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The Structure of Academic Health Systems and the Origins

of IU Health Prepared for: American Dental Education Association

54th Annual Deans Conference

Daniel F. Evans, Jr.President and Chief Executive Officer

November 11, 2012

Structure and Organization of Academic Health Systems• Academic health systems – a combination of a medical school

and an owned or affiliated health care system (can also include other health professional schools)

• Two primary organizational models1. Fully integrated model – education, research, and clinical functions

report thru university leadership and university board of trustees2. Split model – education and research functions report thru

university but clinical functions ( the health system) report thru an affiliated but separate and independent leadership structure and board

• University of Michigan is an example of first model. CEO of UM health system is also the EVP for Medical Affairs at the University

• IU Health is an example of the second model. The Dean of the Medical School and the health system CEO are two different people and report to separate Boards

Academic Health System: Benefits of Alignment

IU Health – Governance Structure

IU Health is sole “corporatemember” of affiliatedhospitals and appoints majority of their boards

Indiana University Health

Indiana not-for-profit 501 (c)(3)

Indiana University HealthBoard of Directors

Methodist Health Group, IncBoard of Trustees(Methodist Class)

Indiana UniversityBoard of Trustees(University Class)

IU HealthPhysicians (IUHP)

IU HealthHospitals(18 state-wide)

IUHP BoardOf Directors(Includes 2reps from IUSchool of Medicine)

History of IU Health• In 1997, Methodist Hospital of Indianapolis merged with two

hospitals owned by Indiana University – IU Hospital and Riley Hospital for Children – to form Clarian Health

• The merger was a response to existing and anticipated changes in the health policy environment:– reductions in state funding for IUSM– impact of managed care– need for larger referral base for IU Hospital– desire to increase market leverage and achieve efficiencies by

combining resources– important for IUSM to expand surplus from clinical services to

support education and research missions• A similar rationale has been used for other mergers and

alliances between health systems and medical schools that occurred at this time and since

History of IU Health (cont)• Clarian changed its name to IU Health in 2011 to better

reflect the close relationship between the health system and the School of Medicine

• Indiana University Health has grown substantially since the formation of Clarian Health in 1997 – it is now largest health care system in Indiana and a top 10 academic health system in the U.S.– 18 hospitals state-wide– $5B in annual revenues– More than 1,000 employed physicians– IUH Methodist is largest tertiary/quaternary hospital in IN. More than

30% of patients uninsured or on Medicaid– IUH Riley Hospital for Children is state’s only comprehensive

children’s hospital

Challenges Facing Academic Health Systems• Health Care Reform (the Affordable Care Act)• Pricing Pressures Across Payer Classes

– Medicare and Medicaid affected by federal and state budget challenges

– Employers struggling to afford premiums and passing more costs onto employees. Impact of new health insurance exchanges in 2014?

– Payers showing greater willingness to exclude expensive providers, even of high quality (narrow networks”)

• Shifting Payer Mix as Baby Boomers Retire and get Medicare• Mantra among health system executives: “manage to

Medicare margins” = 20-25% reduction in cost structures• Big challenge for academic systems given education and

research commitments and costs

The Transition to Accountable Care

• The term “accountable care” refers to health care delivery and payment models in which providers assume some level of financial risk for the clinical and financial outcomes of the care they provide to a defined population of patients.

Key Concepts of Accountable Care• Keep patient well vs. treat patient when sick• Emphasis on primary and preventive care

– Importance of oral health and hygiene• Care management and coordination critical• Use of evidence-based practice to reduce unnecessary

clinical variation and improve quality of outcomes• Manage utilization to control total cost of care per

person• Providers rewarded for quality and efficiency, not

volume of care provided• Expanded information technology; robust decision

support tools