HCFA is considering regional demonstration projects to test the feasibility of pulling graduate medical education dollars out of Medicare rates and creating explicit funding pools to compensate hospitals for their teaching costs, MODERN HEALTHCARE*has learned.
Although details remain sketchy, healthcare executives said the policy goals of such a demonstration would be to protect teaching hospitals' GME funding in the transition to a more competitive, managed-care marketplace.
Under existing Medicare payment policy, the more residents hospitals train, the more money they get, "so it's sort of been a disincentive to reduce residents," said Edward Salsberg, director of the Center for Health Workforce Studies at the School of Public Health in Albany, N.Y.
The pooling idea neutralizes current financial disincentives, which penalize teaching hospitals for shrinking the number of medical residents they train. It also could be structured to incorporate incentives to increase primary-care residencies.
The Greater New York Hospital Association acknowledged that it is discussing such a plan with HCFA. Some 85 of its 100 hospital members are teaching facilities. However, a source familiar with the demonstration proposal said HCFA is entertaining the possibility of giving waivers to several regions with high concentrations of teaching hospitals, not just New York City.
A HCFA spokesman referred calls seeking comment on the discussions to the GNYHA.
But Chris Jennings, a White House healthcare adviser, confirmed that HCFA is working on some initiatives to reform GME funding. Jennings said he is unfamiliar with the details.
Mary Johnson, a GNYHA spokeswoman, said nothing has been officially submitted to HCFA, adding that she is unaware of any official timetable for submitting a proposal.
"Basically we have been talking with (HCFA Administrator) Bruce Vladeck and HCFA in general about this concept, but it's really something we're still in the exploring stages on," Johnson said. "It's not something we really have a lot of details about or something that's been decided upon.9
Currently, New York hospitals receive about $1 billion in GME payments for direct medical education costs, such as resident salaries, and indirect medical education costs, including the higher costs associated with running a teaching hospital. Medicare is projected to spend $6.7 billion in GME payments to hospitals nationally in the fiscal year ending Sept. 30.
Executives at Montefiore Medical Center in the Bronx, one of New York's major academic medical centers, believe creating a direct funding pool for GME would be "a very positive and progressive step," said Joel Perlman, senior vice president of finance and chief financial officer. As more Medicare beneficiaries move to managed care, teaching hospitals are becoming more concerned about the GME dollars embedded in HMO capitation rates, he said. The fear is those funds will erode in rate negotiations with HMOs.
It isn't clear whether HCFA, through the demonstration projects, intends to pool all Medicare GME dollars or just GME funds in Medicare HMO rates.
Sources who asked not to be identified said they believe the national discussions are on a fast track, possibly speeded along by the Clinton administration's desire to announce something before the November elections. However, any number of hurdles could delay the process. Difficult structural and policy decisions include how to pool GME dollars, how to ensure the program doesn't raise spending, whether to include direct and indirect GME funding, and whether to make participation voluntary or mandatory.
Other regions mentioned as demonstration candidates include Chicago, Los Angeles, Miami and upstate New York.