The Urgent Need to Reform Graduate Medical Education Funding

This year there were over 20,000 graduates of US medical schools who applied to the National Resident Matching Program. Many of them, including over 100 who applied to ob-gyn, were without a residency position on Match Day.

It’s no surprise. While the number of US medical school graduates is growing through increased class sizes and new medical schools, the number of graduate medical education (GME) residency slots has not increased proportionately. Indeed, there has been no significant increase in the number of obstetrics and gynecology resident positions since the mid-1990’s.

Simply graduating more medical students will not solve the problem of the growing physician workforce shortage. Beyond medical school, GME is absolutely necessary to generate the finished-product physicians who practice high-quality patient-centered care and perform effectively in multidisciplinary, integrated teams.

One basic problem is funding mechanisms are simply not in place.

On July 29, 2014, the Institute of Medicine (IOM) released a committee report recommending significant changes in the methodology of GME funding. The report criticized the current funding mechanisms, now largely dependent on Medicare dollars. It also cited the lack of accountability and transparency, the inconsistency with workforce needs, and the favoring of specialty care over primary care.

The IOM proposal includes reformation of Medicare funding formulas and distribution mechanisms by phasing out direct and indirect GME payments and transitioning into a performance-based system over a 10 year period. The report recommends establishment of a GME Policy Council which would be charged with studying geographic workforce needs to guide policy and funding decisions.

The largest portion of GME costs are paid through Medicare, which directly reimburses teaching hospitals a pro-rata share of costs. Medicaid funding also plays a role, although it is linked to state workforce policy goals and varies dramatically from state to state. Other lesser sources include the Department of Defense, Veterans Affairs, Health Resources and Services Administration, and the National Institutes of Health. Some third party payers give indirect GME support through higher reimbursement for teaching hospitals, but the majority of insurers, while benefitting from the GME pipeline, do not contribute directly to financing GME.

The number of resident positions funded by Medicare was “capped” in 1997 by the Balanced Budget Act. These direct GME payments for residency are intended to compensate for costs including resident and faculty salaries. Indirect Medical Education (IME) payments are partial compensation to teaching hospitals for higher patient care costs associated with medical education. Although the amount of funding provided through Medicare IME has been steadily declining, the current Medicare Payment Advisory Committee now suggests a further cut by 50%.

The rationale for cuts in IME is based upon decreasing the uninsured population through the Affordable Care Act with a resultant increase in patient revenue to teaching hospitals. This becomes problematic for non-hospital GME-sponsoring institutions in that IME funding is basically de-identified and the funds go into teaching hospital’s general operational revenue, rather than being specifically designated for GME. The accredited sponsoring institutions for a large number of residency programs in the US are not hospitals, but rather universities or other educational entities. In the absence of a specific educational designation, GME funding is a direct competition to the other operational needs of hospitals. The potential unintended consequences of this change in funding streams is to create less incentive for teaching hospitals to cover the balance of unreimbursed GME costs and a disincentive to create new resident positions.

If that is not complex enough, there are different perspectives on how GME funding should be changed. The federal government is in favor of substantial reductions. The Council on Graduate Medical Education has recommended that current levels of GME funding be preserved and 3000 new GME positions be established to meet rural and urban underserved communities and to satisfy unmet needs in primary care, surgery, and psychiatry. The Association of American Medical Colleges recommends an additional 15,000 positions with no limitations. Although there is general agreement that GME financing is too focused on Medicare as the major payor, the medical education community has presented no cohesive message as to how financial support for GME can be expanded.

The time has come to re-engineer funding of GME. The current hospital-based GME financing mechanism does not reflect the diversity of needs of our population. The educational community recognizes the need to shift more of the training of physicians into ambulatory settings and facilities where the majority of their practice will take place. This implies that resident physicians should no longer be primarily employed by teaching hospitals with their education largely confined to in-patient service duties in a tertiary center.

The ACGME Sponsoring Institutions of resident education should have unrestricted flexibility to rotate trainees into alternative settings where they might later choose to practice. Hospital-based educational experiences remain important, but changes in GME funding must reflect the reality of an evolving health care system. To make this happen is going to require a thoughtful effort on the part of obstetricians/gynecologists and all stakeholders involved in medical education.

It’s worth the effort: The fulfillment of health care needs for women is dependent upon on an adequate supply of obstetricians and gynecologists.

This entry was posted in Women's Health and tagged by John C. Jennings, MD. Bookmark the permalink.

About John C. Jennings, MD

John C. Jennings, MD is the president of ACOG through April 2015. He is professor of ob-gyn at the Texas Tech University Health Sciences Center at the Permian Basin. Dr. Jennings was in private practice in San Angelo, TX, for 12 years before entering academic medicine. He has served as head of gynecology and program director of ob-gyn at Wake Forest University in Winston-Salem, NC; professor and program director of ob-gyn at the University of Texas Medical Branch in Galveston; chair and program director of ob-gyn at TTUHSC at Amarillo; and regional dean of the school of medicine at TTUHSC at the Permian Basin.

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