Academic departments of psychiatry face many challenges in financing their multiple missions. Every department has a mission to teach medical students and residents, provide clinical services to patients, and advance knowledge by doing research. Individual departments vary in the emphasis they put on each of these activities. Each mission has different funding streams to support its activities, although, in the case of education, this tends to be more of a "trickle" than a stream. Each department also has unique institutional affiliations that provide funding or place demands on it. This article will describe the financial challenges faced by academic departments in early 2010.
Financial challenges and uncertainty are not new to academic departments. In the early 1990s, there was great upheaval from the advent of managed behavioral health care, which threatened to reduce reimbursement for clinical services and exclude academic departments. Managed-care made psychiatry a less attractive career choice and reduced applications to residency training programs. There was also concern that psychiatrists might be displaced by nonmedical psychotherapists (i.e., psychologists and social workers) and/or primary-care physicians prescribing psychotropic drugs.
In 1993 Meyer (1) anticipated many of the issues facing academic departments of today. He noted that although medical schools are required to offer preclinical courses on human behavior and human development and clerkship training in psychiatry that is relevant to the entire scope of medical and surgical practice, they generally fail to support teaching financially. Until the late 1970s, this was not a critical issue. Some departments had long-standing relationships with state mental health authorities that provided the venue and faculty for clerkship teaching in state hospitals and outpatient facilities. States and communities also developed community mental health centers in the 1960s and 1970s with support from the federal government. Centers that were affiliated with academic psychiatry departments were also able to support faculty and clinical training sites for residents. Academic psychiatry departments received direct support from the National Institute of Mental Health (NIMH) in the form of medical student and residency training grants (including stipends for residents and support for faculty) and Career Teacher awards. By 1981, community mental health centers were adversely affected by a shift in federal support to block grants, a reduction in the support provided by states, and the disappearance of training grants and Career Teacher awards. Departments were unable to replace the federal funding with support from medical schools, which faced their own financial challenges, including intense competition for limited educational funds. In this regard, psychiatry departments faced the same challenges as other cognitive specialties, such as general pediatrics and internal medicine, which also carry a disproportionate share of responsibility for the curriculum (1). Some might look at today's situation as "déjà vu all over again."
When the mission of NIMH shifted, in the early 1980s, from support for community mental health centers and the education of mental health professionals (including social workers, psychiatric nurses, psychologists, and psychiatric residents) to research, it set the stage for major changes in the direction of academic psychiatry. By the early 1990s, NIMH support for psychiatric research had grown substantially, as some psychiatry departments joined the ranks of the most successful research departments in their research-intensive medical schools. However, many academic psychiatry departments had little-or-no external research funding. This compromised their ability to attract and support young faculty; most important, the dearth of research support made it difficult to incorporate the exploding knowledgebase in clinical and basic research relevant to the future of the field and the education of medical students and residents. Several states continued to provide funding for research-intensive mental health treatment and training facilities affiliated with major research universities (e.g., the NY State Psychiatric Institute [Columbia], Nathan Kline Institute [NYU], Connecticut Mental Health Center [Yale], Western Psychiatric Institute and Clinics [University of Pittsburgh]), but cutbacks in research support at other state-affiliated academic sites were devastating (e.g., Lafayette Clinic [Wayne State], Illinois State Psychiatric Institute [University of Illinois at Chicago], and the Massachusetts Mental Health Center [Harvard]).
Until the 1970s, many medical schools encouraged faculty to supplement their incomes through independent practice that was independent of the university or teaching hospital. By late in that decade, many medical schools and/or their departments expanded their clinical billing in faculty-practice plans as a means of generating revenue to support the school or department. The costs of the group practice, plus the imposition of a Dean's Tax, reduced the net income to each department. For cognitive specialties, the net revenue was not an adequate funding source for education. For general internists and pediatricians, whose departments included procedure-based specialties, this was a matter of intradepartmental internal fund transfers. Psychiatry departments did not have this safety net. Moreover, academic health centers, eager to obtain contracts that would include the most lucrative providers in their managed-care agreements (generally, surgeons, interventional cardiologists and gastroenterologists, and hospital-based specialists), were willing to sign agreements that allowed the companies to subcontract for mental health services to managed behavioral healthcare companies that excluded the academic psychiatry departments or otherwise showed preference to low-cost, community-based clinicians (often nondoctoral-level providers).
In their monograph, Meyer and McLaughlin (2) expanded on their earlier observations with in-depth case studies of six departments, illustrating their diverse natures, strengths, weaknesses, and funding mechanisms. Despite initial pessimism in their recommendations, Meyer and McLaughlin (2) concluded, "The glass is as full as it is empty." The departments studied had developed varied strategies to address the challenges.
Many of the issues noted by Meyer in 1993 and 1998 continue to challenge departments of psychiatry. Liptzin et al. (3) summarized the financial challenges facing academic departments located in general hospitals. Reimbursement for psychiatric services has lagged that of procedure-driven specialties and has positioned psychiatry to be financially disadvantaged in the competition for resources within these facilities. The American Hospital Association has highlighted concerns about the potential adverse effect on teaching hospitals of funding cuts in Medicare payments for graduate medical education (4). Medical school and university endowments, which soared in the 1990s, have had to deal with a "financial meltdown" in the overall economy that has dropped stock market indices back to where they were in 1999. (Markets have since recovered to 2008 levels.) The large amount of wealth that evaporated has raised concerns about the current and future level of philanthropic giving to nonprofit educational and healthcare institutions. High unemployment and uncertainty about keeping jobs or losing homes have led to increased levels of anxiety/distress in society, increasing the demand (but not necessarily payment) for psychiatric services. Medical school tuition has outpaced inflation, leaving the average debt of U.S. graduates at almost $200,000. That puts pressure on medical schools to slow the rate of growth in tuition and limits that sources of support for the educational mission of departments. Indebtedness also affects students' choice of a specialty; however, recruitment of U.S. graduates into psychiatry has stabilized or improved slightly in the last 5 years, after many years of steep decline. Psychiatry residency slots continue to attract highly-qualified international medical graduates, despite changes in immigration procedures that are more time-consuming. The Medicare Trust Fund is projected to be exhausted within 10 years, although the lame-duck Congress has again enacted a short-term fix. Current Medicare law projects more than a 20% cut in physician reimbursement in 2010, although Congress has repeatedly cancelled previously-proposed cuts and given small increases, which have not kept up with inflation.
Rising healthcare costs have put enormous strains on federal and state budgets, individual families, and the bottom-line of U.S. businesses. State budget cuts have adversely affected publicly funded universities and mental health services. The large increase in NIH grants during the "decade of the brain" has slowed down. The NIH funding included in the economic stimulus package signed by President Obama in 2009 provided short-term funding, but longer-term commitments are not assured, and the research supported by this infusion must be carried out within 2 years. This is not a serious investment in research that will advance the field and attract bright young people to research careers in clinical neuroscience. Support of graduate medical education and continuing medical education by pharmaceutical companies has generated considerable controversy and has been sharply reduced by companies as well as universities, which have implemented outright bans or restrictions on the acceptance and use of such funds.
Where is the good news in this bleak picture? Mental health services, which had been discriminated against in health insurance plans from their inception, won an important legislative victory in 2008 with the enactment of Mental Health Parity (5). Public awareness of less-than-optimal treatment of veterans has led to substantial increases in funding to Veterans Administration Medical Centers, including their mental health services. The public seems to be more knowledgeable about mental illness and the effectiveness of treatment and more willing to seek help for themselves or a loved one. Our knowledge-base continues to expand in terms of evidence-based treatments and clinical and basic neuroscience. It is possible that healthcare reform will move the healthcare system away from fee-for-service, and its emphasis on doing more, to a patient-centered medical home or other approach that emphasizes wellness and caring for the "whole patient" (6). A recent article (7) suggested, "The evidence is strong that well-designed care-management can substantially reduce costs for patients with complex healthcare needs." Such approaches could increase the actual and perceived value of psychiatric or behavioral services. The American Hospital Association (8) has recommended, "As an important player in the continuum of care, hospitals that positively address behavioral healthcare needs will contribute to the more effective and efficient use of healthcare resources, while also helping to produce positive outcomes for patients and their communities."
Although as Robert Storm Petersen once said, "It is hard to make predictions, especially about the future," we would like to offer a few thoughts for consideration. With expenses rising and revenues unchanged or falling, how can academic departments cope?
Each department and its Chair should undertake a strategic-planning process with a focus on its current and future sources of revenue and the potential return-on-investment for hospitals and health systems as a case for supporting psychiatric services, including opportunities for reducing costs and improving outcomes and patient satisfaction. Much will depend on how health-system reform evolves over the next few years; for example, the use of bundled payments in areas such as oncology, cardiovascular care, and bariatric surgery. Under the latter arrangement, psychiatry departments should receive a portion of these funds for essential behavioral health services.
Deans and university administrators need to be convinced of the return-on-investments in psychiatric research with funding from a range of NIH Institutes, including the National Cancer Institute; National Institute of Diabetes and Digestive and Kidney Diseases (NIDDK); National Heart, Lung, and Blood Institute (NHLBI); National Institute of Child Health and Human Development (NICHD); National Institute on Aging (NIA); and others, not just NIMH, the National Institute on Alcohol Abuse and Alcoholism (NIAAA), and the National Institute on Drug Abuse (NIDA).
There are unique circumstances facing each department, but the core mission of all departments is education. The revenue available to support education is likely to be flat or declining over the next several years. It seems unlikely that Medicare payments for direct and indirect graduate medical education expenses will increase; however, there may still be opportunities for a redistribution of funding from unfilled residency slots to programs that could fill more. An affiliation with the Veterans Administration may also provide some funding for faculty.
To reduce expenses, consideration should be given to ways to share resources, for example, through online sites like MedEd Portal, sponsored by the American Association of Medical Colleges. This provides electronic slides and videotaped lectures on a variety of topics that faculty can use in preparing didactic sessions. Cities with multiple medical schools or residencies might explore ways to share faculty for lectures, although there are few models of that happening successfully even when multiple residencies are affiliated with the same medical school. Some departments (e.g., Massachusetts General Hospital) have had extensive continuing medical education (CME) programs that have generated substantial revenue for the department, albeit with extensive (now unavailable) support from pharmaceutical companies.
Some research-intensive departments have heavily depended on extramural research funding, but the indirect costs built into NIH grants are often not passed to the department. Moreover, research-intensive departments are vulnerable to ups-and-downs in NIH budgeting or the departure of well-funded investigators. To buffer the research enterprise, faculty should be encouraged to seek research support from non-typical sources, such as other federal agencies (e.g., the Department of Defense, the Department of Education), the National Alliance for Research on Schizophrenia and Depression, the Alzheimer's Association, or philanthropic foundations. University, hospital, or medical school development offices should help departments identify grateful patients and provide development office staff and time to seek philanthropic support for Programs of Excellence related to research on mental and addictive disorders. Departments that have had a close connection with the Veterans Administration for clinical services should explore research funding, as well. Departments may also need to focus on a few areas to develop clusters of expertise that will make the research group more competitive for external funding.
Providing clinical services is an important part of the mission that has been adversely affected by a reimbursement system that does not cover the fully allocated cost of providing these services (3). Departments should work with their medical center's managed-care contracting department to negotiate the best possible rates. Department Chairs should become institutional leaders in medical school practice plans or physician—hospital organizations. Academic leaders should also work with the American Psychiatric Association (APA) and local district branches, as well as with groups such as the National Alliance for the Mentally Ill, to lobby and advocate for adequate reimbursement. Despite, or because of, the cutbacks in state funding of psychiatric services, departments should consider ways to support and benefit from collaborative efforts with community mental health or state-funded programs. Healthcare reform at the federal or state level might facilitate the integration of psychiatric services into primary care or turn psychiatrists into consultants, rather than primary treaters. The field needs to be alert to the dangers and the opportunities and advocate on behalf of quality care in the context of systemic change.
The current environment has many risks and opportunities for departments of psychiatry. Successful departments will be those that assess their particular strengths and limitations and explore their options for funding. Departments need to be creative in exploiting opportunities presented by healthcare reform. Just as individual investors are encouraged to diversify their portfolios, departments of psychiatry should have multiple funding streams and take advantage of opportunities in their local or regional service area.