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April 1, 1999, Thursday, Late Edition - Final
SECTION: Section A; Page 1; Column
1; Metropolitan Desk
LENGTH: 1751 words
HEADLINE: Many Hospitals in New York Quit Plan for
Fewer Doctors
BYLINE: By LISA W. FODERARO
BODY:
Two years ago, dozens of teaching hospitals
across New York State embraced an unusual pilot program to ease the nationwide
glut of physicians. The Federal Government would pay bonuses to the hospitals if
they trained fewer doctors, just as it once paid corn farmers not to grow corn.
But half those hospitals have now dropped out of the plan after finding
that they cannot function without the low-cost labor provided by doctors in
training, known as residents. The development, which comes even as the
Government is planning to expand the New York pilot program nationwide, raises
doubts about Federal efforts to curb the number of doctors in the nation, and it
illustrates a conundrum of health care today. While society at large can ill
afford to have an oversupply of doctors, which experts say drives up the cost of
health care, hospital officials cannot afford to run their institutions without
the trainees who will add to that oversupply.
"The financial benefits to
teaching hospitals are still so great that there's an incentive to train more
physicians, whether they are needed in the long run or not," said Edward
Salsberg, director of the Center for Health Workforce Studies at the State
University in Albany.
The pilot program in New York was devised by
officials from the Greater New York Hospital Association, an influential trade
group. It was approved in early 1997 by the Federal agency that pays for
training of physicians, the Health Care Financing Administration, which hoped to
reap eventual savings of hundreds of millions of dollars.
Essentially,
hospitals needed to cut 20 percent to 25 percent of their residents over six
years to receive the subsidies.
But the hospitals found that in many
cases, they were replacing the trainees -- fully qualified medical doctors who
log 80-hour weeks and earn about $50,000 a year -- with more established
doctors, who work a more typical 40-hour week and earn about $150,000.
"It became clear how indispensable the residents are to providing
high-quality care on a day-in, day-out basis," said Kenneth E. Raske, president
of the hospital association. "When you actually began to go to the drafting
board and engineer it, that's when all the problems began to pop up. It became
clear that they couldn't do it."
The hospitals that have dropped out --
mostly large private institutions like New York Hospital and Beth Israel Medical
Center -- knew what the program entailed when they entered it. But they had been
counting on two things that never materialized: declining patient populations,
which would reduce the need for residents, and sharp cuts in the Medicare
reimbursements paid to hospitals to train doctors.
The two dozen
hospitals that have remained in the program have, in fact, experienced declines
in their patient loads, making it easier for them to pare their resident
positions.
The Westchester Medical Center in Valhalla, N.Y., eagerly
joined the program but soon discovered that the "replacement costs were
extraordinary," said Edward A. Stolzenberg, the center's director.
Center officials estimated that it would actually cost the institution
$1.5 million a year to stay in the Federal program. So three months ago, they
withdrew and are now planning to put back most of the 40 resident positions they
had cut.
While costs were the main reason that Westchester Medical bowed
out, the less tangible benefits of running a robust training program also
affected the decision. "Residents keep you on the cutting edge," Mr. Stolzenberg
said. "They push the faculty to a higher standard of care. When a student is
watching you and you're teaching, it's harder to get away with short cuts."
For years, health care experts have decried the overabundance of doctors
in the United States. A surplus of doctors, particularly specialists, pushes up
health costs, economists say, and drains Medicare, the Federal insurance program
for the elderly that provides $7.4 billion a year nationally to hospitals for
medical training. In 1995, one group, the Pew Health Professions Commission,
recommended shutting down a quarter of the nation's medical schools.
On
the face of it, an excess of doctors could be expected to reduce costs, based on
theories of supply and demand. But most health economists say the opposite is
true. The oversupply of doctors in many specialties and in urban areas of the
country, they say, results in unnecessary tests, procedures and referrals to
other doctors.
"In the case of medicine, supply and demand are not
dependent," said Mr. Salsberg of the Center for Health Workforce Studies. "If
you have 100 doctors, they will keep themselves busy, and if you have 200
doctors, they will keep busy also. If a specialty gets crowded, you wind up with
subspecialists, and the danger is they will have a narrower perspective and you
can end up with more services being delivered."
New York State, which
trains 15 percent of the country's physicians, is by far the nation's largest
producer of new doctors. That is one reason the Health Care Financing
Administration was interested in pursuing a pilot program in New York. The
agency is now writing regulations that would expand the program nationwide, as
required by the 1997 Balanced Budget Act.
Health care analysts and even
some hospital officials say Medicare's reputation over the years as a generous
provider of training dollars has led, in part, to the continuing expansion of
hospital residency programs. Medicare pays hospitals up to $100,000 a year for
each resident they train, and there was no ceiling in early 1997 on the number
of residents that a hospital could have.
Some health care experts say
hospitals have traditionally made money on the trainees, though officials at the
Greater New York Hospital Association deny that, pointing out the costs of
employment benefits, administration costs and the inefficiencies associated with
rookie doctors.
The 49 hospitals that joined the Federal program in New
York, officially known as the Medicare Graduate Medical
Education Demonstration Project, were facing a radically altered health
care landscape that offered unprecedented financial pressures.
First,
there was managed care, newly established in New York and dictating price
concessions from doctors and hospitals. Then, there was deregulation. At the
start of 1997, New York lifted the state-mandated rates that hospitals could
charge insurers, a move that ushered in a new era of competition among hospitals
for managed-care contracts.
Finally, Medicare itself seemed poised to
scale back the reimbursements to hospitals for training doctors as Congress
hashed out the terms of the 1997 Balanced Budget Act. A separate proposal before
the Medicare Commission was even more worrisome, removing the financing for
graduate medical education from Medicare altogether and handing
it over to a special appropriations budget so that New York would have to
compete with other states for a limited pool of money.
"A lot of
hospitals thought inpatient capacity would plummet like a stone," said Patricia
J. Wang, a senior vice president of the Greater Hospital Association of New
York, "and if it drops, you can't have all these residency programs."
Hospital officials in New York reasoned that the Federal subsidy program
would help end their reliance on medical residents, who treat patients under
attending physicians' supervision, and would help them withstand expected cuts
in Medicare funds. Under the pilot program, Medicare continues to pay
participating hospitals as if those young doctors were still there, slowly
phasing out the payments over six years.
But for many hospitals, the sky
never fell. The average length of time a patient stays in the hospital has
dropped, but the number of admissions has stayed about the same or even risen.
At the same time, the Balanced Budget Act lowered the reimbursement rate just
slightly, although it did cap the number of residents that Medicare would pay to
train at 1996 levels.
Perhaps most importantly, the Balanced Budget Act
created its own incentive for hospitals to shrink residency programs. Though the
subsidy was smaller than New York's pilot program, it did not entail the
specific reduction targets or timetables. Hospital officials realized that they
could derive some benefit from downsizing, but at their own pace.
The
hospitals in the New York program were also struggling to cut their residency
programs while adhering to state rules, adopted in 1989, that limit the
workloads of medical residents to 80 hours a week.
"They were trying to
meet two contradictory objectives," said Bruce C. Vladeck, former administrator
of the Health Care Financing Administration, the Federal agency that runs the
pilot program.
"One objective was to reduce the number of residents and
the other was to reduce the number of hours the residents are working," said Mr.
Vladeck, who is now the senior vice president for policy of the Mount Sinai
N.Y.U. Medical Center and Health System. "They weren't able to square that
circle."
To date, 26 hospitals have left the program, including three
hospitals in the Mount Sinai consortium and five in the New York University
consortium that defected early last month. Officials of the Health Care
Financing Administration, which is part of the United States Department of
Health and Human Services, are certainly not pleased that so many participants
have pulled out but assert that the program has still succeeded in raising
awareness.
"We're not surprised that some of the hospitals have chosen
to withdraw because the residency reductions are demanding," said Dr. Robert
Berenson, director of the administration's Center for Health Plans and
Providers.
The retreat by so many hospitals from the New York program
may come as a surprise to critics from other states who contended that the
Federal Government was playing favorites in giving New York such a sweet deal.
If the original participants had all stayed in the program, the Government would
have paid the New York hospitals $400 million in incentives. But that was $300
million less than what the Government would have spent if the current system was
continued.
"This ought to pretty conclusively demonstrate to people that
this was not a giveaway of largess from the Federal treasury to New York
hospitals," said James R. Tallon, president of the United Hospital Fund, a
research and philanthropic group. "It was partial assistance for a very
difficult shift." http://www.nytimes.com
LOAD-DATE: April 1, 1999 
