Even though New York's Beth Israel Medical Center has agreed to cut 125 residents from its 500-resident roster over the next five years, the dwindling staff numbers aren't expected to register a big blow.
Beth Israel is one of several hospitals in New York state that is participating in a federal demonstration project aimed at getting teaching hospitals to use fewer residents. The incentive: hefty payments for each cut.
A provision in the balanced-budget law Congress enacted this summer offers similar financial incentives to teaching hospitals across the nation.
"We've been running like crazy without any control on the physician supply," says medical economist Eli Ginzberg, director of the Eisenhower Center for the Conservation of Human Resources at Columbia University, New York. "This is a first step in trying to put the physician supply issue onto the national agenda."
Residency programs have grown virtually unchecked for the past few decades; the number of residents training in the U.S. is now 100,000, compared with 60,000 in 1980, according to the American Medical Association. Approximately 24,000 first-year residents entered programs this year at 1,100 teaching institutions.
At the same time, managed care and an increasing emphasis on primary care have decreased the need for teaching hospitals to churn out highly trained specialists, creating even more pressure to scale back graduate medical education.
In 1995, the Pew Health Professions Commission warned of a physician surplus and suggested that 25% of medical schools be closed and residency programs be trimmed. While many program administrators agreed, few reduced their numbers. The payment structure, they said, offered no incentive to do so. Simply put, more residents equaled more money.
Medicare pays teaching hospitals both the direct costs, such as salaries, associated with teaching residents and the indirect costs, such as research and the care of extremely ill patients, who typically are treated at teaching institutions. Between fiscal 1990 and fiscal 1997--which ended Sept. 30--direct payments increased to $2.5 billion from $1.7 billion, and indirect payments rose to $4.6 billion from $2.9 billion. The total Medicare GME payment in fiscal 1997 was $7.1 billion.
"The goal to decrease house staff, which everybody subscribes to in theory, has not happened much in principle, because when you reduce house staff you end up reducing reimbursement," says Barry Stimmel, M.D., dean of graduate medical education at Mount Sinai Medical Center, New York. "You also have to provide services (to patients) that the house staff has been providing. So for that reason, there's been hesitation over the years for anyone to decrease their number of residents."
In February, HCFA unveiled its New York state demonstration program, which offered incentive payments totaling $400 million over six years to teaching hospitals that agreed to reduce their residency programs by 20% or 25%. During the first year of the program, HCFA will pay the hospitals at a rate of 100%, as if the residents were still there. The payments will gradually decrease to zero.
The program calls for New York to eliminate 2,000 residents by 2001, saving HCFA approximately $300 million in Medicare payments. Forty-two of the state's 76 teaching hospitals have signed on, including some of New York's largest teaching facilities, such as Bellevue Hospital Center and New York University Medical Center.
"We saw the handwriting on the wall--that there is going to be an active downswing of support for house staff--and realized we needed to figure out how to cope with those new movements," says Thomas Killip, M.D., executive vice president of Beth Israel. The medical center has agreed to downsize its house staff by about 28%, or 125 residents, over the next five years. "This is getting our foot in the water with some hold-harmless support."
In August, Congress announced that a similar program, with some variations, would be available to all teaching hospitals until Nov. 1, 1999. In exchange for gradually decreasing Medicare payments, a hospital with, for example, more than 600 residents but fewer than 750 would cut 150 residents. Or if primary-care programs have grown by at least 20%, the hospital would cut 20% of its residents. Hospitals that fail to make the agreed-upon reductions will have to repay the money received.
Although the final rules for the national program have not been published, critics say the deal is not as sweet as the one offered to New York. For example, in the national program, there is no payment for the first 5% cut. "Everyone was interested in (the national program) under the criteria we had, but when you start taking away the incentives, the enthusiasm diminishes considerably," Stimmel says.
New York hospitals were targeted for the demonstration program because they train a disproportionate share of the nation's residents--15%--and receive 20% of Medicare's annual GME spending. The number of residents at New York hospitals has increased by 11% in the past four years.
"New York hospitals have become highly reliant on residents to provide care," said former HCFA Administrator Bruce Vladeck when the demonstration program was announced. "In an increasingly competitive healthcare market, and given the widespread concern about oversupply of physicians, such a heavy emphasis on residents is no longer appropriate."
Mount Sinai is hoping to trim fat without hurting its bread-and-butter programs; transitional and one-year programs will be the first to go, Stimmel says.
Long Island Jewish Medical Center, New York, will look to its subspecialty programs for a 113-resident cut, according to Philip Lanzkowsky, M.D., the facility's executive vice president for medical affairs and medical director.
"It's basically a shift in the paradigm of who's going to be providing the care," Lanzkowsky says. "The workload will be picked up by nurse practitioners and physician assistants where it's required, and the existing staff will just have to work a little harder than they did previously."
Although the idea of working harder may not sit well with attending physicians, it is the future of academic medicine, Lanzkowsky says. "People don't like to work harder," he says, "but we can't look at this in a vacuum. It has to be viewed as part of an overall change in the medical delivery system."
Janis Orlowski, M.D., executive director of operations for Rush Medical College in Chicago, supports some reductions but suggests that residents aren't so easily replaced. "If you just substitute on a one-to-one basis your residency work force for some other work force, you're going to spend more money because most residents work more than 40 hours a week," she says. "If I just decreased the number of residents and took the money, it would seem like a good idea, but not if I have to replace them with expensive nurse practitioners and physician assistants." Rush employs 627 residents.
Boston-based Partners HealthCare, which employs about 1,000 residents at Massachusetts General and Brigham and Women's hospitals, didn't wait for government incentives to trim its numbers; Partners is two years into a 20% reduction plan of its own. Nearly all its programs will face cuts, with some subspecialty programs taking a 35% hit, according to Debra Weinstein, M.D., director of graduate medical education.
Although Partners now hopes to be grandfathered into the national program, it would have committed to the cuts without any government incentives, Weinstein says. "Market pressures are certainly working to control the work force and those are more powerful than the government."
In fact, some say participation in the voluntary program may be low because most teaching hospitals already are reeling from other balanced-budget provisions, namely the residency cap and the reduction in indirect payments.
As of Oct. 1, Medicare began to base its payments on the number of residents enrolled on Dec. 31, 1996. Because the cap is retroactive, some programs are bound to have exceeded that limit and come up short financially.
Also effective this fiscal year, indirect medical payments will be lower. Historically, Medicare indirect payments have been tied to the number of residents per hospital bed, but the new formula, which will save an estimated $1.6 billion, calls for a gradual decrease in payments over the next five years.
Even if participation in the national program is low this year, the concept of voluntary reduction is a step in the right direction, says Robert Dickler, M.D., senior vice president at the Association of American Medical Colleges.
"The incentive program provides a way for hospitals who make future cuts to more effectively manage them," he says. "This is a very important but limited first step."