Reconsidering GME Funding

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Commentary — September 2014

Tex Med. 2014;110(9):53-54. 

By John C. Jennings, MD

With predictions of significant future physician workforce shortages, Texas has increased the number of medical school graduates through approval of new medical schools and increases in existing schools' class sizes. However, the number of graduate medical education (GME) residency slots has not increased proportionately. 

This year, more than 20,000 graduates of U.S. medical schools applied to the National Resident Matching Program, and hundreds of U.S. graduates were left without residency positions. (See "Match-makers: Coaching Students to Maximum Match Potential.") One basic problem is funding mechanisms are not in place to produce the GME positions to accommodate the growing numbers of medical students. 

Addressing the physician workforce shortage goes beyond graduating more medical students. It's also a matter of providing appropriately trained numbers of specialists and primary care physicians to meet population needs through GME. 

Medical schools can help by directing students into areas of practice in which the student's individual interests and talents can be maximized to fulfill health care needs. Our medical education system has produced large numbers of specialists and fewer primary care physicians. Compounding the problem is a geographic maldistribution, with four of five new physicians going into practice areas already oversupplied with physicians. 

Beyond medical school, GME is absolutely necessary to generate the finished-product physicians who practice high-quality, patient-centered care, perform effectively in multidisciplinary teams, and extend access to areas of need. Our current system of GME is dependent upon a limited number of resources for financing. Medicare pays the largest portion of GME costs by directly reimbursing teaching hospitals a pro rata share of those costs. 

Medicaid funding for GME costs links to state workforce policy goals and varies dramatically from state to state. Other lesser sources include the Department of Defense, Veterans Affairs, the Health Resources and Services Administration, and the National Institutes of Health. Some third-party payers give indirect GME support through higher reimbursement for teaching hospitals, but the majority of insurers, while benefitting from the GME pipeline, do not contribute directly to financing GME.

The Balanced Budget Act of 1997 capped the number of resident positions funded by Medicare. The direct GME payments for residency are intended to compensate for costs, including resident and faculty salaries. 

Indirect medical education (IME) payments are partial compensation to teaching hospitals for higher patient care costs associated with medical education. Although the amount of funding provided through Medicare IME has been steadily declining, the current Medicare Payment Advisory Commission now suggests a 50-percent cut. 

The rationale for cuts in IME is based upon decreasing the uninsured population through the Affordable Care Act, with a resultant increase in patient revenue for teaching hospitals. The increase in patient revenue supposedly diminishes the need for designated IME. A large number of the accredited sponsoring institutions of U.S. residency programs, however, are not hospitals but rather universities or other educational entities, all of which necessarily contract with the teaching hospitals for GME funds. 

The increased patient revenue from the previously uninsured goes into the general operational hospital revenue, rather than being designated for support of teaching programs. The lack of specifically labeled educational funds puts GME support in direct competition with other operational needs of hospitals. The potential unintended consequences of this change in funding streams can create less incentive for teaching hospitals to cover the balance of unreimbursed GME costs and a negative incentive to create new resident positions.

On top of that, perspectives differ on changing GME funding. The federal government is in favor of substantial reductions. The Council on Graduate Medical Education has recommended current levels of GME funding be preserved and 3,000 new GME positions be established to meet rural and urban underserved communities and to satisfy unmet needs in primary care, surgery, and psychiatry. 

The Association of American Medical Colleges recommends an additional 15,000 positions with no limitations. Although there is general agreement GME financing is too dependent on Medicare as the major payer, the medical education community has presented no cohesive message for how to expand financial support for GME.

The time has come to reengineer GME funding. The current hospital-based GME financing mechanism doesn't reflect our population's diverse needs. The educational community recognizes the need to shift more physician training into ambulatory settings and facilities where the majority of their practice will take place. This implies resident physicians should no longer be primarily employed by teaching hospitals, with their education largely confined to in-patient service duties in a tertiary center. 

The Accreditation Council for Graduate Medical Education resident education sponsoring institutions should have unrestricted flexibility to rotate trainees into alternative settings, where they might later choose to practice. Hospital-based educational experiences remain important, but changes in GME funding must reflect the reality of an evolving health care system. To make this happen is going to require a thoughtful effort on the part of all stakeholders involved in medical education.    

American Congress of Obstetricians and Gynecologists President John C. Jennings, MD, of League City, is chair of the Texas Medicine Editorial Board. 

RELATED STORY: See "Match-makers: Coaching Students to Maximum Match Potential."

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