• Share
  • Read Later
Dr. Warwick Peacock was on Christiaan Barnard's original heart-transplant team in South Africa, but he eventually found heart transplants too routine to present sufficient challenge. In 1986 he came to ucla Medical Center to pioneer new techniques in brain surgery. Last May he faced an unusual challenge: a six-year-old girl suffering epileptic seizures so severe and unremitting that they could be relieved only by removal of part of her brain. First her brain was mapped by a positron-emission tomography scanner, a machine invented at ucla; then those readings were matched against others provided by a more conventional mri scan.

The girl was wheeled into an operating room at 7:30 on a Thursday morning. Dr. Peacock's team exposed the surface of her brain and applied electrodes to stimulate it and provide yet another map to the diseased areas. Surgeons played the pet scan, the mri and the new data over and over on video monitors; the readings on all three had to match before the cutting away of malfunctioning parts of the child's brain could begin. The incisions were delicate, the atmosphere tense and progress slow. Surgeons relieved one another, while gowned students observed intently and residents stood by to watch and assist as needed; in all, perhaps 20 people drifted through the room. After 812 hours Peacock's team, exhausted but exhilarated, agreed that they were done. The girl recovered quickly and suffered no further seizures.

This is the sort of high-tech wizardry that has earned ucla and other teaching hospitals a crucial role in the U.S. medical system. They are the places where patients find specialized care that is unavailable elsewhere, young doctors learn their art and researchers develop the equipment and techniques that will save lives tomorrow. But all this comes at a fearfully high price-so high that many buyers in today's medical marketplace cannot or will not pay it. As a result, for all their supermodern machinery and fine medical pedigrees, the teaching hospitals are increasingly looking like institutional dinosaurs, exquisitely adapted to yesterday's hang-the-cost medicine practiced primarily by specialists but in need of, well, surgery to survive in tomorrow's world of intensely price-conscious managed care conducted mostly by primary-care physicians. The question is whether the teaching hospitals can slim themselves down enough to survive in this newly stingy atmosphere without sacrificing the quality and innovation that have made them the crown jewels of American medicine -- and the answer is far from clear.

The latest threat comes from Congress, which is moving toward substantial reductions in the growth of Medicare spending and major cuts in the funding of the National Institutes of Health, two important sources of subsidy for teaching hospitals. But the greatest long-range problem is the relentless spread of health-maintenance organizations (HMOS) and managed-care networks. Teaching hospitals traditionally have charged heavy fees for fairly routine procedures to cover the high costs of training and research. Cost-conscious hmos and insurance networks frequently refuse to pay those prices. Since the teaching hospitals cannot survive by performing liver transplants and brain surgery alone but also need the high-volume work of delivering babies and taking out appendixes, they find themselves slashing fees to compete with community hospitals.

Managed care originated in Southern California, so UCLA has been especially hard hit. Some 40% of its patients are under some kind of plan. Not long ago, UCLA cardiologists routinely charged $400 for an appointment and electrocardiogram. Now they are lucky to get $160 from managed care. In response, UCLA has been forced to cut staff from 4,200 in 1990 to 3,200 today. It has instituted productivity standards for doctors and shortened hospital stays. Unlicensed "care partners" have been hired to take over some of the more routine duties of higher-paid registered nurses. And in a kind of if-you-can't-lick-'em-join-'em move, UCLA is purchasing Santa Monica Hospital in order to launch its own managed-care network. It is also cutting deals with local HMOS -- for example, to perform all transplant surgery for subscribers to the giant Kaiser Permanente plan in Southern California.

But what is clearly the most violent cultural wrench for UCLA is its decision to train fewer specialists and more medical generalists. Late last year, an audience of UCLA specialists listened in shocked silence as Alan Fogelman, chairman of the School of Medicine, outlined a vision of the future: "A tertiary cardiology specialist will be waiting for the phone to ring, but it won't." While it still emphasizes training medical scientists and, in fact, has a new program to attract top-notch students who will commit themselves to research but not practice, UCLA will no longer train students to practice medical "subspecialties," such as cardiology and nephrology. Says Fogelman: "We have told internship applicants during the past two years that UCLA was a great place to be trained as a generalist or a [research] scientist. But if the applicant wanted to practice subspecialty medicine, we stated clearly that ucla was not the place to go."

Other teaching hospitals are following similar strategies, with some variations. The Mayo Clinic in Rochester, Minnesota, saw the managed-care wave coming and hatched a particularly wide array of responses. For one thing, it standardized purchasing of such supplies as knee braces and rods for broken bones. It orders in bulk and demands discounts. Meanwhile, Mayo has a thriving side business in newsletters, books and cd-roms.

Mayo was quicker than many research institutions to build a medical network of its own. It has merged with two other Rochester hospitals, opened clinics in Jacksonville, Florida, and Scottsdale, Arizona, and joined nine other clinics and five hospitals with a total of nearly 1,450 physicians over a wide area of Minnesota and neighboring Wisconsin and Iowa. Like old-time circuit riders, Mayo physicians regularly visit these facilities to provide specialized care and pass on the latest medical developments; they have also begun to consult by computer. And Mayo One, the hospital's emergency medical helicopter, can rush patients from remote clinics to the mother ship.

The aim of such empire building is to maintain a flow of patients to the teaching hospital. His health-insurance company initially tried to talk Daniel Vonk, a teacher from Fernandina Beach, Florida, out of going to the Mayo branch in Jacksonville because its fees were so high. Vonk went anyway, on a referral from a sports-medicine specialist who had done an mri when he learned that an ache in Vonk's leg had persisted for more than a year. Mayo specialists diagnosed the problem as bone cancer and subjected Vonk to three operations; Vonk also spent six months in a partial body cast and a year on crutches. The bills were high, all right: even with his insurance benefits Vonk, now 33, wound up owing Mayo $15,000. He appealed under an "indigent patient" program and got that reduced to $5,000, but he will still be paying Mayo $100 a month for a long time. Nonetheless Vonk is so delighted to be walking around cancer-free that he has named a newborn son after his Mayo surgeon.

Nowhere has the transformation of the teaching hospital been more dramatic than in Boston. Last year, in the medical merger of the century, Massachusetts General Hospital hooked up with Brigham and Women's Hospital; they had been ranked No. 1 and No. 2 in federal research dollars received. A few months earlier, Daniel Tosteson, dean of the Harvard Medical School, with which both hospitals are affiliated, wrote that "no single institution has the resources required to respond effectively to managed care and other external pressures ... while at the same time maintaining excellence across the full range of services."

The merged institution is cutting costs by, among other things, consolidating operations: for example, Brigham sends all liver-transplant patients to Massachusetts General. The total number of beds has been reduced from 1,700 to 1,514, and Samuel Thier, president of Massachusetts General, hopes to get that number down to 1,000. A first-year saving of $47 million out of a total combined budget of $1.1 billion seems to confirm what critics of the old teaching-hospital model, such as Alan Sager, professor at Boston University's School of Public Health, have long maintained: these blue-chip institutions had fat "marbled throughout the system like a prime steak."

Certainly the next round of cuts will hit meat as well as fat. Thier has vowed to bring the ratio of specialists to primary-care physicians in the two hospitals, currently 8 or 9 to 1, down to 1 to 1, while also reducing the total staff. "We're all going to get killed," says a Harvard Medical School executive close to the situation. "Now the primary-care physicians have the specialists by the short hairs."

"The primary-care doctors have more power than they ever had," agrees Boston health-center administrator Rina Spence. Because they act as "gatekeepers" for all further treatment, "they're holding all the cards: the patients." So the other key strategy for Massachusetts teaching hospitals involves the neighborhood clinics and suburban practices, where primary-care physicians can be acquired in bulk. Partners Healthcare Systems, a newly formed holding company for the merged hospitals, has organized 402 doctors into a network covering eastern Massachusetts.

Ellen Zane, who heads Partners Community Healthcare, Inc., the network arm, aims to increase that number to 850 in about five years -- though she faces intense competition from two other networks that are also signing up doctors at a frenzied pace. At times the competition gets bizarre: the 20-physician Concord Hillside Medical Associates in a Boston suburb was bought out by the Lahey Hitchcock network earlier this month. But Emerson Hospital in Concord, where the Hillside group sends many of its patients, is simultaneously negotiating to join the rival Partners network. "The situation is filled with fault lines and tensions," says Geoffrey Cole, president of Emerson. Cole doesn't want "to start a nuclear war," observes Zane. "But he's going to have a nuclear war either way."

Meanwhile, substantial reductions in Medicare and NIH subsidies for teaching and research could wipe out much of the benefit from these economies so painfully achieved. "We look at cuts as unfunded mandates," says Mark Laret, deputy director of the Medical Center at ucla, which stands to lose some $16 million. "We are supposed to provide all the same services and do it with less. Medicare, to its credit, is the only payer that contributes anything to the cost of medical education, and that has got to change." UCLA has already talked with several local hmos about a premium tax to finance teaching functions. Others have suggested imposing such a surtax on all insurance premiums. Says Bruce Kelly, the director of government relations at Mayo: "We endorse a set-aside program to fund research and teaching." But a delegation of teaching-hospital administrators who visited Capitol Hill in mid-May, sensing the draconian political climate, made only an exceedingly modest plea: if Medicare funding is cut, say, 13%, O.K., cut us 13% too -- but no more.

Whatever happens, no one doubts the teaching hospitals will survive. Besides revenues that in some cases compare favorably with those of Fortune 500 corporations -- the Mayo Foundation in 1993 took in $1.6 billion -- many also have generous endowments. But will they purchase institutional survival by lowering the standards of excellence in care, training and research that have been their fundamental reason for existence? Some experts are deeply worried. "We're coming close to the edge of impacting quality," says Dr. Michael O'Sullivan, chairman of Mayo's regional-practice board. That may sound like the standard whine of anyone threatened with a cut in federal subsidy, but in this case, the consequences if he is right are dire enough to prompt some serious examination. It would be easy enough to turn the crown jewels of American medicine into paste, but who then would develop tomorrow's effective treatments for AIDS and Alzheimer's?