July 30, 1999

Health Staff Briefed on BBA's Impact on Teaching Hospitals

Over 50 Congressional House staffers from 13 states in the Northeast-Midwest Congressional Coalition were briefed by leaders of four AAMC member institutions on the Balanced Budget Act (BBA) of 1997's impact on teaching hospitals. Ralph Muller, president and CEO, University of Chicago Hospitals and Health System; Ed Howell, director and CEO, University of Iowa Hospitals and Clinics; Elaine Ullian, president and CEO, Boston Medical Center; and Dr. Harold Paz, dean, University of Medicine and Dentistry of New Jersey, described the BBA's impact on teaching hospitals' ability to maintain their patient care, medical education and research missions as well as the overall economic impact on the Northeast and Midwest regions.

Explaining that the Northeast and Midwest regions received 66 percent of all Medicare Indirect Medical Education (IME) payments, 70 percent of Direct Graduate Medical Education (DGME) payments, and 44 percent of all Disproportionate Share Hospitals (DSH) payments in 1996, Mr. Muller stated AAMC analyses predict the typical major teaching hospitals will lose $46 million in Medicare support by 2002 as a result of the BBA. He added that an estimated one hundred major teaching hospitals are projected to be in the red by 2002. After describing the projected future financial picture of teaching hospitals, Mr. Muller outlined the AAMC's BBA relief agenda, which includes:

• halting the BBA's IME and DSH cuts;
  
• paying teaching hospitals 100 percent of GME payments associated with Medicare managed care enrollees;
  
• paying eligible hospitals 100 percent of Medicare DSH payments associated with Medicare managed care enrollees; and
  
• reforming the outpatient PPS.

Mr. Howell focused on the important role played by his institution, Iowa's only academic medical center. He described the University of Iowa Health Care's highly specialized services to the severely ill and indigent, community outreach programs, and collaborations with rural providers. He explained the BBA's Medicare reductions threaten the ability of his university to continue these services, particularly in the more rural areas. Mr. Howell said the BBA is projected to reduce Medicare payments to his institution by approximately $65 million over five years -- with reductions in IME payments the single largest cut.

Dr. Paz discussed the research mission of medical schools and teaching hospitals, explaining that much of NIH funded research is conducted at teaching hospitals. Stating that New Jersey's teaching hospitals are estimated to lose up to $500 million in Medicare payment losses, Paz stressed that the BBA and the competitive market place pose as threats to the research mission. Paz emphasized the need to preserve the infrastructure of teaching hospitals, suggesting that teaching hospitals' ability to foster discovery of new treatments and cures would otherwise be compromised.

Emphasizing that teaching hospitals are also safety net providers, Ms. Ullian described the many safety net programs unique to Boston Medical Center (BMC). Offering that 21 percent of the care provided by BMC is free care, Ms. Ullian indicated that the BBA is putting at risk BMC's interpreter, homeless, AIDS, and outreach services. She added that without BBA corrections, she fears the safety net infrastructure will be dismantled.

Information: Lynne L. Davis or Paul Bonta, AAMC Office of Governmental Relations, 202-828-0526.