Can We Pay for Our Medical Schools?

The single most important national resource in the health field in the United States today is concentrated in our schools of medicine and their allied university departments. Here men and women learn to heal, to investigate. Upon them, all else depends. But what of the schools themselves? Faced with rising costs, imbalanced budgets, increasing deficits, extraordinarily complex community relationships, it is small wonder that university administrators and trustees all over the land have asked themselves — and each other whether universities can afford their schools of medicine.

Our resources of mind and man power are not unlimited. There are just so many physicians, biologists, biochemists, pathologists, virologists, psychiatrists, teachers, research workers, in the country. There are not as many as one might think. Indeed there are not nearly enough, and there may be fewer schools in which to train them tomorrow than there are today. Some have closed, others totter, most are struggling. It would be well for some of the government agencies, voluntary organizations, professional societies, foundations, pharmaceutical and insurance companies, and private citizens to examine their present programs in the light of this hard truth.

Medical education is a tripod supported by three legs: education, research, and clinical service. These must be kept roughly balanced if the structure is not to topple. The leg of financial support for clinical service in hospitals has grown shorter and shorter of late. The research leg has grown to an unprecedented length and girth. The educational leg is slowly wearing away. There simply is not money enough. At a time when they should have the energy of a sorcerer’s apprentice, our medical schools are very sick indeed.

The seventy-odd schools of medicine in the United States will have incurred deficits approximating $10,000,000 this fiscal year. Such financial distress would be alarming at any time. Today, when we are making more demands upon the schools than ever before, the situation is doubly critical.

The cumulative effect of mounting deficits year after year is damaging in the extreme to the fortyone privately supported medical schools. Some schools have drawn increasing amounts from endowment capital and can no longer do so. Many others have been supported by general university funds assigned to the schools of medicine at the expense of other units of the university — gravely complicating the total university picture. Some universities have been able to meet large overdrafts for professional education temporarily because of increased funds from tuition where enrollments have been swollen through veterans’ programs.

Costs have risen on every side. Endowment income has shrunk. Additions to endowment capital for educational purposes have been few, partly as a result of the national philosophy of taxation, and partly because it is now the fashion to give money for research rather than for education.

Only two cost factors have proved controllable—faculty salaries and plant rehabilitation. Thus, at a time when salaries should have been markedly increased, they have been “maintained” or advanced slightly. Only emergency repairs have been made to physical plants although technological advance calls for sensible replacement of equipment.

These minor economics have been in no way sufficient to offset rising operating costs for heat, light, and power, which have doubled in the last ten years. Salaries of technicians, secretaries, and maintenance personnel have had some adjustment upward because of competitive markets. The net result has been to depress the universities’ most valuable and vulnerable asset — scientific manpower. This at a time when the faculties’ responsibilities have grown manyfold and when competition for their services has increased tremendously, as we shall see.

Why variations in coats

The individual costs per student vary widely from school to school. While for the nation as a whole the average cost is some $2500 a year with an average tuition of $500, some costs run as high as $5000 or more a year, exclusive of subsidies to teaching hospitals and research grants.

When schools put the key members of the faculty for the clinical (third and fourth) years on their budgets, they are more expensive than schools that use volunteers with academic rank compensated in part by hospital appointments. This is not a guarantee of better education but it helps.

When a faculty is on a full-time basis, there is a greater opportunity for and interest in research, and members are more often drafted for clinical investigative leadership. Laboratories cost money. Yet this emphasis on the investigative method is a valued part of the physician’s training.

In visible costs

While it is generally recognized that four years and an M.D. degree do not constitute the education of a doctor, the role of 1 he medical schools in subsequent training is not well understood. Before he can practice, most states require a year of internship in an approved hospital. Beyond this, however, men who are going into academic medicine, research, or the specialties require much longer periods of supervised experience. The minimum requirements are determined by Specialty Boards in surgery, pediatrics, and other fields, and must; be obtained in hospitals approved by the boards. There are many such hospitals. So far as school affiliated hospitals are concerned, the postgraduate instruction of specialists claims an important, share of the time of the clinical faculty— perhaps 50 per cent on the average. Furthermore, most Specialty Boards require increasing amounts of basic science, which can only be provided by the schools.

This, then, represents an important, although invisible, component of the medical school activity. Invisible because most schools have no graduate divisions and consequently do not segregate the costs, enroll the men, or charge tuition. At Yale, for example, this year there are 220 undergraduate students and 170 who already have their degrees. If the education cost is divided by 500 instead of 220, the cost per student is reduced accordingly. Obviously, if we are thinking of aid on a per student basis, the graduate group is important.

It is becoming increasingly clear that a well integrated graduate training program, the proper staffing of hospitals, and the adequate continuing education of practicing physicians all require the gradual evolution of a regional hospital network.

This presupposes a teaching hospital at the center, linked with large general hospitals, linked in turn with smaller rural units. Such programs imply a redistribution of accompanying educational costs.

The question is how to meet the cost. It is generally conceded that tuition rates for undergraduates cannot be increased appreciably. Traditionally there has been no charge for the graduates. Hospital residencies and internships carry little or no stipend other than board and room. Few men in such positions could afford to pay tuition. Hospitals do not now pay their tuition for them. It does not seem fair to ask patients to pay a surcharge for medical education at the time they are sick. Certainly Blue Cross and other insurance organizations can reasonably be expected to resist the inclusion of any such charges in their payments. Yet here is a significant educational cost which is now masked by the apprenticeship system and which must be met. Foundations or other agencies sponsoring graduate students or fellows might well pay the school a tuition fee even if it comes out of the stipend of the student.

Who finances hospital deficits?

Medical schools require hospital affiliation, and an infinite variety of partnerships has grown up across the nation. In some cases established community hospitals have been linked with the school. In others, university owned and operated hospitals have been built. In still others, universities have assisted in the construction of community hospitals to their mutual advantage.

Two important factors have contributed to the confusion that exists today where medical schools are still involved in hospital operating costs. One is the tradition that hospitals are charitable institutions that give service to people in accordance with need without regard to ability to pay. Consequently, if the university operates the hospital, it apparently assumes this obligation to provide such service and make up the defied.

The other factor is the rather general assumption that if a school uses patients for instruction, even though it provides the full medical care, any deficit arising from their hospitalization is a proper charge against medical education. If the hospital comes out even on private and semi-private accommodations, any loss is on the wards — ergo, it should be assumed by the medical school. When these assumptions are shared not only by the hospital trustees but by the community at large, by officers of governmental units responsible for indigent cases, and by insurance companies, the situation is ruinous to schools so involved.

Here is a curious paradox. Many agencies of government provide complete hospital care for certain classes of patients often over the hill and far away from the medical school. Yet they inevitably resist meeting the costs of other classes of citizens for either hospital or outpatient services at teaching centers. This results in the impoverishment of the centers by the very society they serve.

It is Interesting to note that the Veterans Administration has located its newer hospitals near schools of medicine. Much of the planning under the Hill-Burton Act has failed to take into consideration the needs of educational and research programs. Even the Hoover Report, which makes much of the lack of over-all planning between governmental (both military and civilian) and voluntary hospitals, fails to emphasize the important relationship that must exist between such facilities and the teaching center.

If any partnership is to succeed, both partners should be strong — one must be. Unfortunately, both medical schools and hospitals today are in financial difficulty. One of the important contributing factors to hospital deficits is the shameful way in which local and state governments fail to meet their obligation to pay the actual costs of patients for whom they assume responsibility. Nowhere else can one order a commodity and by action of the state legislature pay only one third of the cost. When the state builds a road it expects the contractor to make a profit because he is in business for himself. The non-profit hospital, in business for the care of desperately ill citizens, must beg year after year for pennies with a tambourine. How sapiens is this homo? Once upon a time in this country, government encouraged the creation and development of great social institutions for the public welfare. How times have changed!

What has happened to gifts?

About twenty years ago a significant change began in the pattern of private giving. Before that lime it had been customary for men of means and private foundations to support educational institutions through gifts for general endowment, for professorial chairs, sometimes for buildings. This was an era of healthy growth, generally well balanced from the point of view of the individual institution’s needs.

This gave way gradually to a system of contingent gifts. At first these were still for general purposes, but depended upon some system of matching dollars. This was attractive for donors, who thus saw their dollars multiplied and others stimulated to follow in their footsteps. This contingent idea gradually matured into a pattern of special purpose grants for the operation of specific programs with a time factor. Often the donor gradually reduced his support and the university agreed to take up the balance as he withdrew.

These patterns of private philanthropy were both logical and useful in earlier days. Unfortunately, they were crystallizing at a time when the underlying economic and social philosophies, as determined by national (Congressional) policies, were being radically revised. Income, inheritance, and corporation taxes and surtaxes drastically changed the situation. The problem of survival, let alone the continuity of managerial control of closely held family businesses, became a critical matter.

Slowly a whole new series of corporate structures came into being. Family trusts appeared on the scene, to be modified in form with each succeeding change in the tax program. This not only greatly reduced the amount of private funds available for gifts, but precipitated much of this money into foundations. Founders could hardly he blamed, under the circumstances, for wanting not only to maintain a high degree of control, but also to keep intact the principal funds — spending only the income as a general rule. This process automatically reduced the “venture capital” for philanthropy to 3 or 4 per cent of what it was before. A million dollars became $35,000 overnight.

Furthermore, as this process continued, a formalization of foundation programs developed, with a strong tendency to follow the patterns of established leaders. Now during this same period there was a gradual growth in the appreciation of the value of research. This led to the practice of making small supplementary grants-in-aid for a limited period of time for particular research projects. They presupposed a faculty and teaching program in good working order with laboratories available. The man with an idea was given literally a grant-in-aid. The university was properly expected to give time, space, overhead, and operating expenses as its share. For a very small amount of money, the donor had the satisfaction of a partnership in a worth-while enterprise, with some of the vicarious thrill of grubstaking the modern intellectual equivalent of a sourdough, always with the possibility that a rich strike might be made.

This was so appealing that a new trend was started and donors sprinkled ever increasing numbers of small grants-in-aid clear across the board, seeking diversification in the same way that an investor tries to balance his portfolio or a gambler hopes for the long odds by playing individual numbers at roulette. The method required no longterm commitments (or so it was thought) and no invasion of capital.

During the same period, we find the growth of voluntary societies interested in particular diseases. These societies collect money from the public for health causes. They were also logically attracted to this same pattern of giving.

Then came the Second World War. We discovered overnight that military tactics and strategy were limited in decisive ways by health factors. Medical and biological sciences were enlisted in the total war. Medical research became big business. Nation-wide coordinated research efforts were made in many fields and contributed greatly to the war effort, While research institutes — government, private, and industrial — played important roles, much of the effort was carried by the medical schools because there the clinicians and the basic sciences meet. Grants-in-aid became contracts for project research. Money poured into the program. The. schools took on new characteristics. Research which had formerly been part and parcel of the total school program now had an identity of its own. Large amounts of space were given over completely to these programs. A huge auxiliary staff came into being, housed in the universities but only loosely attached to them.

The success of this all-out effort led inevitably at the end of the war to an attempt to transfer the main features of this program to the solution of civilian health problems. Research became the order of the day. All organizations are now concentrating on this field with greatly augmented funds. They turn again, as they must, to the medical schools. Yale today has more money to spend on research than it does on its teaching faculty.

Lest there be any misunderstanding, let it be very clear that it is not a question of less money for research, but of more for education, and a firmer support for the hospitals, if the schools are to grow into the Paul Bunyan stature required by the demands placed upon them today.

Rivalry for manpower

What are the results of the stresses and strains induced by the present distortion in financial support ?

I know a department that desperately needs a major new appointment on permanent tenure at perhaps $10,000 or $12,000 a year. The man exactly suited for the job is available, but there is no money in the school budget to make the appointment. Yet the same department has grants-in-aid of many times that amount for subsidiary personnel and research. Furthermore, if the man could be appointed, there is no doubt lhat he in turn would then be pressed to accept large grants. This is a new way for donors to attract to a program many working dollars for each of their own, but alas, no one is interested.

Increasing numbers of competent professional men and women are engaged on project research. They arc not; a part of the regular school staff. Their appointments are dependent upon the length of their grants. The practice has grown up of paying higher salaries to offset the lack of tenure.

Occasionally the situation produced verges on the ridiculous. Take school A, which has a modest program carried on its own budget and which has not requested outside funds. School B, without such a program, applies for and is granted funds to establish one — on a grant basis. Since a higher salary will have to be paid to draw a competent person away from an academic post, the necessary figure is included in the budget. Presently the first school loses its man to the second because of the salary differential, which it is powerless to correct out of its own funds. Then, in order to continue its own program, it must in turn seek a grant-in-aid and pirate another school for the leadership it needs.

Fellowships, too, present their own problems. Agencies have a flexibility that schools do not. A man who has been sent to school on a $3500 tax free stipend is hardly interested in a starting instructor’s salary of $3500, or even $f000, subject to income tax. It is granted that the salaries of instructors are too low, but if these are increased, commensurate increases have to be granted all along the line —and the medical schools are out of funds, remember?

One of the most difficult problems to deal with in project research lies in the confusion caused by the long period of uncertainty as to whether funds will be granted or not. This is particularly true with Federal funds. Men cannot wait until a few days before their appointment begins, to decide which job to take. Forward financing and commitments for a period of years are absolutely necessary if chaos is to be avoided.

Divide and confuse

The complex compartmentalization of research interest today hardly seems geared to the essential universality of a really important idea. How does one know whether a plan for an investigation of hormones should be submitted to an organization interested in cancer or poliomyelitis, heart disease, sex research, or human reproduction? Conversely, how can such organizations be sure that they can exclude it as not having any relation to their fields of activity?

This splinter approach can become an important factor in increasing the tendency to divisiveness that makes teamwork more and more difficult. It is carried to absurdity when we have large grants made available for the construction of laboratory facilities with the proviso that these must be used exclusively for cancer or for cardiovascular research, or whatever, and no funds to strengthen the laboratories here and there where important work is going on in these same fields. This is progress in retrograde.

No money for overhead

But surely with all of these headaches these grants-in-aid must prove a financial bonanza to the medical schools? When the government builds a ship or a school, it expects to pay the contractor his operating overhead and a profit besides. A nonprofit institution cannot, of course, make a profit. Rut certainly the schools should be given enough to cover the operating costs? Not at all. The outmoded custom of twenty years ago still dominates.

For example, Yale has out-of-pocket operating expenses and overhead of 25 per cent with only emergency outlays for building rehabilitation. This will not seem unreasonable to any businessman or industrialist. If the grantors, in view of the plight of the schools and the value of their contribution, were willing to pay the indirect as well as the direct costs of the work carried on under their grants, Yale would receive $200,000 instead of the $40,000 it obtained for this purpose a year ago. Sometimes it almost seems that every precaution is taken to ensure that no dollar by mistake should go toward the major program of the schools, which, curiously enough, is training ol the very men upon whom all research depends!

Clinical research

There is one more problem in the area of clinical research that requires comment. Under the limitations of present hospital financing, it is necessary for an investigator with an idea to wait for patients with the illness he wants to investigate to present themselves at his hospital along with the money to pay for their hospitalization. He cannot encourage indigent patients to come to the hospital and increase the deficit in the name of research. Perhaps no more profitable use of funds for clinical research could be found than to meet part of such selected patients’ hospital bills. Otherwise, a proper series of cases cannot be treated in a reasonable period of time except in the highly specialized hospitals in the large metropolitan centers. Certainly research maintenance funds have a clear priority over construction funds.

Recommendations

The medical schools of this country hold the key to our own health as well as that of future generations. The manner in which they discharge their responsibilities of instruct ion and research is of immediate and personal concern to every one of us.

We must somehow strive to return, the responsibility for education, research, and service to the universities, and the responsibility for their financing to those who are benefited, each according to his share.

We need a system of priorities if we are to maintain and enlarge our main effort. The support of university chairs of biophysics, microbiology, preventive medicine, psychiatry, to name but a few, certainly comes before project research measured in any terms.

The greatest need now is for funds to support the core of the educational program, the faculty, and staff. The nation will respond both individually and collectively if it understands the real problem. Intelligent redirection of private resources can help immeasurably. In industry both management and labor have a real stake in the issue. The specialized health agencies should be greatly concerned. Alumni should take a second look.

Life insurance companies whose own balance sheets show them to be the happy beneficiaries of this remarkable collaborative effort would do well to invest in the basic medical educational institutions in some reasonable proportion to their indebtedness. There is still time.

Physicians who show great concern about the possible fate of some of our social institutions today might pause for a moment to consider the plight of their own alma maters. One hundred dollars a man a year would wipe out the deficits. What of their own indebtedness?

If government aid is required, it should he designed to strengthen the main structure and be based on a formula that will guarantee continued and predictable support year after year. A teaching staff cannot be built on a fluctuating budget.

Hospital planning must be re-examined and related regionally to the larger needs of teaching and research. The universities must be relieved of a crushing welfare load that is not properly a function of education.

Fluid research funds of appreciable size should be made available to the universities to assist men on their faculties with at least the preliminary exploration of promising ideas.

Beyond this, there is a real place for supplementary funds from both government and private sources to forward special programs designed to meet recognized national needs. Such funds should carry all of the costs of such work so as to strengthen and not weaken the basic structure. They should be flexible enough to fit into the institutional plan at the point of greatest need and not require a devastating reorganization simply to qualify for financial aid. The schools themselves must take the responsibility for intelligent coordination of the research programs they accept with their principal mission.

None of this can be accomplished by any one group acting alone. The successful operation of the program is vital not only to society as a whole but to you and me and those we love. Let us all help, each in his own way. All hands are needed now!

We cannot afford to be without our medical schools.