Baylor Alliance: Innovative Transformation in Action

By Joanne Conroy, MD

brainstormsHealth care reform is challenging academic medicine to reinvent itself as we seek to sustain our missions of clinical care, education, and research. Although the external world may think we are excruciatingly slow to change, pressing conditions—market consolidation, fiscal pressures facing the acute care enterprise, and payers’ new focus on higher quality and lower cost—are driving the creation of a new operating model for academic medicine. Every aspect of how we do business will change: how care is delivered, how students and residents are educated and integrated into clinical care, how the research enterprise is organized and funded, and how the missions come together in a new and meaningful way.

For the past year, the AAMC Advisory Panel on Health Care has worked to develop guidelines and leadership principles to help AMCs create sustainable models for the future.
The panel’s findings are soon to be released in a formal report, which identifies eight themes common among the vanguard of academic medical centers.

The recent joint venture arrangement between Baylor College of Medicine, CHI Saint Luke’s, and the Texas Heart Institute is an excellent, of-the-moment example of this cutting-edge reinvention. I recently spoke with Baylor President and CEO, Paul Klotman, MD, about his vision for the future of his institution and how he is working to redefine academic medicine.

When Klotman, a recognized leader in academic medicine, assumed his role at Baylor in 2010, he inherited a revered Texas institution with a tumultuous recent past and an uncertain future. In 2008, Baylor College of Medicine finalized a split from Methodist Hospital as clinical partner and struggled to build its own hospital. This effort drained the college of resources and jeopardized its ability to continue the work that had made it great: producing world-class faculty, trainees, and research.

Klotman was intrigued rather than intimidated by the history. He had witnessed firsthand the transformation of the New York City health care market a decade ago, as regional economics changed practice dynamics almost overnight. Old disputes and feuds were dispatched quickly and new alliances were formed in the spirit of shaping a new future. Klotman saw similar potential in the Houston market, which could only be described as fractious and fragmented. “The system had managed to maintain its equilibrium even in the face of dysfunction,” he says.

Less than two years later, his instincts have been validated. Three of Houston’s leading medical institutions—Baylor College of Medicine, CHI St. Luke’s Health, and the Texas Heart Institute—have committed to combine, expand, and strengthen their educational, clinical, and research efforts in conjunction with Catholic Health Initiatives. CHI St. Luke’s and Baylor signed a joint-venture agreement to open and operate a new, acute care, open-staff hospital on Baylor’s McNair Campus in the Texas Medical Center. The new hospital, which is part of CHI St. Luke’s Health, will be named Baylor St. Luke’s Medical Center, McNair Campus and eventually will replace the existing, 850-bed St. Luke’s Medical Center now named Baylor St. Luke’s Medical Center, TMC Campus.

Although most medical schools receive support through academic affiliation agreements or joint operating agreements with their hospital affiliates, this joint venture is completely different, according to Klotman. “Baylor is a part owner with joint governance, sharing both the rewards and the risks,” he says. “We also agreed to combine all assets within the 610 Loop in Houston and to work collaboratively on regional strategies. We are committed to creating funds flow models that make sense.”

Klotman sought to take a systems approach, seeking a broad regional presence and clinical services aligned across the continuum of care. “For the past two years, we have been working with Cain Brothers to find the right partner to begin developing a true system of care. CHI was just the right fit for the institution and the market. CHI purchased St Luke’s in 2012 and was ready to redefine relationships,” he says. Strong, aligned governance systems committed to transparency and accountability are one of the key characteristics common to the forward-thinking AMCs in the Panel study.

Another characteristic that seems to position AMCs for the future is a willingness to evolve in structure, partnership, engagement, and industry relationships. Baylor’s history is an example of this evolution in action. Baylor was formed in 1900 in Dallas (as the University of Dallas Medical Department), by a small group of Baylor Alumni physicians who aimed to improve medical practice in North Texas. They formed an alliance in 1903 with Baylor University and the name changed to Baylor University College of Medicine. They were invited to join the Texas Medical Center in Houston in 1943. In 1969, the College separated from Baylor University and became an independent institution, which allowed it access to federal research funding. Now, through the new alliance, BCM stands poised to transform care delivery in the region.

That kind of transformation requires new roles and practice models for leaders and faculty. The new Baylor/CHI St. Luke’s entity will serve both employed faculty and community providers. “There are current discussions about the needs of these providers and what is required to engage and aggregate physician practices across the community to improve efficiencies, decrease operating costs, and improve quality and access to care,” Klotman says.

Academic medical centers also are working to be more transparent about quality outcomes and financial performance. “There is a C-suite commitment to transparency of financial performance data, which is shared with the school and the affiliated faculty practice,” says Klotman. “Quality data is also shared at a department level and within department at a provider level. But the only way to manage data is to present a system that people believe in.”

Klotman also plans an aggressive expansion into population health, and anticipates partnering with community providers both to learn and to deliver new models of care. He cites as an example Kelsey-Seybold, a private multispecialty group practice in the Houston area. The practice is risk-bearing entity that is one of the early ACO success stories, delivering 15 to 20 percent in comparative cost savings, high performance on quality measures, and high enrollee satisfaction. “Partnerships like these help the greater enterprise begin to effectively manage risk for a larger population,” says Klotman.

Tectonic forces are causing upheaval in health care, and academic health centers must evolve rapidly or risk becoming high-priced, anachronistic institutions in a landscape of highly organized health systems. We have thrived for years despite the dire predictions of the late 1990s, when “managed competition” was first discussed as a solution to the flaws in the health care system.

The future will be different, however. In this dynamic and demanding health care environment, some AMCs will thrive. They will transform themselves, reduce their costs, and implement new operating models that can be sustained despite sharply reduced clinical reimbursement. They will find new ways to support the vitality and integration of the clinical, educational, and research missions. They will be academic health systems that are focused on improving health as well as delivering health care. The prototypes of these next-generation systems are emerging today, as evidenced by Baylor and CHI St. Luke’s.

Far-sighted leaders know that they must prepare for a radically different future and brave these challenges today.

Joanne headshot_2014—Joanne Conroy, MD, is chief health care officer for the Association of American Medical Colleges. Her Brainstorms column appears monthly on Wing of Zock. She can be reached at Follow her on Twitter @joanneconroymd.