Administrators for the Brody School of Medicine at East Carolina University say the state must increase funding for the medical school so it can keep cranking out family doctors for rural North Carolina and so its clinics can continue to treat Eastern North Carolina residents, especially those who can’t afford to pay.
ECU Chancellor Steve Ballard says the legislature should give the school an $8 million boost this year and another $30 million each year going forward.
“This kind of medical school cannot survive without strong state support,” said Ballard, who has worked for a year to draw attention to the school’s financial woes while highlighting what he says is the successful accomplishment of its mission.
Ballard’s campaign has had some effect; the UNC Board of Governors included a request for the $8 million in the budget it proposed to Gov. Pat McCrory. The governor is scheduled to present his budget proposal to the General Assembly this week.
Josh Ellis, communications director for the governor’s office, said in an email: “The governor recognizes the importance of the Brody School of Medicine and his budget will reflect that.” Ellis would not provide further details.
But being included in the governor’s budget is no guarantee that the school will get its wish. The legislature will present its own budget later in the session, and it was legislative action two years ago that helped create some of the school’s financial difficulties.
When it opened in 1977, the medical school had three goals laid out by the state legislature: to increase the supply of primary-care physicians to serve the state, to improve the health of residents of Eastern North Carolina, and to help more minority and disadvantaged students get a medical education.
Each of the 80 new students admitted to the medical school each year is a North Carolina resident, in the hopes that graduates will remain in the state to practice, and the school says about half its graduates do. Brody’s tuition is among the lowest in the nation, to keep student debt low so graduates can afford to practice relatively less lucrative family medicine.
Until the last decade, the legislature heavily subsidized the medical school and the more than 20 clinics where it treats patients and trains physicians and nurses, and it supported some of the research conducted by faculty at the school. In the late 1990s, state appropriations made up as much as 53 percent of the medical school’s annual budget.
In the current fiscal year, state funds account for 20 percent of the school’s operating budget. Most of the rest of the school’s revenue comes from the operation of its clinics and the work its providers do at its private partner hospital, Vidant Medical Center, right next door. Vidant helps support the medical school financially.
But Dr. Paul Cunningham, dean of the Brody School, says that about 150,000 of the 500,000 patient appointments the school’s practitioners handle each year are either uncompensated or the patients pay only a small co-pay and lack insurance to pay the rest.
Until last year, some of those patients were made to pay at least a part of their bill through a debt-collection procedure granted to N.C. state agencies by the Set-Off Debt Collection Act. After trying to collect the debt through other means, the physician practices could hand it over to the state attorney general’s office, which could garnish a portion of tax refunds or lottery winnings due a debtor.
Physician practices at Brody and the UNC School of Medicine – the only public medical schools in the state – both used the practice. In 2012-13, UNC collected about $7.3 million in outstanding debt using the procedure. Brody collected about $5.5 million with it that year.
But private hospitals lobbied against the procedure, saying it amounted to an unfair advantage. Last year, the legislature limited Brody and UNC to collecting a portion of the tax refund or lottery winnings due a debtor, and said the schools could only collect from patients who had insurance. With the change, Brody’s collections under the procedure dropped by about $4 million to $1.5 million.
In the fiscal year ending in June 2014, the school tallied $14.4 million in operating losses, although it received one-time funding from other university sources of $5.2 million to reduce the total actual loss to $9.2 million. Brody’s revenues that year totaled $267 million.
By comparison, the UNC School of Medicine is a primary partner with UNC Health Care, which has several hospitals and a large network of physician practices. UNC’s is also a larger medical school, with more than 800 students, including out-of-state students who pay higher tuition, and the medical school also receives federal research grants. In fiscal 2013-14, the UNC School Medicine had revenues of $1.1 billion.
In addition to the other cuts, leaders of the Brody School also are concerned about a reduction in Medicaid reimbursements that they say could cost Brody’s physicians $15 million annually.
Brian Floyd, president of Vidant Medical Center, said the hospital helps support the school, as teaching hospitals across the country do, “But only so much of that can go on,” he said. “You can’t run a whole (public) medical school on clinical dollars. You have to have education dollars from the state.”
Critics of the Brody School say its clinics have been inefficiently run, resulting in unnecessarily high operating costs, and that the school has purchased medical practices off campus that were financially unsustainable.
It’s not clear whether the legislature would consider reinstating the medical schools’ full use of the set-off debt collection procedure. Adam Linker, who helps direct the health care work of the N.C. Justice Center, said the center would be opposed to that but believes lawmakers must find a way to support the schools’ missions, especially their goals of treating the poor. Expanding Medicaid so that more patients have insurance would help, Linker said, or just allocating money to the medical schools to help cover the cost of treating patients who can’t pay.
“There are all sorts of things the legislature could do to restore funding to those institutions without taking tax refunds from poor people,” said Linker, who added that he believes medical debt should be viewed differently from debt that consumers have more choice about taking on.
But this year, Linker said, when the state is expected to have budget shortfalls, it seems unlikely that legislators will find additional money for Brody.
In the past year, say Cunningham and Dr. Phyllis Horns, vice chancellor for Health Sciences at ECU, the school has let vacated positions go unfilled to reduce staff and has looked for other ways to cut costs. The school has begun evaluating doctors’ productivity to identify low performers; it has closed some operations, such as in vitro fertilization lab services, that were seen as too costly; and it has begun to consolidate some clinical services with those provided by Vidant to prevent duplication.
Ballard and Cunningham say that because of its mission to educate and to treat some of the poorest and sickest residents of the state, the value of the Brody School of Medicine can’t be judged by its bottom line. Ballard has written newspaper op-ed pieces about the school’s financial troubles and said earlier this month he worried the school would have to close within five years if it continues to see operating losses like those of the past fiscal year.
Floyd, the hospital president, said the state can’t afford to let that happen.
“People don’t realize the value of what they have here,” he said of the school of medicine. “This is not just a health care success story. This is a success of the North Carolina education system that is going on unrecognized.”