When it comes to Medicare, at least, teaching hospitals are the squeaky wheel that always gets plenty of oil.
Figures on Medicare inpatient and overall profit margins released last month by the Medicare Payment Advisory Commission, which advises Congress, show teaching hospitals are faring better with Medicare than their nonteaching counterparts (See chart).
Solid Medicare margins are nothing new for teaching hospitals. MedPAC data since 1990 show teaching hospitals earning Medicare margins two to four times greater than nonteaching hospitals.
"We have known, MedPAC has known, the government has known that those margins on inpatient are high, while at the same time, the margins on all patients for teaching hospitals is very low," said Robert Dickler, the senior vice president of healthcare affairs at the Association of American Medical Colleges.
Teaching hospitals can only go so far in cutting their costs, Dickler said, and when Congress cut Medicare payments, "The teaching costs didn't go away. The costs of running a research center didn't go away. The costs of running specialized centers . . . didn't go away."
Despite their Medicare figures, teaching hospitals have been one of the loudest voices seeking additional dollars on Capitol Hill, and the AAMC and its 400 teaching hospital members have been heard.
Two years in a row they pushed for -- and won -- legislative delays in proposed reductions in Medicare payments to teaching hospitals to cover the indirect costs of medical education. Delaying the cuts, which were originally mandated by the Balanced Budget Act of 1997, is worth $400 million to teaching hospitals over the next five years (Dec. 18, 2000, p. 2).
The AAMC worked closely with other hospital groups to lobby for increased reimbursements and to delay implementation of Medicare's outpatient prospective payment system this summer.
Teaching hospitals also have gotten their message across in the consumer press with stories in metropolitan newspapers that chronicled the financial woes of academic medical centers.
But even the AAMC's own 74-page report on the finances of academic medical centers showed that teaching hospitals have been able to trim costs in response to payer cuts and competition (Nov. 6, 2000, p. 24).
And Standard and Poor's, the New York-based credit-rating agency, reported recently that teaching hospitals have a "fundamental strength" to help them overcome the pressures.
Academic medical centers typically have a highly favorable, potent reputation in their regional markets, said Terry Goode, a Standard and Poor's credit analyst and a co-author of the report, "An Overview of Academic Medical Centers." Teaching hospitals usually build their good standing by being a market's sole provider of specialized treatments, and it translates into political clout, Goode said.
Teaching hospitals have leveraged their strong reputation for clinical and research excellence not only to get government money, but also gifts from private donors, according to the report.
Though most teaching hospitals have kept at least A credit ratings from Standard and Poor's, the analysts noted that the financial strengths of teaching hospitals are also factors they can't control.
Richard Knapp, the AAMC's executive vice president and lobbyist, acknowledged that the Medicare figures make it harder to sell Congress on the needs of teaching hospitals.
Teaching hospitals have lost some of their most powerful allies, particularly in the U.S. Senate, Knapp said.
Sens. Daniel Patrick Moynihan (D-N.Y.) and Connie Mack (R-Fla.) retired with the end of the outgoing legislature, but teaching hospitals will have no shortage of clout in the 107th Congress that convenes this week.
Sen. Edward Kennedy (D-Mass.) returns to the Senate, and Sen.-elect Hillary Rodham Clinton (D-N.Y.) figures to make up for the loss of Moynihan's seniority with her high profile. Among Republicans, Knapp pointed to Sens. Mike DeWine of Ohio and William Frist of Tennessee as allies.
Some observers warn that teaching hospitals will have to compete on a more equal footing with rural providers for the attention of the Senate Finance Committee's likely chairman, Sen. Charles Grassley (R-Iowa), and the panel's top Democrat, Sen. Max Baucus of Montana.
Even with those hurdles, teaching hospitals always have an ace up their sleeve: their golden reputation.
"Most people realize that if they ever really get sick, that's where they want to be, so I think they realize the value of the institution," Knapp said.