TennCare and academic medical centers: the lessons from Tennessee

To ascertain the potential impact of public-sector-driven health system reform (Medicaid and Medicare programs) on academic medical centers (AMCs).

A qualitative, case-study investigation of how 2 of Tennessee's 4 AMCs were affected by the TennCare program, which enrolled all of the state's Medicaid recipients and a sizable portion of its uninsured in managed care organizations (MCOs) in January 1994.

We reviewed pertinent documents related to the AMCs, response to TennCare; interviewed AMC executives and staff, state officials, and representatives of MCOs serving TennCare beneficiaries; and conducted site visits at both AMCs.

Changes in clinical revenues, clinical volume, patient selection, support for the AMCs, teaching and research missions, and the AMCs' response to these changes.

Both AMCs studied experienced large revenue shortfalls, the closure of some specialty services, adverse patient selection, and loss of the patient volume needed to do clinical research, and had to reduce the number of training program positions. Longer-term consequences of TennCare for AMCs may include the integration of community-based services into academic missions, the acceleration of clinical diversification, and the attainment of experience in managed care, anticipating the evolution of the private-sector market.

The consequences of public-sector health system reform for AMCs are similar to, and equally as challenging as, the effects of private-sector changes in health care delivery. Important differences include the rapidity with which public-sector reforms can transform the AMC market, the vulnerability of special payments to AMCs, such as graduate medical education funding, and the accountability of managers of public-sector initiatives to the political process. It remains to be seen whether public-sector reforms will afford some competitive advantage to AMCs over the long term.