AMCs must forge a new identity in the New Health Economy

The nation’s academic medical centers (AMCs) are the nexus of research, education and clinical care in the $3.6 trillion US health industry. And yet they are facing intensifying pressures at a time of profound change in their industry. Over the next ten years, AMCs need to make some dramatic changes to solidify their crucial position in the industry and continue to thrive.

According to new research from PwC’s Health Research Institute, AMC executives agree that the competitive advantages and distinction they’ve had for a long time are at risk. They may not have the same opportunity to achieve value around training and research as they do today if they don’t act. It has become harder and harder for AMCs to fund their research and teaching missions against eroding clinical profitability.

Meanwhile, the tripartite mission appears to be expanding (see Figure 1). Many AMCs are expanding their clinical missions to address wellness and social determinants of health, such as access to affordable housing or transportation, food and employment. They are broadening their research missions to include population health and personalized medicine. They are stretching their educational missions to train their own workforces in emerging technologies and digital skills while emphasizing interprofessionalism.

Figure 1: The tripartite mission of America’s academic medical centers is broadening

With declining clinical margins and an expanding tripartite mission, they can’t afford to do it all. AMCs of the future will need to invest in business models that have the best financial returns that help build on their unique strengths to create new differentiators.

HRI’s previous research found that provider systems of the future will evolve into four distinct models.

• The Product Leader: Delivering the most advanced care and best outcomes
• The Experience Leader: Achieving the greatest customer satisfaction
• The Integrator: Emphasizing value by having the greatest scale and scope
• The Health Manager: Improving the health of entire populations over time

Most executives HRI interviewed said their AMC would be some version of a Product Leader in the future. These executives also agreed that being a Product Leader alone is inadequate. The inherent complexities of AMCs as well as their role as quaternary referral centers mean AMCs will likely need to become hybrids of two or more future provider system models to continue to fulfill the tripartite mission and be competitive.

If AMCs instead choose the status quo, their margins are at risk of remaining small or eroding, meaning they may not have the same opportunity to achieve value around training and research as they do today.

Regardless of the models they choose, all AMCs should will need to:

• Listen to the market to make sure their portfolio of assets and their workforces match the community’s needs and achieves the right mix of settings;
• Have a value line strategy to address consumers’ desire for lower-cost care;
• Prove their value by telling a better story about the added value they provide through training future physicians, caring for the most complex cases and investing in developing the next generation of medical technologies and treatments;
• Align missions to differentiate in the market and effectively navigate a time of disruptive change in the industry;
• Establish new nonclinical revenue streams to help fund the tripartite mission; and
• Make digital and data the common strategic thread by harnessing the power of their data and using digital technologies.

Learn more about HRI’s research and read the full report: America’s future academic medical centers: Forging new identities in the New Health Economy