Restructuring medical schools to better manage their three missions in the face of financial scarcity

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Abstract

The leaders of schools of medicine face a major financial and management challenge as they approach the end of the twentieth century. The new environment for the practice of medicine is diminishing the clinical income that schools have used for so long to supplement their operations. Deans and their staffs must discover new ways to manage their schools and their schools' finances. In particular, schools that continue to rely on subsidies from their health care operations will very likely face the prospect of having to defend themselves as pressures for more cost-effective operations increase and clinical and other subsidies dwindle. In sum, for deans to remain captains of their own ships, preserve their schools' three missions, and balance their books, it is essential that they lead their schools in change toward better administrative, information, and financial management systems. Stritch School of Medicine at Loyola University of Chicago is reinventing itself in response to this challenge. The organizational and management models being used there have been partially guided by the two approaches to redesigning schools of medicine described in detail in this article, the service line management matrix (SLMM) and the fractal management (FM) method. In turn, the experience of implementing the education and research service lines at Loyola has permitted a refinement of the approaches, reflected in the descriptions in this article. These approaches constitute a new model that provides for the development of three administrative service lines-teaching, research, and clinical service (not implemented at Loyola). Each service line has its own leaders and managers, who are responsible for balancing income against expenses. Each service line is a profit-and-loss center, an approach that highlights how effectively the service line is being managed and leads to greater accountability and productivity of faculty and staff. This new approach makes it possible for the school to answer the question, “Can research and teaching pay for themselves?” If they cannot, any subsidies that are needed from clinical income are identified as such. This businesslike approach supplants the traditional one of commingling all income streams to pay for operations, a strategy that worked well enough when research and clinical income constantly increased but now places medical schools in harm's way.

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