Family Medicine Residencies Battle Ailing Economies, State Cutbacks to Produce Residents

November 30, 2011 04:05 pm James Arvantes

Texas once served as an example of a state willing to make a solid investment in the production and recruitment of its family physician and primary care workforce. In fact, during the past few decades, the state had provided an increasing amount of money for family medicine residency programs through its Texas Higher Education Coordinating Board, which was created to support the recruitment and residency training of family physicians and other primary care physicians in the state.

[Stock Photo-Male Resident]

Two years ago, Texas established one of the nation's most generous physician loan repayment programs. That program awarded as much as $160,000 during a four-year period to physicians who agreed to provide primary care services in designated health professional shortage areas.

Although these measures did not completely solve the state's chronic shortage of primary care physicians, Texas was making progress in this area, according to Jonathan Nelson, communications director for the Texas AFP.

During the past year, however, as Texas has continued to grapple with an ongoing recession and a growing budget deficit, lawmakers shifted into a cost-cutting mode, slashing millions from the Texas Higher Education Coordinating Board and the physician loan repayment program. The legislature cut the line item for family medicine residency programs within the Texas Higher Education Coordinating Board budget from $21.2 million in the current biennium to $5.6 million for the 2012-13 biennium. At the same time, lawmakers reduced the budget for the physician loan repayment program from $23.2 million to $5.6 million for the next biennium.

The program reductions are likely to lead to the closure of at least some of the state's 28 family medicine residency programs, resulting in "significant decreases in the number of primary care physicians produced in Texas," said Nelson.

The Texas experience, while dramatic, is now a common occurrence in states throughout the country. As state lawmakers continue to confront sagging economies, they are looking to slash budgets and curtail spending. In the past five years, five state Medicaid programs -- those in Montana, Wyoming, Rhode Island, Vermont and Massachusetts -- have ended support for graduate medical education, or GME, programs, said Tim Henderson, M.P.H., professor of health policy at George Mason University in Fairfax, Va.

story highlights

  • Family medicine residency programs are struggling to produce residents amid an economic downturn and state cutbacks.
  • In response, residencies are freezing salaries and looking at cutting staff members and services to patients.
  • But some family medicine residency programs are finding ways to cope with the challenges presented by state budget cuts.

"This problem is going to continue to get worse in the near term," said Henderson. "There are going to be more states cutting back support for residency training under their Medicare programs." And this is going to have a direct impact on family medicine residency programs that depend on Medicaid funding, he added.

For example, the Lawrence Family Medicine Residency in Lawrence, Mass., received about $800,000 a year from Medicaid GME funding, which made up a significant amount of the residency's budget, according to the program's residency director, Joseph Gravel Jr., M.D. When Massachusetts eliminated Medicaid GME funding a few years ago, the residency program's sponsoring community health center -- the Greater Lawrence Family Health Center -- was forced to initiate a hiring freeze, which left about 60 positions within the residency program vacant.

"We are thriving clinically and academically, but, as with most (community health centers), we are still very challenged financially," said Gravel.

As a result, the health center is being forced to subsidize the deficit created by the loss of Medicaid funds, said Gravel. "We've had several fundraisers, which have helped a bit. We have even gone to local health care insurers to try to get their support for training family physicians for their members, but to no avail. We've held off hiring medical assistants and registered nurses to fill vacated positions."

Prime Targets

Unlike the more lucrative subspecialty residencies, family medicine residencies are based on providing cognitive services, not procedures, making it difficult for them to earn a profit in the prevailing fee-for-service payment structure. As a result, family medicine and other primary care residencies are seen by some lawmakers as cost centers and, thus, a prime target for spending cuts.

"Across the country, we have been losing half a dozen (family medicine residency) programs a year for almost 10 years," said Perry Pugno, M.D., M.P.H., the AAFP's vice president for education. "There are a total of 451 (family medicine) residency programs right now. The economic downturn has basically stopped the initiation of new programs and has made other ones more economically vulnerable."

AAFP Touts Economic Benefits of Residency Programs

The AAFP has always touted the economic benefits of family medicine residency programs by stressing the short- and long-term impact of the programs themselves.

"The direct cost of offering a residency is only part of the economic picture," said Perry Pugno, M.D., M.P.H., the AAFP's vice president for education. "For every dollar that goes through a family medicine residency's clinic operation, the sponsoring institution makes about $6 in secondary revenue."

In many cases, hospitals that serve as the sponsoring institutions for family medicine residency programs employ a model in which the hospital operates a family medicine practice with the added overhead of a teaching enterprise. This, in turn, consumes some of the clinical revenue made by the residency program, said Pugno.

In recent years, the anemic economy has cut deeply into hospital revenues, making the economic rationale for supporting residency programs even more important, according to Pugno.

He has no trouble pointing out the overall benefits of family medicine residency programs. In many instances, a large proportion of residency graduates will settle in the geographic area where they trained, establishing practices and making patient referrals to the sponsoring hospital as needed.

The AAFP's Robert Graham Center has even created a tool to help residency directors gather data on the economic impact of their residency. The website( allows users to combine several types of demographic, economic and other data to document and illustrate family medicine's contributions to improving community health, easing health care disparities, enhancing access to care and reducing primary care shortages.

The AAFP also provides resources for residencies via its Residency Program Solutions, a consultation service that helps residencies develop their educational programs and the infrastructure to support them. This includes financial modeling, said Pugno.

"We provide consultative support to assist residencies in optimizing their educational programs with fewer and fewer resources to help them get through this very difficult period," said Pugno.

In response to the sluggish economy, some family medicine residency programs are downsizing, which further curtails the production of family physicians at a time when the nation needs more primary care physicians. The Patient Protection and Affordable Care Act is expected to extend health insurance coverage to millions of formerly uninsured individuals during the next few years. At the same time, more baby boomers are reaching retirement age, creating an even greater demand for family medicine, according to Pugno.

In addition, the closure of family medicine residency programs has an impact far beyond the residencies themselves and the production of family physicians, said Pugno. Family medicine residency programs often serve as the only health care access points for low-income and medically disenfranchised patients, making the residencies a virtual lifeline for these patients. It is difficult, however, for family medicine residency programs to not lose money on low-income patients.

Financial Challenges

Tom Kincer, M.D., program director of the Montgomery Family Medicine Residency in Montgomery, Ala., is well-acquainted with the challenges facing family medicine residency programs.

"When you look at what it takes to run a residency program, you have a building, a faculty and nurses, and the usual costs of running a business," said Kincer. "There is a lot of overhead, and residents are not efficient at seeing patients. The amount of resources it takes to run a family medicine program is always greater than the amount of money the residency generates in patient care."

Many primary care programs run an average deficit of $500,000 to $700,000 below what they generate and what they receive in federal GME funding, said Kincer.

In some ways, however, the economic downturn has helped Kincer's program. The residency program has 20 residents, but will be expanding to 24 residents next year to compensate for another family medicine residency program that closed two years ago when its sponsoring hospital went out of business.

"Family medicine is underserved, and expanding the residency program is one of the ways we are going to be able to overcome that," said Kincer.

One way Kincer's residency already is providing help is by working with its sponsoring institution, Baptist Health in Montgomery, to create a patient-centered medical home, or PCMH.

Baptist Health was inundated with uninsured patients using the ER as their chief source of primary care, according to Kincer. The burden on the hospital was so great that its leadership asked Kincer if the residency program would serve as a PCMH for these patients.

"We started a program at the residency where we would provide a medical home to patients who were frequenting the emergency department," said Kincer. The residency program now is providing care to a greater number of uninsured patients, which increases its deficit. But the PCMH has saved an estimated $6 million a year in ER costs, and the hospital has used these savings to compensate for the residency's deficit, said Kincer.

"The hospital has been very good about recognizing the value of the (medical home)," he said. But it's the program's residents who have been among the biggest beneficiaries of the PCMH.

"The residents have really seen the benefit of the (medical home)," said Kincer. "They are able to take patients who did not have a medical home who came in with frequent ER usage, frequent hospitalizations, and provide them with a great standard of care. The residents have seen a reduction in admissions and an overall improvement in the health of those patients, so the residents have really grown and reaped a huge benefit from it."

Traditional Approach

Meanwhile, other family medicine residency programs have taken a more traditional approach when confronting economic challenges. The recent program cutbacks in Texas have forced the family medicine residency program at the University of Texas Medical Branch in Galveston to really look at its budget, according to Tricia Elliot, M.D., director of the residency program.

"We had to streamline some things and make some cuts in certain areas with regard to expenditures," said Elliot, noting that they wanted to preserve staff and residents in the program. For example, faculty members agreed to forgo salary increases for the year and to be very conscious about CME and travel funds, said Elliot.

Elliot also is working on bringing residency programs in the state together to collect data on how the recent state cutbacks have affected their respective programs. "We have to be very cognizant about the effect on our programs so we can go back to the legislature and say, 'Here is the impact, this is why you need to fund this,'" she said.

Family physicians should be out in front of this issue, said Elliot. "The legislature needs to support family medicine programs. We are the ones who are going into rural and underserved areas, and we are the ones who provide comprehensive care for our communities.

"Family medicine is the key to our health care system."