OWNERSHIP AND GOVERNANCE OF UNIVERSITY TEACHING HOSPITALS - LET FORM FOLLOW FUNCTION

Under the best of circumstances, the complex decisionmaking and resour ce-allocation processes of a state university (and often of a variety of state agencies important to the university) significantly hinder th e ability of the university-owned hospital to make changes critical to its financial and, hence, its programmatic success. At worst, as was the case for the University of Maryland Hospital a decade ago, the hos pital can become capital-starved and operationally deficient under the bureaucratic mantle of the state and university and find itself unabl e to respond to the fast changing market, placing its viability in jeo pardy. To remedy this situation at the University of Maryland Hospital , in 1984 the state created a separate not-for-profit corporation, the University of Maryland Medical System (''the Medical System''), gover ned by its own board of directors, with a mandate to assure sound busi ness practices, outstanding patient care, access to patients from acro ss the state for tertiary care, access for the local disadvantaged com munity for comprehensive care, and attention to the academic mission o f the university and its school of medicine, The results include stron g financial performance, the ability to recapitalize outmoded faciliti es and technology, growth of strong programs, and the recruitment of e xcellent chairs and faculty, The Medical System's success suggests tha t university teaching hospitals, which necessarily depend on patient c are revenues, may best be starved by (1) removing them from university governance, thus allowing them to give primacy to their mission of pa tient care, and (2) removing them from state ownership, thus allowing them to use sound business kinetics in the competitive health care env ironment. The challenge under this arrangement is to ensure that the t eaching hospitals can still support the educational and research progr ams that distinguish them. By establishing its independent, actively i nvolved board of directors, the Medical System has successfully respon ded to this challenge.