Academic Health Centers Leading Change in the 21st Century (2004) / Chapter Skim
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6 The Consequences of Current Financing Methods for the Future Roles of AHCs
6 The Consequences of Current Financing Methods for the Future Roles of AHCs
Pages 92-109
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From page 92... ...
This chapter reviews the current financing of education, research, and clinical care in AHCs; identifies behaviors brought about by current financing methods; projects the consequences of continuing current financing methods; and identifies policy options that might harmonize the apparent discrepancy between society's future needs and current financing methods. The focus of this discussion is on AHCs' roles, not on the AHCs themselves.
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From page 93... ...
These funding patterns are only briefly reviewed here as they have been covered in great detail by other groups. Those interested in more extended discussions of the specific formulas for current payment methods should obtain reports produced other groups, such as The Commonwealth Task Force on Academic Health Centers, the Council on Graduate Medical Education, or the Medicare Payment Advisory Commission.
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From page 94... ...
. State Medicaid programs, non-Medicaid state appropriations, Veterans Administration, and Department of Defense also contribute public dollars to financing clinical education.
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From page 95... ...
In the past, private payers routinely paid premiums to teaching hospitals on the order of 25 percent more than what would be paid for similar services in community hospitals. Now, according to some reports, managed care organizations are negotiating agreements with teaching hospitals with premiums no greater than 5 to 10 percent in order for the hospital to be included on a preferred provider list (Anderson et al., 1999; Committee on the Roles of Academic Health Centers in the 21st Century, 2002)
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From page 96... ...
. For example, the inability of the graduate medical education system to produce more specialists in geriatric medicine in the face of obvious demographic trends has caused some observers to question whether the public subsidy provides incentives to meet public needs.
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From page 97... ...
While research in AHCs is funded quite differently from clinical education, some of the threats to funding continuation appear similar. Historically, for example, growth in both the education and research enterprises in AHCs was accepted as economically beneficial (Blumenthal and Meyer, 1996)
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From page 98... ...
In addition, hospitals in states with relatively generous Medicaid eligibility requirements have higher DSH payments and less uncompensated care, other things being equal, whereas hospitals in states with stringent Medicaid eligibility have lower DSH payments but more uncompensated care (The Commonwealth Fund Task Force on Academic Health Centers, 1997b)
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From page 99... ...
Under current law, Medicare spending is projected to double from historical levels to 4.5 percent of GDP in 2030, about the time that the Medicare Health Insurance trust fund is projected to become insolvent (Social Security Administration and Medicare Boards of Trustees, 2002)
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From page 100... ...
A continuation of current methods of financing, in light of future trends, presents difficulties for AHCs to continue to fulfill clinical education, research, and patient care roles as they presently do. Many of the trends affecting health care financing in the future are well under way.
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From page 101... ...
See, for example, Medicare Payment Advisory Commission, Report to the Congress: Rethinking Medicare's Payment Policies for Graduate Medical Education and Teaching Hospitals, Washington, DC: MedPAC, 1999. Anderson, G.F., G
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From page 102... ...
Similarly, IME payments could be restructured to encourage teaching hospitals to train needed specialties and professions in the settings where they are most appropriately deployed. The add-on to inpatient DRG payments based on residents per bed could be replaced with other measures used as the basis for payment, that more directly track to society's health workforce needs.
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From page 103... ...
Financing the Research Role Incremental Change One approach to shrinking surplus patient care revenues and potentially reduced growth in government research sponsorship is to "broaden the base" of research undertakings to include more clinical research and to seek more opportunities for commercial support. NIH sponsorship may remain the mainstay of investigator-initiated research in AHCs, but it may also be supplemented with more clinical research, including that sponsored by private companies, to help cover the fixed costs of the research enterprise and secure new sources of revenue.
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From page 104... ...
More generally, a change in research priorities of this magnitude may slow the pace of discovery of new biomedical inventions and lose or delay their corresponding health benefits. Financing the Patient Care Role Incremental Change As surplus revenues from insured services diminish, one incremental change that would provide greater support to safety net institutions would be to retarget Medicare and Medicaid DSH payments to institutions for uncompensated care to the uninsured and underinsured poor.
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From page 105... ...
By doing so, it would remove the bias inherent in using Medicaid services as a proxy and help preserve institutions most relied upon for care to the poor. Disadvantages include continued reliance on entitlement programs to accomplish public policy concerning nonentitlement objectives, continued vulnerability to Medicare and Medicaid budget cuts, and potential difficulty in devising direct measures of uncompensated care that are unambiguously calculated and not subject to gaming.
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From page 106... ...
Mission-based management is one approach for understanding the contribution of the various activities, but many schools have not budgeted systematically for their different activities performed (The Commonwealth Fund Task Force on Academic Health Centers, 2002)
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From page 107... ...
. Analyses have found that the effect of medical education on patient care costs has decreased, due to combined improvements in the Medicare case-mix index, the DRG patient classification system, and the relative efficiency of major teaching hospitals (Lave, 2001)
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From page 108... ...
Proposals have been put forward to create a fund, with contributions from all payers, to support medical education (COGME, 2000; The Commonwealth Task Force on Academic Health Centers, 1997a)
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From page 109... ...
Clinical cancer centers conduct at least clinical research and may do other research as well. Cancer centers conduct research in a narrowly defined area, such as population research.
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