The Balanced Budget Act of 1997 and Rural Training Supported by Medicare Graduate Medical Education Funds

The Balanced Budget Act of 1997 promised a number of changes in medical education to benefit rural communities. The changes suggested that physician training would be more available in rural communities, programs training physicians for work in rural communities would be better supported, and residency programs would be allowed to be separate from hospitals. The regulations developed by the Health Care Financing Administration to implement the act are reviewed in the context of these expectations. Limitations in the regulations indicate that rural communities will see little benefit from this legislation. This article is a commentary on the expectations and reality of the effects of the Balanced Budget Act of 1997 on rural training supported by Medicare.     

The incentive effects of the Medicare indirect medical education policy

Medicare provided teaching hospitals with US$ 5.9 billion in supplemental graduate medical education (GME) payments in 1998. These payments distort input and output prices and provide teaching hospitals with incentives to hire residents, close beds, and admit more Medicare patients. The structure of the GME payment policy creates substantial variation in input and output prices between teaching hospitals. We examine the extent to which hospitals responded to these financial incentives using a panel data set of 3,900 hospitals, including over 900 teaching hospitals. We find that teaching hospitals did hire residents and close beds in response to the Medicare policy, but did not increase Medicare admissions or alter their use of registered nurses (RNs).     

BBA impacts on hospital residents, finances, and Medicare subsidies

Concern over rapidly rising Medicare expenditures prompted Congress to pass the 1997 Balanced Budget Act (BBA) that included provisions reducing graduate medical education (GME) payments and capped the growth in residents for payment purposes. Using Medicare cost reports through 2001, we find that both actual and capped residents continued to grow post-BBA. While teaching hospital total margins declined, GME payment reductions of approximately 17 percent had minimal impact on revenue growth (-0.5 percent annually). Four years after BBA, residents remained a substantial line of business for nearly one-half of teaching hospitals with Medicare effective marginal subsidies exceeding resident stipends by nearly $50,000 on average. Coupled with an estimated replacement cost of over $100,000 per resident, it is not surprising that hospitals accepted nearly 4,000 residents beyond their allowable payment caps in just 4 years post-BBA.     

Financing graduate medical education in primary care: options for change

The current mechanisms of graduate medical education (GME) financing favor inpatient and procedural care, making the support of primary care programs difficult, as these residencies are oriented toward outpatient evaluation and management. Criteria for evaluating proposals that aim to improve the financial support of primary care programs include the financial, administrative, and educational implications of the options as well as the views of interested stakeholders. Other sources of funding for primary care GME are changes in existing Medicare payments; increased categorical GME funding, ambulatory payment, and grants; commitments from future employers; and redistribution of current funds. Alternatives for spending these funds to aid primary care programs include dividing the sources in three ways: on a per-resident basis, by competitive grants, or by incentives for primary care education. An analysis of the alternatives for changing GME financing shows that several solutions will be needed simultaneously.     

Paying for graduate medical education: the debate goes on

The debate over Medicare payments for graduate medical education has been conducted under the premise that such payments cover the added costs of training. Standard economic theory suggests that residents bear the costs of their training, implying that the additional costs of teaching hospitals are not attributable to training per se but to some combination of a different patient care product, unmeasured case-mix differences, and the costs of clinical research. As a result, payment for the additional patient care costs at teaching hospitals should come from the Medicare trust fund; any subsidies for training should come from general revenues.     

Rural Emergency Department Staffing and Participation in Emergency Certification and Training Programs

ABSTRACT:  Context: The practice of emergency medicine presents many challenges in rural areas. Purpose: We describe how rural hospitals nationally are staffing their Emergency Departments (EDs) and explore the participation of rural ED physicians and other health care professionals in selected certification and training programs that teach skills needed to provide high-quality emergency care. Methods: A national telephone survey of a random sample of rural hospitals with 100 or fewer beds was conducted in June to August 2006. Respondents included ED nurse managers and Directors of Nursing. A total of 408 hospitals responded (96% response rate). Findings: A majority of rural hospitals use more than one type of staffing to cover the ED. The type of staffing varies by time period and ED volume. On weekdays, about onethird of hospitals use physicians on their own medical staff; one third use contracted coverage; 18% use both; and 14% use physician assistants and/or nurse practitioners with a physician on-call. Hospitals are more likely to use a combination of medical staff and contracted coverage on evenings and weekends. Advanced Cardiac Life Support training is common, but Pediatric Advanced Life Support, Advanced Trauma Life Support, and training in working as a team are less common. More registered nurses working in rural EDs have taken the Trauma Nursing Core Course than the Emergency Nursing Pediatric Course. Conclusions: Rural ED staff would benefit from additional continuing education opportunities, particularly in terms of specialized skills to care for pediatric emergency patients and trauma patients and training in working effectively in teams .     

Impact of Critical Access Hospital Conversion on Beneficiary Liability

ABSTRACT: Context: While the Medicare Critical Access Hospital (CAH) program has improved the financial viability of small rural hospitals and enhanced access to care in rural communities, the program puts beneficiaries at risk for paying a larger share of the cost of services covered under the Medicare part B benefit. Purpose: This paper examines the impact of hospital conversion to CAH status on beneficiary out‐of‐pocket coinsurance payments for hospital outpatient services. Methods: The study is based on a retrospective observational design using administrative data from Medicare hospital cost reports and fee‐for‐service beneficiary claims from 1999 to 2003. The study compares changes in beneficiary co‐payments before versus after CAH conversion with payment trends among small rural non‐converting hospitals over the same period. Findings: Conversion to CAH status is associated with an increase in beneficiary coinsurance payments per outpatient visit of $17.19, equivalent to 34% of the sample average. However, CAH designation had no significant effect on the share of outpatient costs paid by the beneficiary. Most of the increase in beneficiary liability associated with conversion is attributable to the provision of more services per outpatient visit. Conclusions: While this and other studies show that conversion to CAH status results in more intensive outpatient care, CAH conversion does not appear to inadvertently create financial barriers to accessing ambulatory services in remote rural communities by forcing beneficiaries to pay a higher share of their Medicare part B costs.     

Medicaid's role in financing graduate medical education

Medicaid is the second-largest explicit payer of graduate medical education (GME). All but five states pay for GME ($2.4 billion in 1998). As states rapidly move their Medicaid populations to managed care, Medicaid support for GME is subject to change. Just sixteen states and the District of Columbia carve out Medicaid GME payments from capitated rates to managed care plans and rechannel them to teaching programs. Concurrently, managed care has motivated several states to distribute Medicaid GME funds in ways more explicitly accountable to the public. Ten states require that GME payments be directly linked to state policy goals intended to vary the distribution of or limit the health care workforce.     

CLINICAL PRIVILEGES FOR RURAL GENERAL PRACTITIONERS

ABSTRACT: Improved training programs and registrable qualifications are now available for graduates wishing to pursue a career in rural practice. In the near future, newly established rural doctors will be able to furnish documentation on substantial additional training, which will include competence in a range of procedural skills. In an environment of increasing regulation and litigation awareness, hospitals are developing systems for recognising the skills and experience of medical staff. However, most clinical privileges systems have been developed for larger hospitals and with procedural sub-specialists in mind. This paper proposes an approach to developing clinical privileges systems that are more appropriate to smaller rural hospitals, so that the skills of rural doctors are fully utilised by their communities.     

Cost-benefit analyses of California family practice residencies

Several national commissions have recommended that family practice residency training be subsidized, but without stating how much support is needed. Financial studies of graduate medical education have used the methods of cost allocation or joint-products cost analysis. Previous cost-allocation studies indicate that one third of family practice residency costs are met by extramural subsidy. Cost reports of eight California public hospitals with a single family practice residency program were evaluated for the 1984-85 fiscal year. Discrepancies in the education costs reported to Medicare and those reported in state hospital disclosure reports demonstrate the arbitrary nature of the cost-allocation method. The Medicare medical education reimbursement was an average of $20,444 per resident. State and federal grants provided an average of $5,190 per resident. The Medicare payments and grants met an average of 35.7% of the education costs reported to Medicare. A joint-products cost analysis was used to estimate the pure cost of education in an 18-resident family practice residency. Replacing the residency with salaried physicians would have decreased the hospital's net return by $143,534. If neither grants nor Medicare education payments had been received, elimination of the program would have increased hospital net return by $428,083.     

Too many applicants for available graduate medical education positions--are we on a collision course?

Until the last few years, graduate medical education (GME) positions were so plentiful in the United States that even with a heavy influx of both U.S. and alien graduates of foreign medical schools, many positions remained unfilled. In the future, however, it is unlikely that all those planning to enter GME in the United States will be able to do so. Applicants for U.S. GME positions increased from 15,000 in 1980 to 20,000 in 1983, while the positions offered declined to fewer than 18,000. Increasing financial pressure may cause some U.S. hospitals to cut back on their GME positions. Recent Federal regulations require them to isolate the cost of education from patient care costs, and community hospitals may no longer with to provide GME if they can no longer recover educational costs. On the other hand, State legislatures may react to pressures to provide GME positions for U.S. citizens graduating from foreign medical schools. Another factor increasing the demand for GME positions is the greater number of U.S.-citizen graduates from foreign medical schools in the Caribbean. The Caribbean schools generally lack the facilities to provide clinical training, so that efforts are made to provide such training for U.S. citizens in the United States. For example, it has been reported that opportunities for two to five thousand clerical clerkships exist in New York State. Alien and U.S. graduates of foreign medical schools have been required to take different examinations to qualify for GME in the United States, but beginning in 1984, both groups will be required to pass a new Foreign Medical Graduate Examination in the Medical Sciences. Ways are also being sought to assess the clinical skills of these graduates. It is hoped that an equitable system to evaluate all foreign medical graduates will soon be in place, so that those who meet standards comparable to the ones required of U.S. medical students will be able to enter U.S. graduate medical education programs.     

Achieving Equity in Medicare Disproportionate Share Payments to Rural Hospitals: An Assessment of the Financial Impact of Recent and Proposed Changes to the Disproportionate Share Hospital Payment Formula

Historically, the Medicare Disproportionate Share Hospital (DSH) payment program has been less favorable to rural hospitals: eligibility thresholds were higher and the payment adjustment was smaller for rural than for urban hospitals. Although the Medicare, Medicaid, and SCHIP Benefit Improvement and Protection Act (BIPA) of 2000 established a uniform low-income threshold and increased the magnitude of the adjustment for certain small and rural hospitals as a means to promote payment equity, the DSH distribution formula continues to vary by location. This study examines how the DSH revisions mandated under BIPA are likely to affect rural hospitals' financial performance and simulates the financial impact of implementing a uniform DSH payment adjustment. Using data from the 1998 Medicare cost report and impact files, this study found that two-thirds of both rural and urban hospitals would have qualified for DSH payments following BIPA compared with only one-fifth of rural hospitals and one-half of urban hospitals prior to BIPA. Although the impact of BIPA revisions on rural hospitals' total margins were found to be modest, the financial impact of a uniform payment adjustment would be somewhat greater: rural hospitals' average total margins would have increased by 1.6 percentage points. Importantly, 20% of rural hospitals with negative total margins would have been "in the black" if rural and urban hospitals were reimbursed using the same DSH formula. These findings suggest that elimination of rural and urban disparities in DSH payment could strengthen the rural health care safety net.     

Hospital Choice of Rural Medicare Beneficiaries: Patient, Hospital Attributes, and the Patient–Physician Relationship

Objective. To examine how patient and hospital attributes and the patient–physician relationship influence hospital choice of rural Medicare beneficiaries.
Data Sources. Medicare Current Beneficiary Survey (MCBS), Health Care Financing Administration (HCFA) Provider of Services (POS) file, American Hospital Association (AHA) Annual Survey, and Medicare Hospital Service Area (HSA) files for 1994 and 1995.
Study Design. The study sample consisted of 1,702 hospitalizations of rural Medicare beneficiaries. McFadden's conditional logit model was used to analyze hospital choices of rural Medicare beneficiaries. The model included independent variables to control for patients' and hospitals' attributes and the distance to hospital alternatives.
Principal Findings. The empirical results show strong preferences of aged patients for closer hospitals and those of greater scale and service capacity. Patients with complex acute medical conditions and those with more resources were more likely to bypass their closest rural hospitals. Beneficiaries were more likely to bypass their closest rural hospital if they had no regular physician, had a shorter patient–physician tie, were dissatisfied with the availability of health care, and had a longer travel time to their physician's office.
Conclusions. The significant influences of patients' socioeconomic, health, and functional status, their satisfaction with and access to primary care, and their strong preferences for certain hospital attributes should inform federal program initiatives about the likely impacts of policy changes on hospital bypassing behavior.     

Recruitment and retention of rural physicians: issues for the 1990s.

This paper briefly describes a number of structural and economic changes in the profession of medicine and in the rural medical care delivery system that have occurred since about 1970. Changes in the national physician supply; in the training, work, and practice characteristics of physicians; in the demographic characteristics of physicians; in the medical resources available in rural communities; and in federal and state support for the provision of medical services are noted. Four conceptual models that underlie physician recruitment and retention programs for small towns and rural communities are described. These include affinity models, which attempt to recruit rural persons into training or foster interest in rural practice among trainees; economic incentive models, which address reimbursement or payment mechanisms to increase economic rewards for rural practice; practice characteristics models, which address technical, collegial, referral, and other structural barriers to rural practice; and indenture models, which recruit temporary providers in exchange for scholarship support, loan forgiveness, or licensure. Examples of applications of each model are provided and the effects of changes in the medical care system on the effectiveness of each model are assessed. Finally, it is argued that elements of an optimal model for the recruitment of physicians to rural practice include the promotion of medical careers among rural high school students, the provision of financial and cultural support for their training, the development of technical and collegial support systems, and the limited use of indenture mechanisms to meet the needs of the most impoverished or isolated rural settings.     

Value-based purchasing and bundled payments

Bundled Medicare payments and value-based purchasing are intended to create integrated delivery systems that are more accountable to their communities and to make providers assume greater financial risk. Here's what hospitals should know.     

Medicare beneficiary satisfaction with durable medical equipment suppliers

CMS has recently launched a series of initiatives to control Medicare spending on durable medical equipment (DME) and prosthetics, orthotics, and supplies (DMEPOS). An important question is how these initiatives will affect beneficiary satisfaction. Using survey data, we analyze Medicare beneficiary satisfaction with DMEPOS suppliers in two Florida counties. Our results show that beneficiaries are currently highly satisfied with their DMEPOS suppliers. Beneficiary satisfaction is positively related to rapid delivery, training, dependability, and frequency of service. Results of our analysis can be used as baseline estimates in evaluating CMS initiatives to reduce Medicare payments for DMEPOS.     

Quality and Cost of Care by Hospital Teaching Status: What Are the Differences?

Policy Points

• In two respects, quality of care tends to be higher at major teaching hospitals: process of care and long‐term survival of cancer patients following initial diagnosis. There is also evidence that short‐term (30‐day) mortality is lower on average at such hospitals, although the quality of evidence is somewhat lower.
• Quality of care is mulitdimensional. Empirical evidence by teaching status on dimensions other than survival is mixed.
• Higher Medicare payments for care provided by major teaching hospitals are partially offset by lower payments to nonhospital providers. Nevertheless, the payment differences between major teaching and nonteaching hospitals for hospital stays, especially for complex cases, potentially increase prices other insurers pay for hospital care.

ContextThe relative performance of teaching hospitals has been discussed for decades. For private and public insurers with provider networks, an issue is whether having a major teaching hospital in the network is a “must.” For traditional fee‐for‐service Medicare, there is an issue of adequacy of payment of hospitals with various attributes, including graduate medical education (GME) provision. Much empirical evidence on relative quality and cost has been published. This paper aims to (1) evaluate empirical evidence on relative quality and cost of teaching hospitals and (2) assess what the findings indicate for public and private insurer policy.MethodsComplementary approaches were used to select studies for review. (1) Relevant studies highly cited in Web of Science were selected. (2) This search led to studies cited by these studies as well as studies that cited these studies. (3) Several literature reviews were helpful in locating pertinent studies. Some policy‐oriented papers were found in Google under topics to which the policy applied. (4) Several papers were added based on suggestions of reviewers.FindingsQuality of care as measured in process of care studies and in longitudinal studies of long‐term survival of cancer patients tends to be higher at major teaching hospitals. Evidence on survival at 30 days post admission for common conditions and procedures also tends to favor such hospitals. Findings on other dimensions of relative quality are mixed. Hospitals with a substantial commitment to graduate medical education, major teaching hospitals, are about 10% to 20% more costly than nonteaching hospitals. Private insurers pay a differential to major teaching hospitals at this range''s lower end. Inclusive of subsidies, Medicare pays major teaching hospitals substantially more than 20% extra, especially for complex surgical procedures.ConclusionsBased on the evidence on quality, there is reason for patients to be willing to pay more for inclusion of major teaching hospitals in private insurer networks at least for some services. Medicare payment for GME has long been a controversial policy issue. The actual indirect cost of GME is likely to be far less than the amount Medicare is currently paying hospitals.     

Predictors of young physicians practicing specialties without prior graduate medical education.

OBJECTIVE. This study identifies predictors of young physicians practicing specialties for which they did not report having graduate medical education. DATA SOURCE. A secondary analysis was conducted using a nationally representative survey of young physicians, Practice Patterns of Young Physicians, 1987 (United States). Physicians were under 40 years of age and in uninterrupted practice more than one but fewer than six complete years. STUDY DESIGN. Young physicians who practiced specialties without prior graduate medical education (GME) in these specialties were compared to young physicians who practiced only the specialties for which they reported GME. Comparisons were made on sociodemographic characteristics, international medical graduate status, number and types of GME specialties, year completed GME, and preference for a practice position that was not offered. DATA EXTRACTION METHODS. Sample size was 4,440, including 345 (7.8 percent) physicians who practiced specialties without prior GME. Logistic regression analysis was used to identify predictors of young physicians practicing specialties without prior GME. PRINCIPAL FINDINGS. Physicians who practiced specialties without prior GME more likely were younger, members of minorities other than Black, and with a physician father, high medical school educational debt, and GME in the more generalist specialties. Interaction effects occurred among sex, marital status, and having had GME in internal medicine. Goodness-of-fit analyses indicated that the predictors were useful, but classification table results indicated that at best two out of three cases could be correctly classified. CONCLUSIONS. Practicing specialties without prior graduate medical education in those specialties was related to sociodemographic characteristics and type of specialty training, but a fuller understanding of the circumstances affecting physician specialty changes will require querying physicians directly about their practice choices.     

Medicare inpatient physician charges: an econometric analysis

To control Medicare physician payments, Congress in 1989 established volume performance standards (VPS) that tie future physician fee increases to the growth in expenditures per beneficiary. The VPS risk pool is nationwide, and many observers believe it is too large to affect behavior. VPS could be modified by defining a separate risk pool for inpatient physician services and placing each hospital medical staff at risk for those services. Using a national random sample of 500,000 Medicare admissions, we explore the determinants of medical staff charges and comment on the policy implications. Multivariate analysis shows that charges increase with case mix and bed size but, surprisingly, decrease with the level of teaching activity. The teaching result is explained by the substitution of residents for physicians in these hospitals.     

A Strategy to Increase the Number of Urban Family Practice Resident Physicians Who Enter Rural Practice

Physician geographic maldistribution is a problem in the United States health care system. Innovative strategies are needed to entice resident family physicians training in the larger, more numerous suburban and urban training programs to practice in rural areas upon completing their training. This paper describes a strategy used at St. Elizabeth Medical Center Family Practice Residency Program, Dayton, OH, to encourage rural practice. In the St. Elizabeth plan, the interested family practice resident moonlights in a rural practice provided by the local county hospital. The county medical staff covers the resident physician's practice during the frequent absences. The residency program faculty provide on-site supervision, telephone back-up coverage, and practice consultation. The county hospital provides billing services; the resident physician retains 100 percent of collections. The resident physician gains exposure to the knowledge, skills, and attitudes needed in rural practice. Upon completion of residency training, the physician remains in practice and is not required to pay back any expenses incurred by the hospital. Two resident physicians participate currently; three others have expressed interest in practicing in the community. A similar plan might work in parts of the United States where, like Ohio, training programs and rural communities are not far apart.