The University Record, December 19, 1994

Medical Center moves to strengthen teaching, service mission

By Michael Harrison
Medical Center Public Relations

The formation of a nonprofit health care subsidiary corporation that will serve as the cornerstone of the Medical Center’s efforts to develop a statewide integrated managed care system was approved by the Board of Regents at its December meeting.

The Board of Regents will be the sole member of the Michigan Health Corp., a nonprofit, tax-exempt organization. The corporation will serve as a vehicle for owning an equity interest in managed care plans and initiating joint venture activities with other health care delivery systems. Such actions must first be approved by the Board of Regents, which also will appoint the board of directors and approve the annual operating and capital budgets of the subsidiary. The U-M Hospitals will provide initial capitalization of $75 million.

“The corporation will help the Medical Center position itself for current and future health care needs of patients across the state and help it meet its academic missions of education and research,” said Farris W. Womack, executive vice president and chief financial officer, who will chair the new corporation’s board of directors.

“The Medical Center has developed a plan for a statewide network of affiliated physicians and hospitals to compete in the health care marketplace. Packaging that network with a coordinated managed care system that is responsible for the health care needs of a substantial population also will support medical education, health research and patient referrals for the Medical Center.”

Hospitals Executive Director John D. Forsyth said that “such a network will help the Medical Center continue to improve its ability to deliver medical care based on cost, quality and access.”

The board of directors of the Michigan Health Corp. will be made up of Womack, Medical School Dean Giles G. Bole and Forsyth.

Health care experts predict that the majority of the U.S. population will be enrolled or insured through some form of managed care by the end of the century. The U-M system will provide strong financial incentives to divert patients from tertiary care centers, will require fewer specialists and more primary care physicians, and demand greater use of community-based outpatient facilities.

“The prevalence of managed care requires academic medical centers to adapt both academically and clinically to survive,” Bole said. “Failure to adapt to managed care as it envelops the health services marketplace could severely compromise the long-term viability of tertiary care medical centers and teaching institutions, like the U-M.”

Womack noted that “the emergence of managed care and market reform, fueled and led by purchaser initiatives in both the private and public sectors, will, if not dealt with, have a significant negative impact on the University’s Medical Center.”

The inpatient setting of U-M Hospitals no longer will afford students adequate exposure to less complex medical problems, which are for the most part managed on an outpatient basis.

Shorter lengths of hospital stay will reduce opportunities for residents to learn about the progression of disease and treatment modalities.

Increased severity of illness of hospitalized patients will afford fewer opportunities for students to provide preventive, rehabilitative, chronic and terminal care.

“The University,” Womack continued, “is embarking upon a number of initiatives to deal with health reform and the changing health care market in Michigan. Many of the initiatives, involving cost efficiencies, primary care development, quality and outcome performance measurement and medical education, are under way.

“Our goal is to develop a statewide integrated financing and delivery system with the U-M Medical Center as the tertiary referral, thereby using the statewide network to support and enhance the undergraduate, graduate and post-graduate education programs of the University in the future.”