A revisionist view of the integrated academic health center.

Like many academic health centers that had expanded aggressively during the 1990s, the nation's first vertically integrated academic health center, the University of Pennsylvania Health System, was profoundly challenged by the dramatic and unanticipated financial impacts of the Balanced Budget Act of 1997. The author explains why-although Penn's Health System had lost $300 million over two years and its debts threatened to cause serious financial and educational damage to the rest of the University-Penn chose to manage its way out of the financial crisis (instead of selling or spinning off its four hospitals, clinical practices, and possibly even its medical school). A strategy of comprehensive integration has not only stabilized Penn's Health System financially, but strengthened its position of leadership in medical education, research, and health care delivery. The author argues that a strategy of greater horizontal integration offers important strategic advantages to academic health centers. In an era when major social and scientific problems demand broadly multidisciplinary and highly-integrated approaches, such horizontally integrated institutions will be better able to educate citizens and train physicians, develop new approaches to health care policy, and answer pressing biomedical research questions. Institutional cultural integration is also crucial to create new, innovative organizational structures that bridge traditional disciplinary, school, and clinical boundaries.