care. The New York-Presbyterian Health Care System, by 1999, had evolved into a system meeting these definitions and able to function as such. Besides the two medical schools, multiple campuses of New York-Presbyterian Hospital, and the 24 integrated or affiliated community hospitals, there were 13 associated nursing homes, several outpatient and inpatient rehabilitation centers, 8 home health agencies, more than 100 ambulatory care sites scattered throughout the metropolitan area, and a variety of other health-related practitioners and facilities. With the leadership of the hospital public health experts and the Columbia University School of Public Health and the Cornell University Department of Public Health, steps have been taken to implement and document change in health practice in New York City. The initial several studies have been completed and many more are underway. For example, data were collected from the emergency and discharge treatment programs for patients suffering from acute heart attacks. The initial survey indicated that the most recommended medications were used only about half the time and some inappropriate medications were being given. During the next year, intensive educational programs were carried out at the institutions within the network, and the survey was then repeated a year later. There was marked improvement in the pattern of treatment for acute heart attack patients. Translating this to
known survival rates, approximately 45 citizens of the New York area survived because of this network-wide change in treatment that might not have happened without the intervention.3 Similarly, a survey and then educational intervention across the network were conducted on the use of thrombolytic drugs for acute thrombotic events. The time from arrival at the emergency door until drug injection was studied, and it showed a wide variability across the network. After educational intervention, this time was dramatically shortened across the system. Many such efforts to improve outcomes on a community-wide basis are underway using the New York-Presbyterian Health Care System as a laboratory and vehicle for such studies and outcomes. For more than a decade, the problems encountered by New York-Cornell Medical Center and ColumbiaPresbyterian Medical Center have been addressed individually and successfully. The merger of these two institutions and the creation of a broad metropolitan-wide health system has facilitated and enhanced the success of these efforts and led to a gradual switch in emphasis from that of the individual hospital and practitioner to the successes that can be achieved by a large number of academic and community physicians and hospitals working together for a common purpose. At this point, one can say that the adventure has started and the work to date has been well done, but much of it is a work in progress and the ultimate achievements and success or failure of this effort have yet to be determined.
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REFERENCES 1. Skinner DB. Are cost considerations contradictory to quality? Ann Thorac Surg 1995;60:1498–1499. 2. Skinner D. Lessons learned from the evolution of an academic health care network and integrated delivery system. In: E Ginsberg, ed. Urban medical centers: balancing academic and patient care functions. Boulder, CO: Westview Press; 1996:22–33. 3. Callahan M, Alfalla D, Klein A, Heinrich G. Improving the care for patients with acute myocardial infarction across an academic hospital network. Society of General Internal Medicine (SGIM) Annual Meeting; April 1999.