Editor’s note: This is the third article in a series examining who pays for medical education and economic changes in Minnesota’s medical community that impact the University’s Medical School. Thursday’s article examines the impact of declining federal funding.

Dr. June LaValleur slips in and out of examination rooms at the University’s outpatient Women’s Health Clinic. Pressed for time, LaValleur expertly juggles the patient’s charts that line the walls.
As an assistant professor and a gynecologist, she has become comfortable in her routine. LaValleur is less comfortable with the vernacular of marketing she adopted as the chairwoman of the marketing committee for the University of Minnesota Physicians.
Nearly 400 faculty members joined the group, which opened its doors Jan. 1. The company streamlined the numerous University physicians into one group to lower costs. The belt-tightening move is one example of the Medical School’s effort to stay afloat in a tight managed care market.
In the late 1980s, managed care turned patients away from the academic doctors, who charged more due to their added duties of teaching and research.
Faculty physicians expect their efforts will revive a steady stream of patients, who have turned to less expensive physicians in recent years.
The physician group’s first success came earlier in October, when the state put the group on their least expensive and largest insurance program.
The plan allows more than 40,000 state employees to choose one of the University of Minnesota Physicians as their doctor. As educators, the physician professors and their students need patients for teaching and volunteers for research studies.
After eyeing the doctors’ stagnating incomes for the last three years, administrators hope the new influx of patients could mean an infusion of cash.
The faculty generate an estimated $100 million annually. A share of their revenue is returned to the Medical School to pay salaries, conduct research and run clinics.
After crash courses in advertising and meetings with a local strategist, LaValleur is fluent in marketing lingo. Rattling off the jargon like a prescription, she explained how the University physicians have been elbowed out of the competition for patients and dollars by less expensive doctors around the state.
University physicians compete against Minnesota’s doctors for patients. But the doctors’ dual roles as physician and professor boosted their bills above those of their non-academic rivals.
For years, insurance companies accepted the higher prices, passing the costs on to patients by raising the price of their health insurance.
But the price-hiking practice eventually elbowed faculty out of a market intent on dropping the price of health insurance.
Paycuts and overtime for the faculty members followed. In order to remain competitive, LaValleur herself took a 25 percent paycut last spring.
Working longer hours has restored her salary. But it has forced the doctor to spend more time in clinics treating patients to make up for the lost dollars, a move that puts a strain on the amount of time she has available for teaching.
She now spends four days a week in the clinic, a day and a half more than before. Added to her clinic schedule, she dedicates an additional day to operating. Monday through Friday of her 70-hour work week is now booked with patients.
The patients are necessary for teaching, she said, and the cost-cutting moves are necessary to keep patients.
Teaching students and conducting research are bound to magnify University doctors’ costs, said Steve Wetzel, executive director of policy and public affairs for the Buyers Health Care Action Group.
This is a fact that has counted against the University doctors in Minnesota’s intensely competitive market, he said.
But because of the physicians’ moves to consolidate, the action group — a coalition of 30 local companies, including Dayton-Hudson and 3M — is negotiating to add the University physicians to their health plans.
The state’s contract laid the foundation for negotiations with the action group.
Signing with the state is a double bonus, Lisa Jetland, executive director for the University of Minnesota Physicians, said.
For the first time in five years, University employees can choose a University physician under the state’s insurance plan. About one third of the 14,000 employees at the University are enrolled in the plan.
The size and dominance of the state’s insurance program make the move a victory for the group, Jetland said.
“If we were not players in that field, it would raise concerns for me about our ability to compete,” she said. Contracts like those with the Buyers Health Care Action Group hinge upon a successful trial run with the state’s health plans.
Failure will impact both doctors like LaValleur and the Medical School’s budget, which receives 25 percent of its revenue from money contributed by faculty.
United States medical schools receive more than one third of their budgets from faculty physicians. The $105 million raised by the clinical faculty funds salaries, research and the faculty’s own practices.
Mirroring a national trend, the amount of money clinical faculty return to the University each year is falling under pressure from insurance companies struggling to keep premiums low.