A grand payment experiment designed to shrink the number of new physicians trained at New York teaching hospitals is falling apart.
Seven major institutions have dropped out of the quirky Medicare project, and many more are thinking about pulling the plug (See chart). Most have found the demonstration to be too restrictive and administratively cumbersome. And providers now realize the difficulty of accomplishing steep reductions in residency slots over six years.
HCFA agreed to dole out $400 million over six years to hospitals that reduce residency slots-particularly specialists-by 20% to 25%. When first announced, 41 hospitals agreed to participate. At least 2,000 of the 10,286 residency slots in those institutions were to be eliminated.
A much more palatable solution cropped up in the federal Balanced Budget Act of 1997. That law eases some of the pain of eliminating residency positions by gradually reducing graduate medical education payments. It isn't as lucrative as the demonstration but has fewer strings attached.
HCFA and executives of the Greater New York Hospital Association unveiled the GME demonstration with great fanfare on President's Day in 1997. Drawing national scrutiny, the experiment was likened to farm subsidies because hospitals would be paid for not training physicians.
The project prompted a national voluntary program enabling teaching hospitals in other states to receive subsidies, too. HCFA has yet to write rules implementing that program.
Officially, at least, 42 hospitals remain in the demonstration. The hospital association counts 40 but declined to say who's out.
Beth Israel Medical Center in New York intends to withdraw, sources said. Deborah Considine, corporate director for GME at the hospital's parent, Continuum Health Partners, and a project proponent, wouldn't comment until HCFA is notified. But she acknowledged that Beth Israel shares the same concerns as the institutions that have already bowed out.
A six-member consortium of hospitals in Rochester is also considering dropping out. "The incentives just aren't lining up properly," said John Meade, president of the Hospital Consortium of Greater Rochester.
Under the demonstration, HCFA figured that eventually the demonstration project would save Medicare $200 million to $300 million annually as the number of residents in training decreased.
Not long after the program's launch date, July 1, 1997, some major teaching institutions began bailing out. Others joined the program the following July, but the exodus continued. According to HCFA, as many as 49 hospitals have participated at one time or another.
Hospitals that failed to shed enough positions must fully reimburse Medicare. But a HCFA spokeswoman said that isn't an issue because hospitals have not yet received a dime in extra payments. The subsidies are figured into hospitals' annual settle-ups with the government for prior cost-reporting periods.
Patricia Wang, senior vice president of finance and managed care at the GNYHA, acknowledged the difficulties some hospitals have experienced. "It doesn't necessarily meet everybody's individual needs," she said. But there are no plans to amend or discontinue the demo. "We really viewed it as an experiment."