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CME Rep. 10 - A-99 -- page

REPORT OF THE COUNCIL ON MEDICAL EDUCATION

									CME Report 10 - A-99

Topic:	Policy Options for Support of Graduate Medical Education

Presented by:		Robert M. Daugherty, Jr., MD, PhD, Chair

Referred to:		Reference Committee C
			(James P. Marvel, Jr., MD, Chair)

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The recommendations in Council on Medical Education Report 6-I-98, which were adopted as amended, asked the American Medical Association to “hold an open hearing early in 1999 on the topic of the number of medical students in U.S. MD- and DO-granting schools and on the number of graduate medical education positions” as part of a review of existing AMA policy.  Suggestions for changes in policy on “the educational pipeline for physicians” are to be brought to the House of Delegates in June of 1999.  

The review and, perhaps, amendment of policy called for in CME Report 6-I-98 is timely.  The Medicare Payment Advisory Commission (MedPAC) is due to release recommendations on graduate medical education financing in August of 1999 and it is likely that the MedPAC recommendations will be introduced as legislation before the end of 1999.  As called for in CME Report 6-I-98, results of the open hearing will be used to inform the AMA’s attempts to influence the emerging government policy on the physician workforce and the financing of graduate medical education.

The open hearing was held on March 20, 1999, during the AMA National Leadership Development Conference.  Invitations were sent to a number of groups within and external to the AMA with interests in graduate medical education (GME).  Prior to the hearing, a Council on Medical Education Working Group* reviewed existing AMA policy and developed a draft set of summary recommendations on GME positions and financing.  These recommendations were shared with participants at the hearing and formed the basis of testimony and discussion.

The Working Group used the principles in the 1997 “Consensus Statement on the Physician Workforce” as a basis for its recommendations.  The Consensus Statement was developed by the AMA in collaboration with the American Association of Colleges of Osteopathic Medicine, the American Osteopathic Association, the Association of Academic Health Centers, the Association of American Medical Colleges, and the National Medical Association.  The principles in the Consensus Statement, which were adopted as AMA policy in 1997 (AMA Policy Compendium, Policy H-305.968), can be summarized as follows:

•	Align the number of entry-level graduate medical education positions more closely with the number of graduates of accredited U.S. medical schools;
•	Provide opportunities for non-citizen/non-permanent resident international medical graduates to train in the U.S., but do not finance this experience from Medicare or any future GME funding pool;
•	Establish a national physician workforce advisory body to monitor and periodically assess 
the size and specialty composition of the physician workforce;
•	Establish a national all-payer pool to provide a stable funding source for the direct costs 
of graduate medical education; and
•	Establish a stable source of funding for teaching institutions to cover the higher costs associated with a more complex case mix, the participation of learners in the delivery 
of care, and the conduct of research and development of new technology.

This report provides background data, summarizes existing AMA policy, and suggests options for additional policy in three general areas:  (1) the number of GME positions, and the eligibility for and allocation of these positions; (2) the mechanism that should be used for funding the direct costs of GME; and (3) the ways that could be used to support the traditional missions of academic medical centers.  The recommendations represent an attempt to clarify and expand the principles contained in the Consensus Statement, and to propose options for implementation.

In addition to the Consensus Statement (H-305.968), the suggested recommendations and strategies for implementation are based on a series of assumptions about the physician workforce and graduate medical education:

•	The number of physicians in the U.S. is moving toward oversupply, especially in some specialties and regions of the country (Policy H-200.990).
•	Regulating the number of physicians in graduate medical education is a necessary strategy 
•	to impact the eventual physician supply.  Planning efforts also should take into account the number of medical students in U.S. medical schools (Policies H-200.968, 200.961).
•	Graduate medical education produces a product that is of benefit to all consumers of health care.  It is, therefore, appropriate that all payers contribute to the financing of medical education (H-305.956).
•	During the process of adjusting the number of residency positions and shifting to new modes of GME financing, there should be transitional funding so as to prevent unintended negative effects on the missions of teaching institutions (H-305.968).

Graduate Medical Education Positions

In 1997, there were 25,816 filled graduate year one (entry-level) positions in allopathic and osteopathic residency programs.  These are positions that do not require previous graduate medical education.  In the same year, there were 17,907 graduates from MD- and DO-granting medical schools.  The total number of resident physicians in entry-level positions was, therefore, 144% of the total number of U.S. medical school graduates from Liaison Committee on Medical Education (LCME) and American Osteopathic Association (AOA) accredited programs.^1,2

In 1997, there were 24,516 resident physicians in entry-level GME positions in allopathic residency programs.  Of these, 2,708 individuals (about 11%) had had some previous GME in 
the U.S.  For example, some may have entered residency training after an osteopathic internship, some may have changed specialties, and some may have been doing an additional residency.  There are no comprehensive data on the numbers of residents that have re-entered a first year position for each of the preceding reasons.  However the fact that individuals do re-enter residency is an important element to consider when comparing the number of medical school graduates to the number of entry-level GME positions.^3

Of the 24,516 filled entry-level GME positions in allopathic residency programs in 1997, 6,257 (or about 25%) were occupied by international medical graduates (IMGs).  Of the IMGs in entry-level GME positions, 59% were U.S. citizens or permanent residents of the U.S.^3
Between 1993 and 1997, the total number of residents enrolled in GME programs remained about constant, and the number of residents in entry-level GME positions has decreased 5.8%.^3  The effects of the 1997 Balanced Budget Act (BBA) on the number of residency positions still are uncertain.  The BBA set a hospital-specific cap on the number of positions that would be funded under Medicare, based on the number of residents on duty at the end of 1996.  The BBA also has a provision for demonstration projects to provide transition funding to institutions that reduce the number of resident physicians, however, the regulations for this initiative have not yet been released. 

Consideration of the number of residency positions also should take into account trends in the number of U.S. medical school graduates.  Over the past 20 years, the number of allopathic medical schools decreased from a high of 127 to 125 and the number of graduates remained at about 16,000 per year.  The number of osteopathic medical schools increased in the same time period from 14 to 19 and the number of graduates increased from about 1,151 to about 2,100 
per year.  

In determining the number of entry-level residency positions, it is necessary to balance workforce considerations with the desire to preserve access to training positions and the needs of teaching institutions for the services provided by resident physicians.  Most proposals to limit the number of entry-level GME positions are based on the perception of physician oversupply.  There is current evidence that some physicians completing residency training in certain specialties and locations are experiencing difficulty in securing a non-academic practice position.^4  However, drastic cuts in the number of residency positions would limit choice of specialty for both U.S. 
and international medical graduates and also seriously impact teaching institutions.  Reducing 
the number of entry-level residency positions to 110% of the number of U.S. medical school graduates, as has been proposed by the federal Council on Graduate Medical Education (COGME) and others,^5 would result in a loss of over 6,000 positions.  The Council believes that 
a gradual reduction to 120% of U.S. medical school graduates would be a more balanced approach, which would allow space for graduates of U.S. medical schools, for U.S. citizen and permanent resident IMGs, and for some re-entry of individuals who had had previous residency training.  A decrease to 120% would mean a reduction of about 4,300 entry-level positions from current levels.  Over time, this would have a major effect on the total number of residents and 
on the eventual number of physicians.

Graduate medical education is the midpoint of medical education for U.S. medical school graduates.  It has been AMA policy that, in the event of reductions in GME positions, access should be maintained for U.S. medical school graduates and for IMGs already legally present in the U.S. (Policy H-255.974).  It also is AMA policy to support the position that IMGs who plan to return to their country of origin have the opportunity to obtain GME in the U.S. (Policy H-255.968) but that the issues involved in support of such physicians be separated from the issue 
of support for U.S. citizen or permanent resident IMGs (Policy H-255.989).  IMGs in exchange visitor (J-1 visa) programs provide valuable clinical service to teaching institutions as they pursue residency training.  However, the primary goal of U.S.-funded graduate medical education should be the preparation of the next generation of U.S. practicing physicians.  There should be other sources of funds for the training of individuals who will leave the U.S. and use their skills in their home countries, and there also should be other funding to support the needs of teaching institutions to deliver patient care. 

The AMA has longstanding policy that advocates workforce planning based on data (for example, Policy H-200.987).  Data analysis and planning should be conducted by a private/public advisory body that is immune from anti-trust constraints.  Such a body, which would exist outside the regular governmental structure and be exempt from antitrust constraints, could develop recommendations for the total number of GME positions to be funded and for the general distribution of positions across specialties.  The workforce advisory body also should advise 
on the distribution of the funds to support GME from Medicare or from a new payment system.  Private professional organizations, such as the Accreditation Council for Graduate Medical Education (ACGME) and its Residency Review Committees, medical specialty societies, and 
the AMA, should be given sufficient explicit immunity from antitrust constraints so that they 
may engage responsibly in the national debate on the physician workforce. 

The newly-created workforce advisory body should monitor changing workforce needs at the regional and specialty level, to ensure an appropriate allocation of positions.  In making an assessment of need, the contributions to the health care workforce of other health professionals should be taken into account.  This is not an easy assessment to make, however.  Staff from the AMA Medical Education Group have determined that there are 107 health-related professions and occupations that impact the work of physicians.  Some of these areas have experienced significant recent increases in numbers.^6

If reductions in the number of entry-level residency positions are to be made, allocation of the remaining positions should take into account such things as educational program quality, as assessed by the use of educational outcomes.  The Accreditation Council for Graduate Medical Education is engaged in an effort to study the issue of program quality and to identify appropriate and measurable outcomes of the educational process. 

The Funding of Graduate Medical Education

Currently, governmental sources (federal and state) are the only explicit payers for graduate medical education.  Medicare is the largest payer, contributing about $2.2 billion dollars in 1997 to cover the direct costs of GME, including resident salaries, supervisory costs, and overhead related to the educational program.  In 1997, the federal government also contributed $1.75 billion to GME through Medicaid.  The Department of Defense and the Department of Veterans Affairs together paid about $500 million dollars to support residency training in programs affiliated with their institutions.

The states also contribute to GME.  There are fee for service medical education payments under Medicaid.  In addition, a number of states have set aside funds to support the growth of family medicine training programs or departments, and some may support other primary care disciplines as well.  States contribute to public medical schools to support faculty salaries, which benefits graduate medical education programs.  Both states and the federal government support Area Health Education Centers, which serve as training sites for residents.

While there are a number of identifiable ways that governmental entities directly provide financial support for GME, private payers have had a more indirect role through the payment 
of higher charges.  In the increasingly price-sensitive health care market, this explicit cross subsidization of GME is now less feasible.

The current system of supporting GME through Medicare has considerable support from the academic community.  Even with the cuts in funding mandated by the Balanced Budget Act of 1997, Medicare has provided a predictable source of revenue to support GME.  It is uncertain how long the logic of funding GME from the Medicare program can be sustained, even in the context of the current budget surplus.  The Council on Medical Education has taken this opportunity to consider how a financing system for the direct costs of GME could be organized.  The direct costs of GME include resident physician salaries, payment of attending physicians for supervision, and overhead expenses based on the presence of a teaching program.  Currently, there is wide variation among teaching institutions in the per-resident amount paid by Medicare 
to cover the direct GME costs.

This proposal presupposes that any change to a new system would be gradual, and that attention would be paid to ensuring that the transition would not disrupt residency programs or teaching institutions.  It is also essential that any funding source for GME be stable, to allow for meaningful planning within programs, institutions, and consortia.  This requires a budgeting system that is not subject to a fluctuating annual appropriations process.  The AMA has had policy in support of an all-payer system for the direct costs of GME since 1992 (Policy H-305.956).  The all-payer concept has met resistance from Congress and from third-party payers because it has been perceived to be a new tax.  

An all-payer system could create a Graduate Medical Education Trust Fund.  These funds to support the direct costs of GME should be housed elsewhere than in the Health Care Financing Administration.  Instead, the Council believes that a GME Trust Fund authority should be established that is outside the regular governmental structure.  The private/public sector advisory body should, in addition to making recommendations about the number and distribution of GME positions, develop a mechanism to distribute funds from the GME Trust Fund.

An all-payer system requires a more explicit determination of GME costs.  An accurate assessment of the total costs of maintaining a residency program (including resident salaries, supervisory costs, and program overhead) would be necessary to determine the size of the all payer pool.  The budgeting system should be based on a “per resident” amount, that will move over time to greater comparability across locations.  Calculation of per resident costs should also take into account regional costs differences.  Once the size of the pool has been calculated, each payer should contribute proportionately according to a data-based formula that is developed by the workforce advisory body.  There should be a phase-in of any increased standardization of direct medical education payments.  

The preceding approach to the development of a more standardized per-resident amount for the direct costs of GME lends itself to the creation of a “voucher system” (Policy H-305.945).  The voucher is a guarantee for the direct costs of each eligible residency position, and can be designed to provide funds to the site where training occurs.  Funding, through a voucher or other similar system, should be guaranteed for the length of residency training, not on a per-year basis.

It is important that, absent the establishment of an all-payer system, funding for the direct costs of GME remain within Medicare.  This would maintain the predictability in funding that is critical for program stability.

Support for Teaching Institutions

The indirect medical education adjustment (IMEA) was introduced as a result of the 1983 switch to the Medicare prospective payment system, based on Diagnosis Related Groups (DRGs).  The government recognized that DRGs did not take into account the additional costs of providing service to Medicare inpatients based on the generally higher levels of acuity that are found in teaching institutions.  The IMEA also supports other general costs in teaching institutions, such as the need for more costly staffing and the inefficiencies associated with the presence of a teaching program.  The IMEA was conceptualized as a single mathematical adjustment to DRG payment rates, without any attempt to separate out the various elements that contributed to higher teaching hospital costs.  The IMEA formula includes the resident-to-bed ratio.  The Balanced Budget Act of 1997 reduced the level of the adjustment, but maintained the unitary concept of the IMEA.  In 1997, teaching institutions received $4.6 billion from the IMEA.  

A reduction in the number of residents would affect teaching hospitals in two ways.  The first is the loss of service provided by residents.  In order to continue to provide patient care, teaching hospitals would have to hire other service providers to replace residents lost through program downsizing.  Data are needed on what types of arrangements are being used by institutions that have reduced resident numbers, and about the costs and quality implications of the move from residents to other health professionals.  The second effect of reductions in the number of resident physicians would come from the loss of revenue from the direct and indirect Medicare adjustments, since they are tied to the number of residents.  The New York State Demonstration Project was designed to provide transitional funding to teaching hospitals that voluntarily reduced the number of residents.  This program is being impacted by the Balanced Budget Act, and the ultimate effects on teaching hospital finances and resident numbers are not yet known.  The New York State Demonstration Project should be studied and the results used to develop regulations for the national voluntary resident reduction program that was included in the BBA.

Conclusions and Recommendations

While the ultimate effects of the 1997 Balanced Budget Act on the number of residents in training is unknown, concerns remain about the U.S. physician supply.  There also is a need to rationalize the funding of graduate medical education.  The Council on Medical Education recommends that the following principles be adopted as AMA policy and communicated to federal and state policy-makers, and that the remainder of this report be filed.

1.	The principles in the 1997 Consensus Statement on the Physician Workforce (Policy 
H-305.968) should be reaffirmed.

Graduate Medical Education Positions

2.	The number of federally-funded entry-level graduate medical education positions should be reduced, over time, to no more than 120% of the number of 1997 graduates of U.S. MD- and DO-granting medical schools.  The number of federally-funded entry-level positions should be monitored and there should be flexibility in the number and allocation of positions, so that regional and specialty needs can be met.
3.	Planning for the number of residency positions should take into account the contributions to patient care made by other health professions and occupations. 
4.	Guidelines for the number of funded positions should be developed by a private/public sector advisory body, which should exist outside of the regular governmental structure.  The advisory body should have significant representation from the medical profession and the academic medical community.  
5.	Explicit immunity from antitrust constraints should be provided to private professional groups, to allow participation in the national debate on the physician workforce.
6.	Program quality, based on an assessment of educational program outcomes under the leadership of the Accreditation Council for Graduate Medical Education and its Residency Review Committees, should be a factor in the allocation of funded residency positions.  
7.	There should be no discrimination between U.S. medical school graduates and U.S. citizen/permanent resident international medical graduates in the allocation of funded residency positions.
8.	There should be no increase in the number of graduates from U.S. MD- and DO-granting medical schools over 1997 levels.

Funding of Graduate Medical Education

9.	The direct costs of graduate medical education should be supported through a Graduate Medical Education Trust Fund that receives contributions from all payers for health care.  The private/public sector advisory body should study and develop mechanisms for the distribution of funding from this Trust Fund.  
10.	Financial support for residency training should be sufficiently stable to allow for meaningful planning.  This requires a budgeting system that is not subject to an annual appropriations process.  If a Graduate Medical Education Trust Fund is not established, funding for the direct costs of graduate medical education should remain within the Medicare program.
11.	Budgeting for the direct costs of graduate medical education should be based on a per-resident amount, which should move toward comparability across locations.  The direct costs of GME include resident salaries, supervisory costs, and educational program overhead.  Regional cost differences should be taken into account.
12.	Funding should follow residents to all educational sites.  Any authorization or “voucher” system should permit such distribution of funds to the sites that incur the costs of training.

Support for the Missions of Teaching Institutions

13.	The indirect medical education adjustment (IMEA) through Medicare should be maintained until there are explicit alternative mechanisms to support the costs associated with higher acuity in teaching institutions and indirect costs associated with the presence of a teaching program.  There should be no reductions in the IMEA beyond that mandated in the 1997 Balanced Budget Act.
14.	Transitional funds should be provided to teaching institutions that lose residents as a result of cuts in the number of funded positions.

Fiscal Note:	No significant fiscal impact

*           The Council on Medical Education Working Group consisted of Robert M. Daugherty, Jr., MD, PhD (chair); Robert N. Moyers, MD, Richard Allen, MD, and Darrell Kirch, MD Section on Medical Schools).  Staff to the Working Group were Barbara Barzansky, PhD; Rebecca Miller, MS; and Francoise Kusseling, PhD.

Complete references are available from the Medical Education Group.