Adverse selection at academic health centers

Abstract

Market influences are placing many academic health centers (AHCs) in financial distress. Competitive forces threaten the core missions of AHCs, principally because of selective contracting, which has introduced price competition to medical care. This manuscript discusses the issue of adverse selection for AHCs, the probability that patients with higher levels of illness severity seek care at, or are referred to, AHCs. AHCs are particularly vulnerable to adverse selection because of their prominence as referral centers, their specialty composition, research expertise, and the socioeconomic status of patients located proximal to their centers. The adverse selection of AHCs increases the likelihood that health plans will trim their networks to exclude them. Health plans may still contract with AHCs for tertiary care only, but this will only worsen the adverse selection at AHCs.