Academic health centers on the front lines: survival strategies in highly competitive markets

The authors describe approaches that five academic health centers (AHCs) have taken to reduce costs, enhance quality, or improve their market positions since the onset of price competition and managed care. The five AHCs, all on the West Coast, were selected for study because they (1) are located in markets that had been highly competitive for the longest time; (2) are committed to all the major missions of AHCs; and (3) own or substantially control their major clinical teaching facilities. The study findings reflect the status of the five AHCs during the fall of 1998. Although some findings may no longer be current (especially in light of ongoing implementation of the Balanced Budget Act of 1997), they still provide insights into the options and opportunities available to many AHCs in highly competitive markets. The authors report on the institutions' financial viability (positive), levels of government support (advantageous), and competition from other AHCs (modest). They outline the study AHCs' survival strategies in three broad areas: increasing revenues via exploiting market niches, reducing costs, and reorganizing to improve internal governance and decision making. They also report how marketplace competition and the strategies the AHCs used to confront it have affected the AHCs' missions. The authors summarize the outstanding lessons that all AHCs can learn from the experiences of the AHCs studied, although adding that AHCs in other parts of the country should use caution in looking to the West Coast AHCs for answers.