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The case for restructuring our school

(Editor’s note: The following is a draft document that describes reasons for restructuring the School of Medicine. It is currently being considered by the Faculty Executive Council.)

Profound market forces in the external world are changing the business of health care delivery. The pressure to reduce costs drives this revolution. Our School has many reasons for fundamental change:

We must have a balanced school budget. The majority of our revenue sources are under siege. More than 60 percent of our School revenue comes from patient care-the revenue segment that is under the most intense pressure. Our revenue sources will directly influence to a significant extent our functions and programs.

The major conflict between the academic core missions of the School (teaching and research) and the business of the School (clinical practice) could be tolerated previously because of the large margins from the clinical business as the basis for lump sum budgeting with subsidies for education and research. Now, accountability is and will be required by all partners who provide sources of revenue-be they hospital partners, research granting agencies or HMO payors, etc. In this new world, the fundamental conflict of missions will be more apparent.

The conflict requires a shift in management organization: toward programmatic budgeting (education, research, patient care).

Some of our partners, e.g. affiliated hospitals, face profound change. L.A. County, for example, will greatly increase its emphasis on primary care and comprehensive centers and clinics, which will have profound effects on the LAC+USC Medical Center and, therefore, on our revenue sources and programs. We will adjust and work with our traditional partners and their own restructuring. We will also identify new additional partners.

The commercially-competitive clinical business should be separate but related to the University. This high-volume, low-margin, risk-bearing clinical business must compete successfully in the private sector. The clinical business, however, must neither distort academic values nor threaten fundamental academic freedom.

Success is measured, in large part, on the basis of how our Medical School is valued in our community. In addition to this perceived value of our teaching and research, the community places increasing emphasis on the price it must pay for health care, all the while demanding higher quality. We must adopt a “customer-minded” attitude and meet the demands of the market place by offering high quality at popular prices as provided by an integrated health system. Health care has been and will remain predominantly a local matter for our School, faculty, and related clinical business.

We must maintain access to patients-by maintaining maximum flexibility as our strategy. We must preserve quality and excellence in all we do. We cannot try to be all things to all people. We will have strength in selected areas. Priorities will be the basis for making the tough choices. For scholarly activity, our competition is national-witness the peer review system. For health care, our competition is local. In both fields, excellence and quality must be our hallmarks.

All of these forces will lead to a change in the size and mix of the faculty, and, for some, a change in location with an emphasis on productivity as the basis of compensation.

Our students will graduate from a school that imparts knowledge and skills relevant to the new external reality. Our new curriculum will recognize the demands of the external world for primary care.

As noted above, we must secure our revenue sources and live within a balanced budget. Our restructured School will provide the vehicle for replacement revenue sources to fund our programs.

The case for restructuring our school

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