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August 01, 2011

Federal Budget Cuts and Teaching Hospitals

Teaching Hospitals 
With the announcement of a deal between the White House and Congress over raising the debt limit, there is a underling debate that eventually will effect medical schools and education of future physicians.

Within the debate about reducing deficits and increasing the debt ceiling, one troubling idea that Congress has suggested is cutting more than $60 billion in Medicare payments for graduate medical education at our nation’s teaching hospitals – which could undermine the new health insurance law, gravely affect patient care, and threaten our economic recovery.

The cuts would reduce the Medicare subsidy for training doctors and for providing intensive medical services like trauma centers and burn units and sophisticated equipment that the teaching hospitals offer. The plan would apply to teaching hospitals nationwide but would have its most profound impact in cities like New York and Boston, where medical schools and their affiliated hospitals have a significant presence.

Federal financial support for medical education began with the G.I. Bill of Rights after World War II, and became part of Medicare after it was established in 1965, according to a study in the Journal of General Internal Medicine. It has survived, with modifications and many attempts to curtail it over the years.

Critics of the Medicare payment say it has become a hidden subsidy for hospitals’ operating costs. But the administrators of New York’s teaching hospitals say they operate on very thin margins because they serve large proportions of patients who are receiving government insurance for the poor and the elderly, and because they provide some of the most sophisticated — and expensive — medical treatment in the country. Either way, the hospitals have come to depend on the money.

Cutting payments for graduate medical education to teaching hospitals would have astronomically negative impacts on patient care in America, especially given the fact that an additional 32 million Americans will gain health coverage under the Affordable Care Act. Reducing payments will only further exacerbate the physician shortage America already faces. By 2020 the nation is expected to face a shortage of 45,000 primary care physicians and 46,000 surgeons and medical specialists, according to the Association of American Medical Colleges —a stunning shortage of 91,000 doctors.

As Rep. Joseph Crowley (D-N.Y.), who sits on the House Ways and Means Committee, explained in a recent article in POLITICO, if Congress were to cut Medicare payments to graduate medical education, it would be extremely problematic and harmful to patients and Americans for a number of reasons.

As Crowley pointed out, “teaching hospitals educate the next generation of physicians—who are clearly essential for our future,” and “the importance of academic medical centers and teaching hospitals goes far beyond delivering care” because “they serve as economic anchors in their communities.”

In his district, for example, the Bronx’s Montefiore Medical Center could lose more than $100 million annually from the proposed cuts—a staggering loss that would severely harm their local economy. There is no question that this is real money with real consequences: More than 70,000 well-paying jobs are at risk nationwide. In fact, according to the New York Times, New York State’s prestigious teaching hospitals could lose more than $1 billion a year.

Montefiore Medical Center in the Bronx, Mount Sinai Medical Center and New York-Presbyterian Hospital in Manhattan would be the hardest hit in the nation by Medicare cuts, followed by U.P.M.C.-Presbyterian in Pittsburgh, the Hospital of the University of Pennsylvania in Philadelphia and Massachusetts General Hospital.

“The impact would be devastating to a place like Montefiore and to the borough of the Bronx and the City of New York,” Dr. Steven M. Safyer, president and chief executive of the medical center, said Monday. “It would be incomprehensible what it would lead to. We’re the main employer in the Bronx, with 18,000 employees. It would lead to loss of jobs, curtailing the pipeline of the doctors of tomorrow, exacerbating the health needs of this very challenged community, the Bronx.”

Though the final numbers may well change, under the worst-case situation New York hospitals estimate they would lose $1.25 billion, or 57 percent, of the $2.19 billion a year they currently receive in Medicare subsides for medical education, according to the Greater New York Hospital Association, a powerful lobbying group. It expects the cut would begin in 2015. Nationwide, hospitals would lose $5.8 billion of their current $10.9 billion in payments, or 53 percent, according to the group.

A more modest deficit-reduction package now being discussed, however, would cut only $1.4 billion nationwide over 10 years.

If the larger proposal is passed, Montefiore will lose $1 billion over 10 years. The hospital trains 1,200 residents at any one time, turning out 350 to 400 doctors a year, Dr. Safyer said. A vast majority of its patients — 80 percent — are on either Medicare or Medicaid.

The Simpson-Bowles Commission, which advised Mr. Obama on debt and deficit reduction, called in December for reducing “excess” payments to hospitals for medical education. The commission said the payments could be brought in line with the costs of medical education by limiting the direct subsidy to 120 percent of the national average salary paid to residents. A second, indirect subsidy, which pays for intensive services and advanced equipment that teaching hospitals typically provide, should also be reduced, the commission said.

Gail R. Wilensky, a former senior health and welfare adviser to the first President George Bush, said numerous studies by the Congressional Budget Office and others have found that the indirect subsidy is overfunded by “several percentage points higher than can be justified empirically.”

Dr. Wilensky said it might make more sense for subsidies for training medical residents in various specialties to go directly to the residents, who are working for low wages and essentially supporting the hospitals with their cheap labor, rather than to the institutions.

But hospital officials said the payment covered not only residents’ salaries and benefits, but also the supervising physicians’ salaries and benefits, and overhead like classroom space.

The average resident salary in the Northeast was $54,093 in 2009, the most recent year for which figures are available. In New York, with fringe benefits, supervisors’ salaries and overhead, the total cost of training came to $128,400, according to the hospital association. On average, Medicare subsidized 39 percent of that amount, or $49,581, roughly proportional to the percentage of inpatient treatment that was covered by Medicare.

Senator Charles E. Schumer, Democrat of New York, who has been involved in the negotiations, said he was doing everything he could to keep the education payments.

“This to me is one of the lifebloods of New York,” Mr. Schumer said. “One of the best things New York does for America is train high-quality physicians who then sally forth around the country and provide great medical care for the rest of their lives.”

These cuts potentially compound two other issues according to Henry Black MD, ACRE leader and NYU faculty “one issue is the limitation on the number of hours that a resident is permitted to be on duty. As a result, teaching hospitals have already had to increase the number of trainees or reduce the time spent on nonpatient care activities.

The second is the unanimous concern that the United States is facing a serious shortage of primary-care physicians and specialists, who will be necessary to care for our aging population.”

Discussion

Far from being a luxury, Crowely recognized that “teaching hospitals depend on this funding to fulfill their mission.” Teaching hospitals confront significant additional costs as a result of training physicians, which includes direct costs like salaries and benefits for residents and their faculty, as well as overhead and clerical costs.

There are also the indirect costs that come with being on the front lines in training doctors. These hospitals usually treat more complex cases, and need medical residents to order more diagnostic tests as part of the learning process.

Crowley further recognized that America’s “teaching hospitals help develop the next generation of physicians, and they cannot be asked to skimp on the advanced teaching services and equipment that are part of this responsibility.”

Dating to the 1960s, the subsidy has helped make New York State the world capital of medical education, training about 16,000 doctors a year, or 14.5 percent of the nation’s total, more than any other state.  In New York particularly, where one out of every six doctors in the country is trained, teaching hospitals have welcomed their role. But Crowley asserted, “they cannot do it alone.”

Congress has long recognized the additional costs associated with training our future doctors. The federal government has supported its share of the costs through Medicare’s graduate medical education payments. Hospitals are already stretching their Medicare reimbursements as much as possible, and cuts to these payments would be a further strain on these critical institutions.

As a result, Crowley urged the President not to cut Medicare payments for graduate medical education and to follow his own words, by not turning our backs on critical investments in our future or at the expense of badly needed economic growth. He asserted that, “Medicare cuts to medical education are clearly not the answer, and Congress needs to look beyond the temptation to just cut and see the bigger harm to our country.

Representative Carolyn B. Maloney, a Democrat whose district includes parts of Manhattan and Queens, said in a statement that cutting money for medical education would be a mistake. Ten teaching hospitals on the East Side of Manhattan rely on the subsidy and “train doctors who will, once trained, provide care for Americans across the country,” Ms. Maloney said.

If Medicare payments are cut for graduate medical education at teaching hospitals and academic medical centers, this will have significant financial impact on other areas of these institutions, particularly continuing medical education (CME) departments.  Resources and staff in CME departments are already scarce, and sometimes nonexistent. 

Henry Black, MD sums it up nicely “How can we do all of these things — reduce the number of residents whom teaching hospitals train (an inevitable consequence of reducing the Medicare “subsidy”) at the same time that we limit the number of hours those residents are allowed to work — yet still increase the number of physicians we produce? Do the math: this simply doesn’t compute.”

If cuts occur, the resources of CME departments may have to be used and altered to account for such cuts, and this will make it harder for institutions to provide meaningful CME to their staff and health professionals as well. If the faculty to who are educating these graduate medical students and residents cannot get meaningful CME from their own institutions, it is difficult to see how will they be able to ensure that our next generation of doctors is the most educated and up-to-date?

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