Are Universities Becoming Appendages Of Their Medical Systems?

 U-of-M-FY-2023-Consolidated-Revenues.jpg

Barak Richman, the Bartlett Professor of Law and Business Administration at Duke University posted a thought provoking opinion on Politico yesterday. Using the University of North Carolina as an example, he notes that:

https://www.politico.com/news/magazine/2023/12/31/universities-no-longer-fight-for-academic-freedom-blame-the-hospitals-00133272

One answer — albeit a distressing one — is that UNC, like many large universities, is really a hospital system with a university appendage. UNC Health has a budget that is about $2.2 billion more than the entirety of UNC’s flagship campus in Chapel Hill ($3.5 billion vs $5.5 billion). This is also true for North Carolina’s private universities that operate health systems, like Duke University, whose health system has a budget $1.1 billion larger than the remainder of the university ($4.5 billion vs $3.4 billion). Moreover, both health systems are growing faster than the rest of both campuses.

These facts are important because the financial health of hospitals is highly dependent on political decisions. For example, the North Carolina General Assembly’s legislative session this year included debates over Medicaid expansion, which would infuse enormous sums of additional dollars into the state’s health sector, and “ certificate of need” rules that would govern whether current hospitals could prevent competition from new entrants. The legislature — like all other state legislatures — also routinely makes decisions on insurance eligibility, the array of services that medical professionals may offer (so called scope-of-practice rules) and the tax-exempt status of many health care facilities.

So, perhaps it is not surprising that UNC leaders prioritized legislation that enhanced the financial security of its hospital system rather than measures that would protect its Chapel Hill faculty. And perhaps it is not surprising the University of Pennsylvania, MIT and Harvard — each of which rely heavily on government, foundation and industry funding (UPenn’s health system has a budget that is more than twice the university’s) — might seek presidents who exhibit the cautious effectiveness of corporate leaders, who can assure cooperation with policymakers and compromise with ideologues, rather than visionaries who inspire resoluteness and can mount an aggressive defense against Rep Elise Stefanik (R-N.Y.).

Professor Richman's main concern is a corrosive effect on academic freedom, but a larger view would note that the managements of universities with substantial health systems will focus on their health care subsidiaries to the detriment of their educational subsidiaries.

Looking at Michigan's largest university health system, we see the same effect:

And the supremacy of U of M's health care operations is growing rapidly every year:

https://2023.annualreport.umich.edu/leadership-messages/chief-financial-officers-report/

https://2022.annualreport.umich.edu/leadership-messages/chief-financial-officers-report/

The government of Michigan will have to soon decide whether the Board of Regents form of management dictated by Michigan's 1963 Constitution is still well suited to operating this institution.