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A Word From the President: Sequester or Not, Academic Medicine Must Transform

AAMC Reporter: October 2012

As the United States careens perilously toward a year-end “fiscal cliff,” many are wondering if sequestration, a major part of this perfect storm, will really happen. In fact, if policymakers fail to reach a compromise before the Jan. 2, 2013, deadline, non-security discretionary spending will be cut by 8.2 percent in fiscal year (FY) 2013 on top of an additional $900 billion in discretionary spending cuts already mandated by the Budget Control Act over the next decade. Could Congress actually let these cuts, which a White House report recently called “deeply destructive,” go into effect?

While the fate of the sequester remains to be seen, the AAMC has been, and will continue to be, vigorously advocating to minimize the potential impact of federal budget cuts on programs important to medical schools and teaching hospitals, and on those we serve. But no matter the outcome, it is imperative that academic medicine prepare for a very different future.

Many of you have heard me speak about my belief that our nation’s fiscal crisis really is different from anything we have experienced. Unsustainable growth in health care spending is a significant part of the problem with national health expenditures reaching an all-time high of $2.7 trillion in 2011. Although the rate of increase has leveled off a bit, most likely due to the weak economy, we can expect health spending to rise at a faster rate as the economy recovers and millions gain access to health insurance as a result of the Affordable Care Act.

At the state level, governors and legislators are experiencing the largest budget shortfalls on record, and these deficits are expected to continue through FY 2013 according to the Center on Budget and Policy Priorities. States increasingly are spending more on Medicaid at the expense of education and other priorities. The National Association of State Budget Officers estimates that in FY 2011, 23.6 percent of state budgets went to Medicaid spending.

These hard economic realities portend some daunting challenges for academic medicine. Though no one can predict the future, it would be irresponsible to ignore some likely scenarios. In patient care, it seems inevitable that clinical reimbursement rates will continue to drop, and that we must find new ways to deliver safe, high-quality care more affordably. While medical research is one of the most important investments our nation can make in the future, we must find new ways to collaborate and derive maximum value from resources likely to become more constrained. And while we are asking Congress to provide support for more residency training positions to alleviate the coming doctor shortage, we must recognize that those funds may have to come at the expense of something else. In other words, the old model of simply asking for more federal funding is no longer a viable strategy.

Instead, what medical schools and teaching hospitals must do is identify and implement ways we can contain costs across our mission areas of medical education, research, and patient care. Otherwise, policymakers will do it for us. Indiscriminate, across-the-board budget cuts like sequestration, or cuts contained in so-called “deficit reduction plans” like Simpson-Bowles, while they may be well intentioned, cannot account for the intricacies of our mission areas and likely will do more long-term harm than short-term good. As a community, we must do all we can to fight vigorously against unwise, short-range decisions that would destabilize the nation’s academic medical centers just when they are needed most. At the same time, our national fiscal reality requires us to do all we can to bend the cost curve in medical education, research, and patient care, and to reinvest those savings back into our missions rather than depending on increasing levels of government support.

As educators, we all should agree that our revenue challenges cannot be met by further tuition increases. New AAMC data show that medical students have been pushed to unprecedented limits. In 2012, median student debt rose to an all-time high of $170,000. Rather than increasing tuition, we must find ways to reduce the cost of undergraduate and graduate medical education. How much could be saved through better use of technology, such as online courses? If we could decrease the cost of residency training, the savings we achieve could be used to train even more residents to become the practicing physicians our nation so urgently needs.

A promising trend that makes the research process more efficient is the way in which research hubs are sharing resources across their campus departments and across the nation. An excellent example can be seen in Ohio where the three Clinical and Translational Science Award institutions—Case Western Reserve University, University of Cincinnati, and The Ohio State University—have established a statewide agreement allowing a single organization’s Institutional Review Board to approve and monitor multicenter studies for all sites. Ultimately, this collaboration will increase efficiency by eliminating redundancy and reducing the regulatory burden on researchers, while still protecting human research participants.

Finally, in clinical care, we know all too well the failures of the fee-for-service reimbursement system. While it is too early to draw conclusions, many believe that the alternate payment models being tested by accountable care organizations and others have the promise of making care better for patients and more cost effective.

As our nation heads to the polls next month, I encourage you to keep these issues “top of mind.” The individuals we elect on Nov. 6 will determine whether and how the sequester goes into effect, and will make important decisions affecting our missions and the patients we care for every day. With or without sequestration, however, we all must prepare for a future in which we do more with less. I believe that our best option, as the people who know our mission and our institutions better than anyone, is to lead this transformation from within. I know of no more intelligent, committed, and creative group of people than the faculty, students, residents, and institutional leaders I am privileged to meet whenever I visit your institutions. And I know of no group better suited to meeting the challenges we face.

Darrell G. Kirch, M.D.
AAMC President and CEO