Vanderbilt University recently announced plans to reconfigure Vanderbilt University Medical Center as a not-for-profit academic medical center that is financially distinct from the university. While the change should have little effect on day-to-day operations, Jeff Balser, MD, PhD, vice chancellor for Health Affairs, said the restructuring would strengthen VUMC’s growing presence in a rapidly evolving healthcare economy.

“The decision was based on our look into the future and our understanding that, as VUMC stretches its arms and becomes more interactive with health systems throughout the southeast, it’s an endeavor that requires us to really utilize a different financial, government and board model than used in a university setting,” Balser explained.

New Model for a New Era

Currently the medical center is among just a few facilities entirely embedded within a university’s legal and financial structure and utilizing the same governing board. Unlike most health systems, VUMC also functions under an AA university bond rating – the high investment grade rating of many top research universities.

Balser said the new model will allow for more flexibility in the types of capital and debt VUMC will be able to access, which will in turn help grow VUMC’s network of affiliate providers. Launched in 2011 with three partners, the network now includes more than four dozen hospitals, health systems and large practice groups in five states.

“It’s just very hard for a university to contemplate governing a multistate health system since it’s not a mission constant with the university’s activity,” Balser explained. “It’s not just about access to capital but being able to create government and management systems necessary and supportive of a big healthcare facility.”

Same Name, Same Faces

Balser said he expects no visible changes short-term: VUMC will remain not-for-profit with academic arrangements, faculty status and degree programs unaffected. In their November 2014 announcement, VUMC committed to continue full support of research and educational activities of the School of Medicine clinical departments, Graduate Medical Education (residencies and fellowships), and clinically related centers and institutes. At the same time, Vanderbilt University will play a greater role in supporting the MD and PhD-granting programs of the School of Medicine, its basic science programs, as well as the academic programs in the School of Nursing.

Moving Forward

However, the long-term impact will be visible through VUMC’s growing network of affiliates, services and clinical trials. The move is consistent with the direction of healthcare in general where smaller organizations are turning to larger systems for shared savings programs, quality improvement and more services in more locations.

“People are mobile and don’t want to hear that when they go 200 miles away they can’t access the same healthcare,” Balser said. “Patients want access to the best possible care no matter where they are.”

The process is expected to take 12-18 months and will include appointment of a new board for the separate financial entity. The news came a year and a half after the announcement of VUMC’s “Evolve to Excel” initiative – a two-year plan to cut $250 million from its $3.3 billion operating budget. E2E also cut 400 VUMC employees and eliminated 1,100 open positions. With difficult changes now behind them, Balser said VUMC is in “very good shape” to continue their transition.

“The chancellor [Nicholas Zeppos] and I are entirely committed to this work,” Balser said. “The best thing we can do is respond to what we can see in the future, and the best time to do this is when we’re doing well and not under stress. Right now we’re in very good shape, and the ideal time to go through this process is when we are all strong.”