Facing staggering hospital deficits, Georgetown University recently sold its teaching hospital and faculty group practice to a local nonprofit health system. The University of Minnesota sold its hospital to a nonprofit Minneapolis system some years ago. The University of California-San Diego Medical Center, on the verge of bankruptcy in the mid 1990s, was rescued by an infusion of state funds. In the wake of a failed merger, the primary teaching hospitals of the University of California-San Francisco and Stanford University are each losing tens of millions of dollars annually. At a time of historic national prosperity and scientific progress, when the endowments of many universities are brimming over, the fiscal stresses of these university medical facilities seem a striking anomaly.
Obvious questions arise.
The extent of the financial difficulties plaguing academic health centers is surprisingly hard to pinpoint because of time lags in available data and anomalies of university accounting. Operating margins for the nation's teaching hospitals collectively averaged just above 2 percent in 1999, compared to nearly 6 percent in the mid 1990s. Incomplete, unaudited quarterly reports nevertheless suggest that after several years of decline, average teaching-hospital operating margins may have stabilized or even turned upward in 2000. Skeptics correctly point out that the majority of the nation's AHCs continue to be in the black, that a bad year or two does not constitute a crisis, and that AHCs have often cried wolf about their finances in the past. Yet it seems clear that never since the Great Depression have so many eminent university teaching facilities been in such distress simultaneously.