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August 12, 2014

Institute of Medicine Recommends Value-Based Payment System and More Transparency For Graduate Medical Education


"There is a striking absence of transparency and accountability in the GME financing system for producing the types of physicians the nation needs," states the Institute of Medicine's Committee on the Governance and Financing of Graduate Medical Education (GME).

The Committee recently published a report entitled Graduate Medical Education that Meets the Nation's Health Needs and held a corresponding discussion. They recommend significant changes to GME financing and governance with the goal of shifting the program "to a performance-based system," rather than one that directs money to facilities with an accredited training program.


Currently, the vast majority of public financing for GME—totaling $15 billion in 2012—comes from Medicare, which financed an estimated $9.7 billion of graduate medical education that year. In 2012, the Josiah Macy Jr. Foundation asked the Institute of Medicine to conduct an independent review of the governance and financing of the GME system. Eleven other private foundations provided additional support for the study, including the ABIM foundation, Aetna Foundation, Kaiser Permanente, and UnitedHealth Group Foundation as well as the Health Resources and Services Administration (HSRA) and the Department of Veterans Affairs. Eleven U.S. senators, from both sides of the aisle, encouraged the IOM to undertake the study.

Outdated GME Model

Medicare GME payment rules date as far back as 1965, "a time when hospitals were the central, if not exclusive, site for physician training," IOM states. The payment system relies on a class-based reimbursement model, even though Medicare is moving dramatically away from that. Hospitals services remain essential, but "the burden of chronic disease, the need for greater emphasis on preventative care, and modern information technologies…mean that health care increasingly takes place in community settings and relies on non-physicians and integrated care models," the report argues.

In short, IOM states, healthcare is moving towards a value-based system for hospitals and physician reimbursement. The only place not moving in this direction is graduate medical education.

"Newly trained physicians," for example "are not very well equipped for ambulatory care even though that's where most of the care is provided in the United States," stated committee co-chair Gail R. Wilensky of Project Hope at the Public Briefing about the report.

"If we were to continue to recommend funding using Medicare resources, we needed to have it redesigned and repurposed to develop a physician workforce we deemed appropriate for the 21st Century."

Committee Goals

The IOM Committee identifies six goals for an improved GME financing system.

  • (1) Encourage production of a physician work-force better prepared to work in, help lead, and continually improve an evolving health care delivery system that can provide better individual care, better population health, and lower cost.
  • (2) Encourage innovation in the structures, locations, and designs of GME programs to better achieve Goal 1.
  • (3) Provide transparency and accountability of GME programs, with respect to stewardship of public funding and the achievement of GME goals.
  • (4) Clarify and strengthen public policy planning and oversight of GME with respect to the use of public funds and the achievement of goals for the investment of those funds.
  • (5) Ensure rational, efficient, and effective use of public funds for GME in order to maximize the value of the public investment.
  • (6) Mitigate unwanted and unintended negative effected of planned transitions in GME funding methods.

The Committee noted that they "were struck" by the lack of accountability in graduate medical education with regards to examining patient need. "The only mechanism that currently exists is that the program be accredited." There was virtually no oversight into whether a particular GME program "makes sense in terms of the needs of the population."

Committee Recommendations

The Committee provided recommendations to further their goals with a view towards the next decade.

According to the IOM committee, they began their deliberations with a very basic question: "Should the public continue to support GME, and, if so, at what level?" Ultimately, the committee concluded that Medicare GME funding should be maintained at the current level, but that payment methods should be modernized reward performance, ensure accountability, and incentivize innovation in the content and financing of GME. Given the amount of change the healthcare delivery system is undergoing, Medicare funding could provide "key leverage" to help produce meaningful change and lead to efficient care provided at lower cost.

While the Committee wants to keep the same amount of funding, they recommend taking a hard look at where these funds are going.

"IOM committee strongly urges Congress to amend Medicare law and regulation to allow a transition to an accountable, performance-based system," states the report. "Transforming Medicare's role in financing GME will be a complex undertaking and requires careful planning." Thus, the committee recommends "a 10-year transition from the status quo to full implementation of its recommendations, followed by a reassessment of the need for continued Medicare GME funding."

A fundamental aspect of the recommendation is a two-part governance infrastructure for federal GME financing modeled after the Medicare payment advisory commission. "A GME Policy Council in the Office of the Secretary of the Department of Health and Human Services should oversee policy development and decision making," states the report. A GME Center within the Centers for Medicare & Medicaid Services "should function as an operations center with the capacity to administer payment reforms and manage demonstrations of new payment models." A central function of this Council would be to "serve as coordinator between accrediting agencies," noted Wilensky.

Finally, the Committee recommended establishing a two-part Medicare GME fund. First would be a GME "Operational Fund" to finance ongoing residency training activities and, second, a smaller "Transformation Fund" to finance development of new programs, infrastructure, performance methods, and other "priority specialty areas and priority geographic areas that have currently been "given short-shrift in the distribution of Medicare Funds," states Wilensky. Currently, the Committee believe 90 percent will be allocated to the Operational Fund, and 10 percent into Transformation Fund. This allocation will shift as time goes on, and will involve moving from a cost-based system to an outcomes-based system.

Towards the end of the decade, IOM recommends an additional assessment should be done to evaluate the results of the changes and whether or not there continues to be a rationale for Federal funding going forward.

Debra Weinstein of Partners Health System summarized the path that lies ahead: "Strategically investing in GME so we can identify the national health outcomes we think our important, clarify what those outcomes are specifically, develop metrics for measuring them, and then tune the payments towards those metrics."


The IOM report's goals demonstrate the current healthcare migration towards low cost, quality-based initiatives. It will be interesting to follow the next steps of the committee in implementing their recommendations.

The Committee's recommendations haven't been popular with some groups. For example, the Association of American Medical Colleges responded by saying:

"[T]he IOM's proposal to radically overhaul graduate medical education (GME) and make major cuts to patient care would threaten the world's best training programs for health professionals and jeopardize patients, particularly those who are the most medically vulnerable. The committee's proposals assume that in the coming decades, our health care workforce would require no expansion of the highly specialized services or physicians equipped to meet the needs of a growing and aging population, with ever greater need for both primary and specialty health care."

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