Do Medical Schools Want Value-Based Care?? The 'Dean's Tax' May Prohibit.

This video provides an in-depth exploration of the intricate financial structures within America's academic medical centers (AMCs) and medical schools, specifically analyzing how these established revenue flows create significant resistance to the adoption of Value-Based Care (VBC). Dr. Eric Bricker, the speaker, meticulously breaks down the diverse funding sources for medical schools, including endowments, grants, university contributions, government funding, student tuition, and crucially, revenue from their affiliated academic health systems and faculty physician groups. He highlights that the latter two are most profoundly impacted by a shift to VBC, setting the stage for understanding the financial disincentives at play.

The core of the video's argument revolves around the "Dean's Tax," a controversial practice where faculty physician groups pay a portion of their clinical revenue (typically around 10% from Medicare, Medicaid, and commercial insurance billing) directly to the medical school dean. This tax, coupled with declining physician reimbursement rates (especially from Medicare and commercial payers tied to Medicare), creates a financial squeeze on physician groups. Simultaneously, academic health systems have historically been able to negotiate higher facility fees from commercial insurers, making them a more financially stable contributor to the medical school. Dr. Bricker explains that under the current fee-for-service model, medical schools rely heavily on this "Dean's Tax" and hospital system contributions, often even subsidizing faculty physicians who don't generate enough billing revenue to cover their costs.

The progression of ideas then shifts to how Value-Based Care fundamentally disrupts this financial equilibrium. VBC, by definition, aims to reduce costly hospitalizations and incentivize outpatient, home health, and preventive care. This means less revenue for hospitals from facility fees and significantly less billing for specialists within physician groups (e.g., fewer surgeries, less orthopedic or cardiac care). Consequently, the "Dean's Tax" revenue stream for medical schools would diminish, creating a strong financial disincentive for medical schools and their faculty to embrace VBC. Dr. Bricker emphasizes that for VBC to succeed in an academic setting, a radical restructuring of financial relationships is necessary, including increased subsidies from the health system to both the medical school and the physician group, and a shift away from fee-for-service physician compensation models. He cites the American Association of Medical Colleges (AAMC) white paper and the successful example of Ashner Medical Center in New Orleans, which transitioned specialists to salaries and increased subsidies, demonstrating that such changes are feasible but require significant "political will."

Key Takeaways:

• Complex Financial Web of AMCs: Medical schools derive revenue from a multitude of sources including endowments, grants, university funds, government, tuition, and critically, their affiliated academic health systems and faculty physician groups. Understanding these interconnected flows is essential to grasping their operational challenges.
• The "Dean's Tax" as a Disincentive: Faculty physician groups pay a "tax" (typically 10%) from their clinical billing revenue to the medical school. This revenue stream is a significant component of medical school funding, and its potential reduction under VBC creates a strong financial barrier to adoption.
• Divergent Revenue Trends: While academic health systems have historically secured increasing facility fee reimbursements from commercial insurers, physician professional fee reimbursement (especially from Medicare and related commercial plans) has been declining, creating a financial strain on physician groups.
• VBC Disrupts Traditional Revenue: Value-Based Care models inherently aim to reduce high-cost inpatient care, leading to decreased hospital facility fees and lower specialist billing (e.g., fewer surgeries, procedures). This directly impacts the revenue streams that currently support medical schools and physician groups.
• Financial Squeeze on Physicians: Many academic physicians do not generate enough billing revenue to cover their costs, requiring subsidies from the hospital system. A shift to VBC would further reduce their fee-for-service revenue, exacerbating this financial challenge.
• Necessity for Compensation Model Reform: For VBC to be adopted, medical schools and academic health systems must fundamentally change physician compensation models, moving away from the "RVU treadmill" (relative value unit-based billing) towards salaried models or other risk-based arrangements.
• Increased Subsidies from Health Systems: To compensate for lost "Dean's Tax" revenue and decreased physician billing under VBC, the academic health system (especially if it includes a successful health plan) must increase financial subsidies to both the medical school and the physician groups.
• AAMC's Call for Change: The American Association of Medical Colleges (AAMC) recognizes these financial challenges and has published white papers advocating for new "next-generation funds flow models" to facilitate VBC adoption in academic settings.
• Ashner Medical Center as a Model: Ashner Medical Center in New Orleans successfully transitioned its specialists to salaries, increased subsidies from the health system, and even paid physicians more for doing less fee-for-service work, demonstrating a viable path for VBC implementation in AMCs.
• Political Will is Paramount: The ultimate determinant of VBC adoption in medical schools is not just financial logic but the "political will" within these complex institutions to restructure long-standing financial relationships and overcome internal resistance.
• Shift in Care Settings: VBC incentivizes a shift towards more outpatient care, ambulatory surgery centers (ASCs), and home health services, moving care delivery away from traditional inpatient hospital settings.
• Health Plan Profitability under VBC: Academic health systems that operate their own health plans can become more profitable under successful VBC models, as they retain the difference between capitated payments and reduced care costs, providing a potential source for increased subsidies.

Tools/Resources Mentioned:

• AAMC White Paper: The American Association of Medical Colleges (AAMC) has published a "fantastic white paper" on "next-generation funds flow models" for academic medical centers.
• ECGMC.com Blog: A blog post titled "Is it time to abolish the Dean's Tax?" from ecgmc.com/insights/blog/1896/is-it-time-to-abolish-the-deans-tax.
• Denver Post Article: A 2006 article from the Denver Post titled "Med school in fiscal pinch" (denverpost.com/2006/06/24/med-school-in-fiscal-pinch/).

Key Concepts:

• Value-Based Care (VBC): A healthcare delivery model where providers are paid based on patient health outcomes, rather than the volume of services provided (fee-for-service). It often involves taking on financial risk for patient populations.
• Dean's Tax: A portion of the clinical revenue generated by faculty physician groups that is paid directly to the medical school dean, typically around 10% of their billing.
• Capitation: A payment arrangement for healthcare service providers where a fixed payment is made per patient over a set period, regardless of how many services the patient uses. This is a core mechanism of VBC.
• Academic Health System: A complex organizational structure typically comprising a medical school, one or more teaching hospitals, and associated clinics and research facilities.
• Faculty Physician Group: The collective body of physicians who are faculty members of a medical school and provide clinical services, generating professional fee revenue.
• RVU Treadmill: A colloquial term referring to the pressure on physicians to increase the volume of services (measured in Relative Value Units) to maintain or increase their income under fee-for-service compensation models.

Examples/Case Studies:

• University of Pittsburgh Medical Center (UPMC): Mentioned as an example of an academic health system that operates a large health plan, offering Medicare Advantage and employer-sponsored health insurance. This highlights the potential for AMCs to integrate health plans into their VBC strategy.
• Ashner Medical Center (New Orleans): Presented as a successful case study where an academic medical center implemented VBC by shifting specialists to salaried compensation, increasing subsidies from the hospital system, and even paying physicians more for delivering less fee-for-service care, leveraging savings from reduced hospitalizations.