The Cost of Regulation

Health Reform Legislation Offers Small Step Forward

While the ACGME continues to spotlight just how much clinical work is too much for residents, the bean-counters of the medical industry continue to struggle with how to pay for those residents. And for all the hype surrounding the healthcare reform bill, the new rules will have a minimal impact on that score, according to the Association of American Medical Colleges (AAMC).

In 1997, Medicare capped the number of residents it would subsidize based on 1996 levels. The actual reimbursement formula for most hospitals, however, remains tied to 1984 costs, with allowances for northward adjustments based on economic indicators.

Landmark legislation signed by President Obama in March does nothing to either of those data points; however, it does allow for more pooling and shifting of roughly 1,000 unused slots to hospitals that need them more. Karen Fisher, AAMC’s senior director for healthcare affairs, says the compromise is a short-term fix that slides resident slots around. AAMC President and CEO Darrell Kirch, MD, says the reform measures are “a work in progress,” and says his group will continue lobbying efforts to increase the number of residency slots.

“Now, more than ever, the nation must expand the physician workforce to accommodate millions of newly covered Americans and a rapidly growing Medicare population,” Dr. Kirch said in a statement when reform legislation was passed. “U.S. medical schools are already doing their part by increasing enrollment. We strongly urge Congress to join in this effort by lifting the caps on Medicare-supported residency positions so that future physicians can finish their training.”

Early on in the healthcare debate, several lawmakers brought up proposals to add 15,000 residency slots—about a 15% increase to the nearly 100,000 slots currently available—but a price tag in the billions quickly scuttled those ideas. Instead, residency reimbursement rules remain largely unchanged.

Medicare pays 1,100 teaching hospitals roughly $9 billion a year in direct graduate medical education (DGME) payments and indirect medical education (IME) payments.

However, AAMC officials estimated in a February letter to Medicare’s Payment Advisory Commission (MedPAC) that teaching hospitals are underfunded by some $2 billion a year. In fact, MedPAC’s own staff estimated in 2008 that “the aggregate overall Medicare margin for major teaching hospitals was negative 1.5 percent,” the letter (download PDF) reads.

“Hospitals are training about 6,000 more residents than what Medicare supports,” Fisher says.

The issue is not likely to go away, as the impending physician shortage threatening the nation’s academic and nonteaching hospitals showcases the need for more residents. On the resident education side, the situation is likely to become even more imbalanced as roughly two dozen new medical schools are in the development pipeline, including several that recently seated their inaugural class.

At least one hospitalist is confident that Medicare and the politicians who ultimately oversee the system eventually will recognize the need to more fully support academic institutions.

“People will realize that to build an outstanding healthcare system, you need to have highly trained and qualified physicians,” says Bradley Sharpe, MD, an associate clinical professor in the Division of Hospital Medicine at the University of California at San Francisco. “Also, because the advancement of science is a consistent goal of the United States . . . and academic centers are a key driver of that advancement, there is likely to be ongoing support of the overall academic missions at teaching hospitals.”—RQ