Federal Policies Threaten Graduate Medical Education Funding

Federal policy makers have launched a "full-frontal assault" on graduate medical education that threatens the viability of residency training programs at a time when the nation needs to produce more primary care physicians.

The assault has come from all directions -- in proposals that gut financial support for medical education, drain teaching facilities' resources for providing education, and if successful, "represent a substantial negative impact on graduate medical education," say five family medicine organizations in a June 12 letter (PDF file: 4 pages / 456 KB. More about PDFs.) to Leslie Norwalk, acting administrator of CMS.

The strongly worded letter is signed by the AAFP, the Society of Teachers of Family Medicine, the Association of Family Medicine Residency Directors, or AFMRD, the Association of Departments of Family Medicine and the North American Primary Care Research Group.

"It is more than unfortunate that these proposals would be recommended at a time when the United States is experiencing maldistribution and shortages of physicians, and a sizable portion of the U.S. population is approaching Medicare eligibility," the letter says. "In addition, we are concerned over the cumulative effect on the nation's safety net."

First hints of the trend began in 2003, when CMS began auditing community-based residency programs and demanding repayment of millions of graduate medical education, or GME, dollars. CMS contended the programs did not meet the law's requirement that teaching hospitals pay "all or substantially all" of the cost of resident education because they did not pay their community-based volunteer preceptors.

The AAFP and other members of the family medicine family have fought the volunteer preceptor rule with letters; personal meetings among AAFP leaders, leaders of other family medicine organizations, and high-ranking CMS officials; and appeals to Congress for legislative relief. To no avail. Federal officials on May 11 issued a final rule continuing their policy of stipulating how teaching hospitals must pay their community-based preceptors.

"They heard us, but they didn't accept what we were proposing," said Sam Jones, M.D., of Fairfax, Va., immediate past president of the AFMRD, about CMS.

Perry Pugno, director of the AAFP Division of Medical Education, agreed. "This was a perfect demonstration that, notwithstanding our extensive efforts, the federal government is capable of absorbing maximal effort with no visible evidence of impact," he said. "They went ahead and implemented the ill-advised plan that we warned them about."

The final rule establishes a "regulatory and paperwork nightmare in order for hospitals to comply," said Hope Wittenberg, director of government relations for the Academic Family Medicine Advocacy Alliance, during a June 11 business session of the AFMRD. A hospital must either pay each preceptor using time/motion studies and actual physician salary data or use a complex formula of proxies. "The formula must be applied to every preceptor and include resident-specific salary information and fringe benefits for each occurrence."

Worse, said Jones, CMS likely will enforce the rule retroactively.

"A lot of programs, when they knew this was going to be an issue, started paying their community preceptors; they made a good faith effort," said Jones. "Now that the new rule and formula have been created, CMS will review the programs within the context of the new rule and say, 'You made a good effort, but you're going to get a huge fine.' Our concern is that it's open season again."

In the meantime, other CMS proposals have wore away at GME funding by redefining provisions of Medicare and Medicaid law.

Since 2004, CMS has issued rules that

Fully implemented, the rules would effectively deny billions of dollars in Medicare and Medicaid funding to help teaching hospitals and residency programs defray the cost of medical education.

"Normally … we would include the sections of the proposal that we support and express our thanks to CMS for their inclusion," the June 12 letter says. "Unfortunately, we find that we cannot do that in this case. In fact, in recent months, we have been struck by the seemingly constant attack on graduate medical education funding that CMS and the administration are promoting."

CMS rules announced since August 2006 "seem to us to be a full-frontal assault on graduate medical education," the letter continues. "Taken together, we are very fearful that the administration is systematically unraveling the graduate medical education infrastructure in the United States."

Meanwhile, the Medicare Payment Advisory Commission has called for reducing the IME funding factor by 1 percent, and the Bush administration's fiscal year 2008 budget calls for diverting $30 billion in capital funds and Medicare and Medicaid disproportionate share, or DSH, funds from hospitals and other health care facilities.

Such actions have raised eyebrows throughout the medical community. Pointing to President Bush's 2008 budget, editors in the Feb. 17 issue of The Lancet noted, "These forces are echoing around the USA. Many academic centres are seeing declining revenues from their major source of income -- patients. Smaller, private hospitals are springing up to capture money from high-reimbursement specialties such as cardiology. The foundation stone of academic hospitals is being severely eroded."