Organizational Design and Funds Flow

There has been more organizational and funds flow redesign occurring in academic health systems in the last five years than in the previous two decades combined. This is being driven by several significant changes in the national environment:

Stagnant Academic Funding: The research mission at an average AMC loses more than $0.25 on every dollar of expenditure, and over time expenses are expected to increase (e.g., researcher salary packages, new facilities) while revenue streams stagnate (e.g., NIH, state funding).

Multiple Missions: The academic and community missions rely on clinical service for funding –any changes in the clinical reimbursement environment inherently impact the other missions.

Payor Risk Transfer: Payors are increasingly pushing risk to providers, including care variability risk (e.g., bundles), patient heterogeneity risk (e.g., capitation) and collections risk (e.g., HDHPs). The adoption of risk increases the volatility of academic medical center margins.

Consolidation: The healthcare provider space is in a significant consolidation phase, and AMCs are at the front of the pack. As M&A accelerates, AMCs have toadapt their organizational structures and funds flow models to encompass a much more diverse health system. As activity shifts to the ambulatory arena, different organizational and funds flow models are needed that are not as inpatient-centric.

Emphasis on Value: AMCs are now being asked to demonstrate quality, service and cost metrics (and can’t just rely on reputation). While AMCs have historically been organized around departments, this model isn’t always the most aligned with patient care. If the clinical enterprise wants to change its organizational structure (e.g., service lines), the funds flow model must follow.

Whitecap draws on our extensive expertise in organizational structure, funds flow, and incentive alignment to help the nation’s leading academic health systems (adult and pediatric) navigate the complex organizational dynamics across the academic ecosystem.