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SUMMARY This report is the result of a study by a committee of the Institute of Medicine charged with developing strategies to overcome barriers to financing graduate medical education (GME) for primary care practitioners in ambulatory settings. Current systems of financing make it difficult to prepare physicians adequately for the special demands of primary care practice. Such physicians must be prepared to confront a wide array of problems, provide coordination of health care services, respond to community health needs, and perform many other functions that may take place in settings ranging from solo practice to health maintenance organizations. Because of recent changes in the health care system, the hospital is a less suitable principal focus for the GME experience of primary care physicians than the ambulatory setting in which most of the physician's career will be spent. However, because payments for health services and for GME are skewed to favor inpatient and specialty education it is hard for educators to increase the time that residents spend in primal care outpatient settings. Although there are signs that primary care education programs are responding to changes in the location of medical care and in the nature of hospital care by increasing the emphasis on outpatient experience, such adaptation has been slow. One of the reasons posed for the failure of the programs to initiate the needed move to primary care outpatient settings is the difficulty in financing such training. The committee interpreted its charge as generating recommendations that would immediately start to diminish existing financial ba~Tiers.i The centerpiece of this study was a workshop, held in Washington D.C., April 18 and 19, 1989, to which were invited leaders in the three primary care specialties of general internal medicine, general pediatrics and family medicine. Experts in medical education financing, hospital administration, academic administration, policy analysis, and the insurance industry were also invited. The presentations and discussion at the workshop, together with four papers commissioned by the committee formed the basis of the committee's deliberations. 1 For the purposes of this study general internal medicine, general pediatrics, and family practice are the primary care specialties. The committee's recommendations are intended to encourage programs that emphasize primary care and ambulatory training. Unfortunately, not all programs fit this description. 1
Because the charge to the committee was to try to lower financial barriers, and because of severe time constraints, the committee did not conduct independent evaluations of some important financial and non-financial issues that play a major role in shaping the training of primary care physicians. These include the role of Residency Review Committees in shaping the residency training experience, the extent to which the process of accreditation of education programs assures that "essentials" (the educational requirements for accredited residency training programs that are approved by a Residency Review Committee of the specialty) are fulfilled, the problems residency programs confront as they seek to implement changes in essentials, what needs to be done to enhance the quality of the training experience in different ambulatory settings, and to what extent, if any, residency programs may be closing because of fiscal problems. In addition, the committee did not address in depth ways of reducing teaching costs and increasing resident's practice revenues. A number of questions have been raised about the quality and content of ambulatory training and the funding of specific elements of education such as the teaching of behavioral sciences and epidemiology. These important questions, which bear on the development of quality education programs in primary care, are subjects worthy of investigation which could not be undertaken by the committee. Moreover, the committee did not undertake an investigation of the organizational structure of medical schools and hospitals. An attempt to initiate long term, radical change in the way in which GME is conducted and financed would require fundamental reorganization of these institutions. However, the concern of the committee was to initiate immediate movement in constructive directions. Problems in Financing GME for Primary Care Physicians in Ambulatory Settings The committee reviewed the literature and available data about the costs of training in ambulatory settings and the revenues available to those trying to ensure appropriate ambulatory training experiences for primary care residents. Two major questions arise when considering the costs of shifting residency training to ambulatory settings. First, what is the cost of training in ambulatory settings compared with the cost of training in inpatient settings? Second, what, if anything, is the net cost to the site or program? Few attempts have been made to answer the first question. There are, however, indications that teaching in ambulatory settings is less efficient than in inpatient settings.- For example, in hospitals it is possible to schedule rounds to bring faculty and residents together. In ambulatory care the teacher cannot bring large groups of residents to a patient, and the patient cannot be asked to wait for the convenience of the teaching experience. Another factor thought to contribute to higher costs in ambulatory c'
settings is the need for additional space to accommodate teaching in a facility that is usually designed for economical use of space for patient care only. In a hospital residents are more easily accommodated without additional or dedicated space. On the second question--whether the training site or program will experience net costs as a result of the ambulatory training--there is some evidence that revenues will not cover costs of first-year residents, but may do so for second and third-year residents. Finally, there are indications that both ambulatory training sites and inpatient training sites experience increased indirect costs from providing the training experience. For instance, the test-orderin~ h~h~vior of r~irl~nt.~ it: more costly than that of other physicians. O -~ , Patient care revenue is today the major source of support for graduate medical education. Support that is specifically tied to GME comes from several sources. A principal payer is Medicare, which pays approximately $1 billion annually to hospitals for the direct costs of resident and faculty salaries and benefits, and approximately $2 billion for the indirect education adjustment which pays for costs associated with teaching activities. States play a major but uneven role in financing GME. For example, states sometimes support private medical schools, state-owned hospitals and certain residencies--most often in family medicine in states that perceive a need to enhance their~supply of those practitioners. Special federal funds for GME in primary care are also available from Title VII of the Public Health Service Act. These are grants to primary care training programs--family practice, general internal medicine, and general pediatrics--that require residents to spend at least 25 percent of their time in continuity practice in ambulatory settings. Revenues for GME for primary care physicians in ambulatory settings suffer from several disadvantages compared with revenues for inpatient training and training for other specialties: third-party coverage is more constrained, outpatient payment levels are lower, and copayments and deductibles are higher. Thus it is harder to offset the costs of teaching through patient care income. Although Medicare has reduced the differential between inpatient and outpatient training in its GME payments, a discrepancy still exists: residents in clinics that the hospital does not itself operate are excluded from the calculation for the indirect medical education adjustment. 3
Additional Benefits from Improving Support for Primary Care GME Two important aspects of primary care that are affected by GIVE financing are the supply of primary care physician manpower and care for medically indigent populations. The manpower issue focuses on whether the future supply of primary care physicians will be sufficient to meet the nation's requirements, or whether efforts should be made to increase the number of medical school graduates choosing careers in primary care. The committee reviewed attempts to estimate the adequacy of the future supply of primary care physicians, and indicators of change in the supply of primary care physicians such as the number of medical school graduates selecting primary care specialties. Although projections of both the supply of and need for medical manpower contain much uncertainty, the committee concluded that if measures to improve support of GME in primary care settings would at the same time increase the number of individuals going into primary care, a double benefit would accrue: training would be improved and there would be some correction in the current imbalance between oversupplied specialties and the primary care specialties for which there are possibilities of undersupply. The issue of care for medically indigent people converges with issues in financing GME for primary care in several ways. Teaching hospitals provide a disproportionate amount of uncompensated care. Often the presence of residents in those hospitals is essential if the provision of such care is to continue. In addition, some of those hospitals are experiencing serious erosion of their margins. Changes in payments for medical education that reduce revenues of teaching hospitals could diminish the provision of uncompensated care. However, primary care training in ambulatory sites, which also provide substantial amounts of uncompensated care, can help lighten the burden on hospitals by providing timely preventive care. In addition, there are examples of arrangements between local or state agencies and primary care training sites whereby an agency has funded care for medically indigent people at the site and thus at the same time helped support . . . ;ralnlng. Committee Conclusions and Recommendations It is the committee's judgement that the care provided by future generations of primary care physicians would be enhanced if the GME experience placed greater emphasis on training in primary care outpatient settings. Current payment systems make it difficult to accomplish the needed shift. The committee also concluded that the wide variety of primary care teaching programs and of 4
existing and potential sites for outpatient training means that no single approach to overcoming financial barriers will solve the financing problems of all primary care programs. The committee developed recommendations for improving the ability of education programs and health care providers to support GME for primary care physicians in ambulatory settings. These recommendations are intended to encourage several different entities to act decisively and expeditiously. Entities to whom the committee addresses recommendations include federal, state, and local governments, hospitals, and private foundations. This dispersion of responsibility for making needed changes reflects the committee's belief that GME is of benefit to, and is correctly the concern of, numerous participants in the health care system. The committee developed its recommendations bearing in mind four major considerations. First, the goal is to improve the quality of primary care GME both by increasing the time spent in ambulatory setting and increasing the number of sites that closely resemble primary care practice conditions. Second, the recommendations should immediately start to move the policy process in appropriate directions, acknowledging that GME financing issues will not be completely solved without more radical restructuring of revenue flows and hospital financial incentives. Third, two secondary goals should be fostered: expanding the primary care physician workforce and sustaining or enhancing access to care for medically indigent people. Fourth, the recommendations are made in the expectation that no major new federal financing for GME will soon be available. Physician Payment Reform The committee noted that increasing payment for primary care services would have the mutually reinforcing effect of enhancing the revenues of primary care training sites and making a career in primary care more attractive by increasing its earning potential. A resource-based relative value scale (RBRVS) has been proposed as the basis for Medicare physician payment. Under this system payment is based on the costs of the resources (including time) used to provide a unit of service. RBRVS payment would redistribute income among physicians so that primary care specialists would increase their income; surgical and more procedurally oriented specialists would experience reduced income. The committee supports the proposal that Medicare adopt a resource-based relative value scale method of payment for physicians, and recommends that all payers adopt such a payment method. 5
Under RBRVS payment the financing of primary care GME in ambulatory settings would be facilitated by an increase in patient care revenues; the improved earnings ability of primary care faculty would increase the ability of faculty practice plans to support teaching physicians; and the economic incentives that deter some physicians from entering primary care would be diminished. Medicare Direct Graduate Medical Education Payment Proposed rules for Medicare payment for the direct costs of graduate medical education introduce a weighting factor that diminishes payments for residents who have passed the initial residency period (board eligibility plus one year, the total not to exceed five years). The committee suggests building on this precedent by which Medicare GME payment can influence physician supply. The committee recommends an adjustment to the Medicare payment for the direct costs of GME that would create an incentive to establish residencies in primary care and to place those residents in primary care ambulatory settings. The mechanism should be a differential in the fulZ- time equivalent calcuZation between primary care residents and other residents. Residents in genera! internal medicine, general pediatrics, and family medicine should receive a higher weighting factor than other residents. Primary care residents who spend 25 percent or more of their time in a primary care ambulatory setting (not including specialty clinicsJ should receive a larger weighting factor. The suggested incentive both would make the provision of primary care residencies more attractive to hospitals, and generate revenues needed for the development of quality training programs in community practice sites. It is reasonable to offer extra support to needed specialties by directing small amounts of resources away from those that are better financed and for which the supply is considered to be more than adequate. Medicare Indirect Graduate Medical Education Adjustment Evidence suggests that the outpatient sites of residency training have costs associated with teaching activities similar to those recognized by the Medicare indirect medical education teaching adjustment. The committee recommends that Medicare include in the calculation of the indireof medical education adjustment time spent by primary care residents in all primary care ambulatory settings. 6
By extending the Medicare indirect medical education payment to all primary care sites additional money will become available to help support the costs of training in primary care outpatient sites. Since Medicare's indirect GME payment is a recognition of the costs of education it is appropriate that hospitals use some of this revenue to support the primary care ambulatory services that are an essential cost of training primary · ~ care p nyslclans. The committee urges hospitals to commit a portion of the revenue from the Medicare indirect GME adjustment to direct financing of services at community-based ambulatory sites used for training primary . · - care pnyslczans. State and Local Roles Case studies indicate that state capitation payments contribute significantly to the ability of funded primary care residencies to support primary care ambulatory residencies. States should continue this important role, especially where significant shortages of primary care practitioners are predicted. The committee recommends that states assess their need for primary care physicians, bearing in mind the special roles of these physicians. States that determine that an increased supply of primary care physicians would benefit their citizens, and states that find a potential shortage of primary care practitioners, should increase their financial support of GME and widen their support to include general internal medicine and general pediatrics as well as family medicine. States making judgments about the need for primary care physicians should be cognizant of the differences in care provided by primary care specialists and other physicians--noting the potential for the provision of cost-effective care that these physicians represent. Medicaid programs can also help enable primary care ambulatory training to remain financially sound. The committee encourages Medicaid programs that do no! now support GME to follow Medicare GME payment policies. Primary care sites of residency training can sometimes help state and local governments solve problems of health care for medically indigent populations by 7
providing cost-effective, appropriate services. The training sites benefit from the additional revenues generated by state or local support of this activity. The committee recommends that primary care GME programs assume the responsibility for informing legislators and agencies of ways in which primary care ambulatory GME could provide services that would benefit needy populations as we!! as the education programs. The programs should aisro make efforts to ensure continued stupor! by maintaining contact with the relevant agencies and legislators through such means as new~Zetters. Grants Because of insecure funding, grants should not be regarded as a source of protracted operating support. However, grants can have an important catalytic role in the initial development of ambulatory sites, supporting irlnovative educational arrangements, enabling creative financial arrangements to be developed, and helping develop the faculty needed to initiate a quality program. The committee recommends that the funds available through Title VI! of the Public Health Service Act be directed to the development of innovative mode! programs and demonstration sites from which others can learn of new ways of arranging and supporting quality primary care ambulatory training programs,. IEn addition these grant programs can continue to play a role in faculty development during the early years of programs. Private foundations, both local and national, interested in medical education and the provision of health services, should add their support to such activities thus multiplying the benefit of the limited federal grants funds that are available. Academic Leadership The success of committed leaders in overcoming financial barriers and establishing innovative arrangements for training primary care residents in ambulatory settings underscores the importance of academic leadership. These leaders also have a key part to play in developing the professional values that will encourage young physicians to enter primary care specialties. The committee encourages deans and faculty members to emphasize the importance of ambulatory training, and urges the implementation of academic systems that reward those who provide role models for future generations of primary care physicians and devote time to developing the curricula and 8
teaching skills needed to make training in ambulatory settings a useful and positive experience. Efficient Use of Training Resources The committee was convinced that the efficiency with which training sites are operated makes a significant difference in the financial health of the training program. The committee believes that budgeting and planning for primary care ambulatory training sites should take into account the need to develop effective clinic management. In addition, to the extent that economies of scale can be achieved by the use across specialty lines of facilities and other resources, these cost savings should be sought and interspecialty barriers lowered. The committee believes that budgeting and Planning for In conclusion, believing that quick action is needed to ensure the future supply of appropriately trained primary care nhvsicinns ' ~ ' ~ 1 1 ~. · ~ - =~ , one committee developed one Ioregolng recommendations tor ways of improving the ability of education programs and health care Droviders to sunnort (IMP. for nrim~r~r rare nh~r~i~iane in ambulatory settings. _ 1 ~_ · ~ ~ . ~ _ ~= ~ ~ ~ ~ ~ ~^ A -~^ ~ ~ J The committee's recommendations address numerous par~lclpanls in one nealtn care system. However, the recommendations are not addressed to all those whose influence could appropriately be brought to bear on the problem, nor do the recommendations cover all possible solutions. Rather, the recommendations are intended as first, immediate, steps in a direction that the committee believes must be pursued. 9