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Graduate Medical Education That Meets the Nation's Health Needs (2014)

Chapter: 5 Recommendations for the Reform of GME Financing and Governance

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Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
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5

Recommendations for the Reform of GME Financing and Governance

Abstract: Throughout the nearly 50 years of federal support, the nation’s graduate medical education (GME) system has been regarded as a model of physician training that produces high-quality clinicians. The capacity of the system has expanded, yet there is little evidence that the expansion is in areas where it is most needed, and there is growing concern that recent GME graduates lack some of the essential skills for 21st-century practice. Medicare alone distributes nearly $10 billion annually for the residency training of physicians, with minimal reporting requirements and no connection to outcomes. The committee’s recommendations provide an initial roadmap for reforming the Medicare GME payment system and for building an infrastructure to drive strategic investment in the nation’s physician workforce. Change cannot and should not occur precipitously. The committee recommends a 10-year transition from the status quo to full implementation of the recommendations, and then a reassessment of the need for continued Medicare GME funding. The rules governing the Medicare GME financing system are rigid and rooted in statute. The committee strongly urges Congress to amend Medicare law and regulation, as outlined in this chapter, to enable the beginning of the transition in this very important investment in the nation’s future physician workforce.

Since the creation of the Medicare and Medicaid programs, the public has provided tens of billions of dollars to fund graduate medical education

Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
×

(GME) in teaching hospitals and other educational institutions that sponsor physician residency training. The scale of government support of this phase of physician education is unlike that given to any other profession in the United States. In 2012 alone, public tax dollars contributed more than $15 billion to support residency training. The Medicare and Medicaid programs provided more than 90 percent of the federal funding, an estimated $9.7 billion and $3.9 billion, respectively.

This chapter reviews the committee’s assessment of current GME governance and financing, described in the previous chapters, and then presents five policy recommendations for their improvement (see Box 5-1). The focus is on the Medicare program because, as the dominant funding source, it has the most leverage to effect change. The committee does not recommend changes to the financing and governance of residency programs provided or sponsored by the Veterans Health Administration (VHA) or the Department of Defense. As Chapter 3 notes, although the VHA does not sponsor residency programs, VHA hospitals train a substantial portion of the nation’s physicians through affiliation agreements with medical schools and other sponsoring organizations. VHA GME funding comes solely from the agency’s annual appropriations. The VHA Office of Academic Affiliations tracks GME spending in VHA teaching hospitals and also has access to a full range of information on its residency programs.

OVERVIEW

The committee began its deliberations by considering several fundamental questions: Should the public continue to support GME? If yes, then why should Medicare, a health insurance program for older adults and certain disabled persons, be the conduit for the public’s funding of an educational program? Would other GME financing mechanisms be more appropriate?

The Public’s Role in Financing GME

Public financing of GME, particularly through Medicare, has been a secure and stable funding source for physicians’ residency training for nearly 50 years. During that time, GME training positions have expanded in number and in the breadth of specialties; residents’ working conditions have improved; substantially more women are in the training pool; the number of underrepresented minorities has increased (although greater representation is still needed); and residency training has evolved from an apprenticeship model with an emphasis on service to a curriculum-based educational experience tied to the achievement of defined competencies in specific areas.

Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
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BOX 5–1
Recommendations

RECOMMENDATION 1: Maintain Medicare graduate medical education (GME) support at the current aggregate amount (i.e., the total of indirect medical education and direct graduate medical education expenditures in an agreed-on base year, adjusted annually for inflation) while taking essential steps to modernize GME payment methods based on performance, to ensure program oversight and accountability, and to incentivize innovation in the content and financing of GME. The current Medicare GME payment system should be phased out.

RECOMMENDATION 2: Build a graduate medical education (GME) policy and financing infrastructure.

  1. 2a. Create a GME Policy Council in the Office of the Secretary of the U.S. Department of Health and Human Services. Council members should be appointed by the Secretary and provided with sufficient funding, staff, and technical resources to fulfill the responsibilities listed below.
  • Development and oversight of a strategic plan for Medicare GME financing;
  • Research and policy development regarding the sufficiency, geographic distribution, and specialty configuration of the physician workforce;
  • Development of future federal policies concerning the distribution and use of Medicare GME funds;
  • Convening, coordinating, and promoting collaboration between and among federal agencies and private accreditation and certification organizations; and
  • Provision of annual progress reports to Congress and the Executive Branch on the state of GME.
  1. 2b. Establish a GME Center within the Centers for Medicare & Medicaid Services with the following responsibilities in accordance with and fully responsive to the ongoing guidance of the GME Policy Council:
  • Management of the operational aspects of GME Medicare funding;
  • Management of the GME Transformation Fund (see Recommendation 3), including solicitation and oversight of demonstrations; and
  • Data collection and detailed reporting to ensure transparency in the distribution and use of Medicare GME funds.

RECOMMENDATION 3: Create one Medicare graduate medical education (GME) fund with two subsidiary funds.

  1. 3a. A GME Operational Fund to distribute ongoing support for residency training positions that are currently approved and funded.

  2. 3b. A GME Transformation Fund to finance initiatives to develop and evaluate innovative GME programs, to determine and validate appropriate GME performance measures, to pilot alternative GME payment methods, and to award new Medicare-funded GME training positions in priority disciplines and geographic areas.
Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
×

RECOMMENDATION 4: Modernize Medicare graduate medical education (GME) payment methodology.

  1. 4a. Replace the separate indirect medical education and direct graduate medical education funding streams with one payment to organizations sponsoring GME programs, based on a national per-resident amount (PRA) (with a geographic adjustment).

  2. 4b. Set the PRA to equal the total value of the GME Operational Fund divided by the current number of full-time equivalent Medicare-funded training slots.

  3. 4c. Redirect the funding stream so that GME operational funds are distributed directly to GME sponsoring organizations.

  4. 4d. Implement performance-based payments using information from Transformation Fund pilots.

RECOMMENDATION 5: Medicaid graduate medical education (GME) funding should remain at the state’s discretion. However, Congress should mandate the same level of transparency and accountability in Medicaid GME as it will require under the changes in Medicare GME herein proposed.

However, the statutes and regulations governing GME financing were developed at a time when hospitals were the central—if not exclusive—site for physician training. The health care context is dramatically different from that of five decades ago, and health care delivery continues to evolve rapidly. The imperative for an accelerated transition toward a high-value, high-performance health care system has been well articulated by previous Institute of Medicine (IOM) committees as well as many others (Bipartisan Policy Center Health Project, 2013; Commonwealth Fund, 2006; IOM, 2001, 2006a,b, 2008, 2012). A high-value health care system embraces the entire continuum of care, not just hospital care; relies on interprofessional teams, not just doctors; emphasizes primary rather than specialty care; and requires accountability to the public and payers, rather than relying on trust in the good intentions of professionals. Although hospitals and specialists remain essential, the burden of chronic disease, the need for greater emphasis on preventive care, and modern information technologies (to name but a few influences) shift attention to homes, communities, highly skilled clinicians who are not physicians, and integrated models of coordinated care—in ways that few in 1965 could have foreseen.

Several key considerations informed the committee’s thinking regarding future public funding of GME. First, the committee agreed that its charge

Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
×

was not to develop an idealized GME financing system from scratch—as if teaching hospitals had not been receiving GME dollars in a fairly consistent way for nearly 50 years. It might be a historical accident that Medicare evolved to be the primary public funder of GME. Nevertheless, withdrawing Medicare funding altogether risks serious unintended consequences.

Chapters 3 and 4 described the lack of comprehensive and standardized reporting of GME outcomes related to financing. Very limited information is currently available on the use of public dollars distributed for GME. Despite assertions to the contrary, it is not possible to determine if the “production” of our nation’s physicians is actually dependent on federal monies. Moreover, little evidence suggests that the current terms of GME financing encourage the production of the types of physicians that the nation’s health care system requires. In fact, as the previous chapters make clear, Medicare GME rules discourage efforts to train physicians in the clinical settings—outside the hospital—where most people seek care. The historic cost-based system perpetuates inequities in funding, and the institutional caps on funding likely represent a disincentive to expansion of GME in some cases where it may be needed. At the same time, there are no funding incentives in Medicare that encourage innovation or desired GME outcomes.

The committee considered a range of potential GME funding sources, including maintaining or modifying current Medicare support, an all-payer approach that would require both private and public payers to contribute to GME financing, a dedicated federal GME program independent of the Medicare and Medicaid programs, a significant expansion in Title VII health professions funding directed to physician education, and even the possibility of requiring residents to pay tuition.

It quickly became clear that funding GME through an entitlement program—such as Medicare—provides a level of stability that enables sponsoring institutions to make the commitments to the trainees, faculty, and facilities that GME needs. Stable funding is also essential to ensuring a meaningful role for residents in patient care delivery, which is the foundation of our educational model. Relying on a federal program that depends on discretionary appropriations would introduce significant risk and considerable uncertainty for training programs. Federal agencies struggle to hold onto the funding needed to achieve their objectives. The tenuous funding of the Health Resources and Services Administration’s (HRSA’s) Children’s Hospitals GME (CHGME) program is a case in point: Its reauthorization was in question throughout the course of this study (Wong et al., 2013).

Finally, the health care sector consumes more than 17 percent of the gross domestic product, 26 percent of which is federal funding (CMS, 2012). Advocating for increased federal GME funding would be irresponsible without evidence that the public’s current level of investment is helping to produce the workforce needed in the 21st century. At the same time,

Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
×

Medicare GME funding should not be reduced from current levels if it can be leveraged for greater public benefit. Both the public’s health and the economy have an important stake in the effectiveness and availability of the physician workforce and the health care workforce overall. A significant cut to GME funding would squander the very leverage required to effect much-needed change. This is the time for all those engaged in the GME system to work together to produce the physician workforce that the nation needs. As a result of these considerations, the committee thus decided to focus its recommendations on Medicare GME payment reforms (and their related governance).

The Outcomes of Current GME Governance and Financing Arrangements

As Chapter 1 describes, the committee agreed on a set of goals for future federal financing of GME. These six goals, presented in Box 5-2, served as the committee’s framework for assessing the current GME system. The following discussion uses this framework to recap the conclusions of the previous chapters and to discuss their implications for the committee’s policy recommendations presented in greater detail later in the chapter.

BOX 5–2
IOM Committee’s Goals for Developing Graduate Medical Education (GME) Policy Recommendations

  1. Encourage production of a physician workforce better prepared to work in, help lead, and continually improve an evolving health care delivery system that can provide better individual care, better population health, and lower cost.

  2. Encourage innovation in the structures, locations, and designs of GME programs to better achieve Goal #1.

  3. Provide transparency and accountability of GME programs, with respect to the stewardship of public funding and the achievement of GME goals.

  4. Clarify and strengthen public policy planning and oversight of GME with respect to the use of public funds and the achievement of goals for the investment of those funds.

  5. Ensure rational, efficient, and effective use of public funds for GME in order to maximize the value of this public investment.

  6. Mitigate unwanted and unintended negative effects of planned transitions in GME funding methods.

Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
×

GME Goal #1: Encourage production of a physician workforce better prepared to work in, help lead, and continually improve an evolving health care delivery system that can provide better individual care, better population health, and lower cost.

The committee found considerable evidence that GME financing does not encourage the production of the physician workforce that the nation needs. Under current statute, Medicare funds residents regardless of local, regional, or national workforce needs or the quality of the training programs. Accreditation and certification processes help ensure that GME programs meet professional standards and produce physicians who are ready to enter practice with required knowledge, experience, and skills. However, antitrust and fair trade prohibitions preclude accreditors from dealing with broader national objectives such as the composition of the physician workforce, the geographic distribution of GME resources, or other priority concerns—nor would it be an appropriate role for accreditors to undertake.

Chapter 2 described a variety of indicators that newly trained physicians are not adequately prepared to practice in today’s health care delivery organizations (Center for Total Health, 2011; Cordasco et al., 2009; Crosson et al., 2011; MedPAC, 2010). Although expertise in care coordination, team-based care, costs of care, health information technology, cultural competence, and quality improvement are essential to contemporary medical practice, medical educators report that these skills are rarely addressed in GME curriculums or during the residency experience (Center for Total Health, 2011). Recent surveys of residents and faculty suggest that they know little about the costs of diagnostic procedures (Patel et al., 2013; Sehgal and Gorman, 2011) and that residents feel ill prepared to provide culturally competent care (Betancourt et al., 2007; Weissman et al., 2005). Department chiefs in internal medicine, pediatrics, general surgery, and obstetrics/gynecology in Kaiser Permanente’s Northern California region report that recently trained physicians have difficulty performing simple office-based procedures and managing routine conditions (e.g., minor depression and anxiety, minor chronic pain, certain acute musculoskeletal problems, basic dermatological conditions, and headaches) (Crosson et al., 2011). Yet the Centers for Medicare & Medicaid Services (CMS) has no way to reward residency programs that improve outcomes in these areas because, as Chapter 3 describes, Medicare GME payments are based on rigid formulas that do not distinguish between high- and low-performing residency programs.

Chapter 2 also described commonly held concerns about the proportion of GME directed toward subspecialty training (considered too high) and toward primary care (considered too low). The number of subspecialty programs accredited by the Accreditation for Graduate Medical Education

Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
×

(ACGME) rose by more than 30 percent from academic years 2003-2004 to 2012-2013. The number of fellows in subspecialty training grew by 40 percent (ACGME, 2013). Although the ideal proportions of primary care, specialty, and subspecialty are unknown, the evidence does suggest a worsening imbalance. Numerous reports describe a “hidden curriculum” during residency training that actively discourages primary care specialization (COGME, 2010; Dowdy, 2011; Erikson et al., 2013; Kussmaul, 2013; Warm and Goetz, 2013). The transition to a highly specialized physician workforce clearly occurred with little strategic direction or evidence-based judgment.

Concerns that the nation faces a looming physician shortage, particularly in primary care specialties, are common. The committee did not find credible evidence to support such claims. Too many projections of physician shortages build on questionable provider–patient ratios, fail to consider the marked geographic differences in physician supply, and ignore recent evidence of the impacts of more effective organization, new technology, and deployment of health personnel other than physicians (Altschuler et al., 2012; Auerbach et al., 2013a,b; Bodenheimer and Smith, 2013; Ghorob and Bodenheimer, 2012). More conclusive evidence is needed to justify interventions aimed at increasing the number of GME positions at a faster rate than is already occurring.

Regardless of the numbers debate, there is a dearth of successful models for promoting primary care careers and influencing trainees’ career choices. If the GME system is to maintain robust capacity in primary care training and to encourage primary care careers, there should be a dedicated effort to identify or develop effective interventions. For example, GME funds might be used to finance new incentives for choosing a primary care career. The incentives might focus on the individual trainee by offering medical school loan repayment in exchange for a long-term commitment to primary care practice—on a greater scale than currently provided by HRSA—or else provide incentives to educational institutions that sponsor priority residency programs by paying a substantially higher per-resident amount (PRA) for primary care trainees. No organization currently has the mandate to investigate the utility of such interventions or to develop effective alternatives. Strategic investment in GME cannot be achieved without robust research and demonstration capacity.

GME Goal #2: Encourage innovation in the structures, locations, and designs of GME programs to better achieve Goal #1.

Chapter 3 described how Medicare’s GME payment formulas discourage innovation and systematically disadvantage residency programs that are based in non-hospital ambulatory care settings as well as children’s, safety

Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
×

net, and other hospitals that care primarily for non-elderly patients. Under current statute and regulation, Medicare distributes GME monies directly to teaching hospitals in two independent funding streams: (1) direct graduate medical education (DGME) payments to cover the salaries and benefits of residents and faculty and certain other costs, and (2) an indirect medical education (IME) adjustment to Medicare prospective payment system (PPS) inpatient rates to compensate for the inefficiencies thought to be associated with sponsoring residency programs. Both funding streams are directly tied to hospitals’ volume of Medicare inpatients. In 2012, IME accounted for $6.8 billion or 70.8 percent of total Medicare GME payments to teaching hospitals. DGME payments totaled $2.8 billion or 29.2 percent. Except for an accreditation requirement, the payments are essentially guaranteed regardless of program performance, efficiency, or quality of training, or whether the types of physicians trained reflect national or regional health needs.

The committee concluded that continued Medicare GME funding is warranted only if its distribution is redesigned to help produce a physician workforce better able to support a high-value, high-performing health care system.

Several modifications to Medicare GME financing are essential to encourage innovation and to better meet local, regional, or national health care workforce requirements:

  • First, the funds should be distributed to the organizations that sponsor residency programs, not just the teaching hospitals that employ or otherwise rely on residents’ services. Under the status quo, nearly all GME training occurs in hospitals—including primary care residencies—even though non-hospital settings are where most physicians will spend their careers and where most people seek health care services. As noted in Chapter 3, about half of all residency programs are currently sponsored by teaching hospitals. Hospitals have little incentive to train residents in community ambulatory settings. Transferring fiduciary control to all sponsoring institutions increases the likelihood that GME funds will flow to and increase training in non-hospital settings.
  • Second, as the Medicare Payment Advisory Commission (MedPAC) and others have recommended, GME payments should reward performance and reflect local, regional, and national workforce needs (MedPAC, 2010). This will require not only the introduction of performance-based payment methods but also a change in how Medicare determines which training slots are eligible for GME payments. As noted in Chapter 3, with some exceptions, Medicare regulations limit each hospital’s number of funded slots accord-
Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
×
  • ing to their number in 1996, nearly two decades ago. As a result, there are significant inequities in the geographic distribution of Medicare-funded slots. In addition, the regulations do not require that today’s funded slots be in the specialties that were originally funded in 1996. Hospitals are free to replace what were previously primary care slots with subspecialty training slots—regardless of local workforce priorities. The committee recognizes that the transformation to performance-based payment is necessarily a longer-range goal. Considerable work needs to be done to determine the types and location of physician trainees who should receive priority and to develop and test the performance measures for GME payments. Funding for such developmental work is essential and should be funded using existing Medicare GME dollars.

  • Third, the linkage between hospital Medicare patient volume and GME payment should be phased out. At first blush, tying Medicare GME payments to Medicare patient volume seems logical and appropriate. However, this linkage has important negative consequences. Many important training sites tend to serve a younger population. Safety net providers, for example, care for patients of all ages, but their GME payment rates are reduced because they tend to have fewer Medicare patients than other teaching hospitals. Because it is very unusual for a child to be Medicare-eligible, pediatric training programs based in freestanding children’s hospitals do not have the same access to Medicare GME funding as other hospitals. The CHGME program was created to remedy this situation, but, as noted above, its reauthorization has been uncertain.
  • Finally, the separate DGME and IME funding streams should be merged into a uniform PRA. The committee could not find a justification for continuing the separate funding streams. Moving to a uniform, single PRA payment will simplify administration and facilitate program oversight, transparency, and evaluation. The committee also recommends that a portion of current GME funding be preserved for the developmental work described above and also for new training slots (where needed), ongoing program management, policy making, and evaluation.

GME Goal #3: Provide transparency and accountability of GME programs, with respect to the stewardship of public funding and the achievement of GME goals.

The committee found little informative data on Medicare or Medicaid GME financing and its outcomes. CMS GME reporting requirements

Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
×

are minimal and do not generate the kind of standardized data essential to program evaluation. The previous chapters show that the most fundamental questions about GME financing and program outcomes cannot be answered. These include, for example, questions regarding the bottom-line financial impact of residency training programs on teaching institutions, how GME public funds are used for educational purposes, the extent to which residents are trained in community-based settings, the specialties and demographic characteristics of funded trainees, the practice locations of recent trainees, whether recent trainees accept Medicare and Medicaid patients once they enter practice, and the quality of care delivered by these physicians.

As Chapter 3 reported, teaching hospitals are asked only to report the data elements that are needed to calculate Medicare IME and DGME payments. The DGME cost data are not complete, standardized, or audited (Wynn et al., 2006, 2013). The revenue impact and cost savings associated with sponsoring residents are neither tracked nor reported; in fact, they are rarely acknowledged when the costs of GME are examined. Medicaid GME has no reporting requirements. Policy makers—including CMS Medicaid officials—have to rely on privately sponsored surveys of state Medicaid programs to obtain estimates of GME spending and to learn about state GME efforts (Henderson, 2013; Spero et al., 2013).

Despite numerous efforts by researchers, no one has been able to adequately document the financial impact of residency training programs on teaching hospitals (Wynn et al., 2013). At the outset of this study, the committee organized a small workgroup to interview key GME officials at four academic medical centers and work with them to collect and assess available Medicare GME cost data (see Chapter 3). Despite hours of investigation and the efforts of numerous individuals, the GME officials were unable to produce comprehensive, comparable financial data. It became clear that even GME program staff have limited information regarding the net financial impact of GME on their own institutions. A 2002 survey of family medicine residency programs came to a similar conclusion: More than half of the programs did not even know how much Medicare GME funding they received (Chen et al., 2002).

The absence of transparency is a serious concern in a nearly $10 billion public program. The committee recommends that future GME funding be contingent on standardized reporting that will allow program evaluation and inform future program improvements. The committee strongly urges that Congress require CMS to direct a portion of Medicare GME funds toward the development of a minimum dataset for future GME reporting and program evaluation.

Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
×

GME Goal #4: Clarify and strengthen public policy planning and oversight of GME with respect to the use of public funds and the achievement of goals for the investment of those funds.

Chapter 4 revealed that no one entity has the authority or explicit responsibility for overseeing the public’s investment in GME. Current statute requires only that residency programs be accredited by the ACGME, American Osteopathic Association (AOA), Commission on Dental Accreditation, or Council on Podiatric Education, in order to receive federal funding. The ACGME’s Next Accreditation System promises significant progress toward 21st-century health system objectives. But, as noted earlier, accreditation alone cannot ensure that the composition and competencies of the physician workforce meet the nation’s needs.

The Medicare GME program should have a transparent, simple, and logical organizational infrastructure for strategic policy development and implementation; program oversight; performance measures to monitor program outcomes with respect to strategic goals; and easily understood and accessible performance reports for the public, stakeholders, and policy makers.

The existing organizational infrastructure for GME program oversight and policy making is very limited. The relevant federal advisory groups and research centers—most notably the Council on Graduate Medical Education (COGME), MedPAC, and the CMS Center for Medicare & Medicaid Innovation (CMMI)—do not have authority over GME funding or influence over its outcomes.

COGME, a federal advisory committee associated with the Bureau of Health Professions, provides some GME policy advice to Congress and the Secretary. But it is housed in an agency—HRSA—whose focus is on programs for low-income and disadvantaged populations and is without regulatory authority to effect CMS programs. Moreover, COGME is grossly underfunded; its recent appropriations support only 1.3 full-time equivalents (FTEs) (HRSA, 2012). In addition, COGME depends on the volunteer efforts of its members who, by statute, are mandated to represent stakeholders. As a result, COGME lacks important technical expertise and the capacity for objective and impactful policy analysis.

MedPAC, in its role as advisor on Medicare programs, has produced or commissioned numerous valuable reports on GME (Cordasco et al, 2009; MedPAC, 1999, 2001, 2003, 2009, 2010; Wynn et al., 2006, 2013). However, its attention to GME is relatively infrequent, as GME accounts for less than 2 percent of total Medicare spending. MedPAC’s mandate is to focus on much broader issues of physician and hospital payment as well as beneficiaries’ access to and quality of care (MedPAC, 2013).

Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
×

CMMI has robust resources for developing, testing, and accelerating the adoption of new payment and service delivery models. However, its current statutory mandate does not include GME and to do so may be an unwise distraction from its major focus on other innovations in Medicare and Medicaid (CMMI, 2012).

Thus, a new organizational structure is required to oversee the transformational changes of a new GME program. As Chapter 4 notes, several elements will be essential to effective oversight of public funding for GME. These include

  • sufficient resources, authority, and conflict of interest protections to develop objective guidance regarding GME program goals;
  • explicit authority to develop and implement new payment methodologies, including performance measures to monitor program outcomes;
  • transparent processes and user-friendly public reporting; and
  • the ability to convene, coordinate, and promote collaboration between and among federal agencies and private accreditation and certification organizations.

Goal #5: Ensure rational, efficient, and effective use of public funds for GME in order to maximize the value of this public investment.

As the above text indicates, the committee concluded there is a fundamental misalignment between the rules governing Medicare GME financing and the objectives of a high-value health care system. Rather than embrace innovation and the preparation of physicians in the interests of the nation’s health, the current system yields a variety of undesirable consequences and provides minimal opportunity for strategic investment. Formulating smart financing strategy will require not only an organizational infrastructure to consider the options but also dedicated monies to support the testing of innovative payment and educational models for future broader-scale implementation. As noted in the above review of Goal #1, the committee recommends that a portion of current GME funds be redirected to demonstrations of GME payment models that will realign the incentives in GME financing toward the production of a physician workforce that meets the nation’s health needs.

Table 5-1 provides a brief summary of recommended next steps.

Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
×

TABLE 5-1 Goals and Recommended Next Steps for Reforming Medicare Graduate Medical Education (GME) Governance and Financing

Goals for Future GME Funding

Recommended Next Steps

Goal #1
Encourage production of a physician workforce better prepared to work in, help lead, and continually improve an evolving health care delivery system that can provide better individual care, better population health, and lower cost.
  1. Amend Medicare statute to allow for a new Medicare GME performance-based payment system with incentives for innovation in the content and financing of GME in accord with local, regional, and national health care workforce priorities.
  2. Create a high-level GME policy and financing infrastructure within the Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS) with responsibility for federal GME policy, including development, testing, and implementation of new payment methods.

See Recommendations 1, 2, 3, and 4.

Goal #2
Encourage innovation in the structures, locations, and designs of GME programs to better achieve Goal #1.
  1. Distribute Medicare GME funds to the organizations that sponsor residency programs via a national per-resident amount (geographically adjusted).
  2. Create one unified GME fund to replace the separate Indirect Medical Education and Direct Graduate Medical Education funding streams.
  3. Conduct demonstrations to identify feasible and effective performance-based payment methodologies.
  4. Delink Medicare GME payments from teaching institutions’ Medicare patient volume.

See Recommendations 3 and 4.

Goal #3
Provide transparency and accountability of GME programs, with respect to the stewardship of public funding and the achievement of GME goals.
  1. Require standardized reports from sponsoring organizations as a condition for receiving Medicare GME funding.
  2. Develop a minimum dataset for sponsors’ reports to facilitate performance measurement, program evaluation, and public reporting.
  3. Develop performance measures to monitor program outcomes with respect to those goals.
  4. Provide easy access to GME reports for the public, stakeholders, researchers, and others.

See Recommendation 2.

Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
×
Goal #4
Clarify and strengthen public policy planning and oversight of GME with respect to the use of public funds and the achievement of goals for the investment of those funds.
  1. Create a high-level GME policy and financing infrastructure within HHS and CMS with responsibility for federal GME policy, including development, testing, and implementation of new payment methods.

See Recommendation 2.

Goal #5
Ensure rational, efficient, and effective use of public funds for GME in order to maximize the value of this public investment.
  1. Use a portion of current Medicare GME funds to fund the new infrastructure, developmental activities, new training slots (where needed), and program evaluation.

See Recommendations 1, 2, 3, and 4.

Goal #6
Mitigate unwanted and unintended negative effects of planned transitions in GME funding methods.
  1. The GME Policy Council should develop a strategic plan—in consultation with the CMS GME Center and GME stakeholders— that allows for a careful phase-in of the reforms.
  2. The Council should ensure that its blueprint for the transition includes a rigorous strategy for evaluating its impact and making adjustments as needed.

See Recommendation 2.

Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
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Goal #6: Mitigate unwanted and unintended negative effects of planned transitions in GME funding methods.

The committee’s recommendations, described below in greater detail, provide an initial roadmap for reforming the Medicare GME payment system and for building an infrastructure to drive strategic investment in the nation’s physician workforce. These recommendations call for a dramatic departure from the status quo. The committee acknowledges that repurposing and redesigning Medicare GME funding will be disruptive for teaching hospitals and other sponsors of residency programs. Sudden changes in cash flow for teaching institutions could undermine their capacity to prepare for the new GME financing system and could negatively impact their other essential missions. Transition to a new funding methodology must seek to mitigate these risks. In addition, the transition must accommodate the need for residency programs to honor long-term commitments to trainees, and for existing arrangements with affiliated training organizations to be renegotiated. A well-planned, long-term period of transition is of paramount importance.

RECOMMENDATIONS FOR REFORMING GME GOVERNANCE AND FINANCING

Significant reforms are needed to ensure value in the public’s sizeable investment in graduate medical education. These recommended reforms, presented below, cannot occur without legislative action. The rules governing the Medicare GME financing system are rooted in statute. The committee strongly urges Congress to amend Medicare law and regulation to begin the transition to a performance-based system of Medicare GME funding.

Although clearly far-reaching and a marked change from the status quo, the committee’s recommendations are based on a careful consideration of the evidence on the outcomes and unintended consequences of the current GME financing system (described above and in the previous chapters). The recommendations are also based on the fundamentals of good governance, particularly transparency and accountability to the public for program outcomes (as described in Chapter 4). CMS has successfully accomplished major payment transitions before—during implementation of the PPS in the 1980s and the Medicare Resource-Based Relative Value Scale (RBRVS) payment system in the subsequent decade (Braun and McCall, 2011; Hsiao et al., 1992; RAND Health, 2006). Both the PPS and RBRVS reforms involved far greater percentages of Medicare spending.

Transforming Medicare’s role in financing GME will be a complex undertaking requiring careful planning. The committee’s recommendations outline the objectives for the transition and the building blocks of a

Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
×

reformed, value-based Medicare GME financing program. A well-resourced program infrastructure should be established quickly to formulate a more detailed roadmap than the one presented here.

These recommendations will require several transitions that should be gradually phased in over an extended period. Every effort should be made to mitigate unwanted and unintended negative effects. The committee recommends 10 years for the full Medicare GME transition. As noted earlier, residency programs must honor multiyear commitments—some as long as 6 years—to trainees. Existing contractual arrangements with affiliated training organizations may require renegotiation. For example, most of the VHA residency programs are sponsored by a medical school or teaching hospital through locally negotiated affiliation agreements (Chang, 2012). As Chapter 3 noted, nearly 130 VHA health facilities had affiliation agreements in 2011 with 151 medical schools (Veterans Affairs Office of Academic Affiliations, 2012). In 2012, 37,800 residents rotated through VHA facilities.1

Invest Strategically

RECOMMENDATION 1: Maintain Medicare graduate medical education (GME) support at the current aggregate amount (i.e., the total of indirect medical education and direct graduate medical education expenditures in an agreed-on base year, adjusted annually for inflation) while taking essential steps to modernize GME payment methods based on performance, to ensure program oversight and accountability, and to incentivize innovation in the content and financing of GME. The current Medicare GME payment system should be phased out.

The committee debated—at great length—the justification and rationale for federal GME funding either through the Medicare program or through other avenues of funding, given the lack of comparable federal funding for other areas of health care education such as undergraduate medical education, for other health care professionals, or for other areas important to society and in shortage. At a time when all federal programs are under close scrutiny and information about the return on the public’s GME investment is scarce, the committee cannot support continuing Medicare GME funding at current levels ($9.7 billion in fiscal year 2012) without a realignment of the program’s incentives. The continuation and appropriate level of Medicare GME funding should be reassessed after the program reforms have in been place for some period of time. Ten years is an appropriate time frame to consider.

________________

1 Personal communication, Barbara K. Chang, Director of Medical and Dental Education, VA Office of Academic Affiliations, July 15, 2013.

Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
×

Three critical considerations led the committee to this conclusion: first, the health delivery system is in the midst of significant change; second, these changes reflect increasing attention to achieving the triple aim (as the IOM has been advocating since the publication of Crossing the Quality Chasm in 2001); and, third, these monies (IME and DGME combined) could be used to leverage changes in physician residency training to produce a workforce more suited to achieving the triple aim.

Build an Infrastructure to Facilitate Strategic Investment

RECOMMENDATION 2: Build a graduate medical education (GME) policy and financing infrastructure.

  1. 2a. Create a GME Policy Council in the Office of the Secretary of the U.S. Department of Health and Human Services. Council members should be appointed by the Secretary and provided with sufficient funding, staff, and technical resources to fulfill the responsibilities listed below:
  • Development and oversight of a strategic plan for Medicare GME financing;
  • Research and policy development regarding the sufficiency, geographic distribution, and specialty configuration of the physician workforce;
  • Development of future federal policies concerning the distribution and use of Medicare GME funds;
  • Convening, coordinating, and promoting collaboration between and among federal agencies and private accreditation and certification organizations; and
  • Provision of annual progress reports to Congress and the Executive Branch on the state of GME.
  1. 2b. Establish a GME Center within the Centers for Medicare & Medicaid Services with the following responsibilities in accordance with and fully responsive to the ongoing guidance of the GME Council:
  • Management of the operational aspects of GME Medicare funding;
  • Management of the GME Transformation Fund (see Recommendation 3), including solicitation and oversight of demonstrations; and
Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
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  • Data collection and detailed reporting to ensure transparency in the distribution and use of Medicare GME funds.

The committee urges Congress and the Secretary of Health and Human Services (HHS) to take immediate steps to establish a two-part governance infrastructure for federal GME financing. Transforming Medicare GME financing will require an overarching policy development and decision-making body and a separate operations center with the capacity to administer GME payment reforms and to solicit and manage demonstrations of new GME payment models. A portion of current GME monies should be allocated to create and sustain these two new entities. No additional public funds should be used. Recommendation 3 describes the creation of a GME Transformation Fund for this purpose.

The committee considered a range of organizational alternatives for establishing this new infrastructure, including an expansion of COGME, new units within HHS and CMS, an independent congressional advisory commission comparable to MedPAC, a directive to MedPAC to assume an expanded role in Medicare GME policy, and other options. Table 5-2 describes the pros and cons of selected options. As noted earlier, several factors were paramount: sufficient and durable resources, regulatory authority over Medicare payment policy, capacity for objective and expert research, and ability to promote collaboration between public and private agencies. Pragmatic concerns were also paramount. The fate of the unfunded National Health Care Workforce Commission was instructive in this regard. Would new appropriations or funding sources be required for the new entities? Programs that are subject to the appropriations cycle face continuing uncertainty about future funding. Could a new entity exercise independence from undue political pressures? How would the new policy body influence the flow of Medicare funds and CMS research and demonstration programs?

Ultimately, the committee decided that the best alternative is to create the governance structures within the Executive Branch agency that has the necessary authorities over the Medicare program and can also draw on Medicare resources. This authority exists only within CMS and HHS. The federal agencies that currently provide advice on GME policy are not situated to effect change. Although the independent MedPAC has deep analytic expertise and knowledge of Medicare, as a congressional body, it cannot direct an Executive Branch agency. COGME, the HRSA advisory committee, lacks authority over Medicare spending and is not located, resourced, or appropriately organized to oversee large-scale demonstrations of alternative GME payment models or to provide independent policy advice. As a result, the committee concluded that COGME will no longer be required when the new governance structure is operational.

Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
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TABLE 5-2 Pros and Cons of Selected Organizational Options for Strengthening the Governance of Medicare Graduate Medical Education (GME) Funding

Option Description Pros Cons
Expand COGME

• Increase COGME appropriations to support a significant expansion in its oversight of GME policy and research.

• COGME is already chartered as a federal advisory committee on GME policy.

• COGME has been producing reports on GME policy since 1998.

• COGME is in the Health Resources and Services Administration (HRSA), an agency with limited relevance to and no regulatory authority over Medicare policy or funds distribution.

• COGME’s congressional charter requires its members to represent stakeholder interests rather than objective policy analysis or technical research.

• Potential political interference from organizations with vested interests in GME policy.

• Would require substantial increase in appropriations and would be subject to annual changes in discretionary appropriations.

Create GME infrastructure in the Department of Health and Human Services (HHS)

• Create a GME Policy Council in the oversee reforms in Medicare GME policies.

• Also create a GME Center in CMS to implement changes in GME funding, oversee pilots and demonstrations, and facilitate scaling up of successful pilots.

• The Secretary of HHS has direct authority over CMS operations. provides high level visibility.

• CMS has direct responsibility for Medicare policy and funds distribution and the capacity to collect GME funding data

• Close intradepartmental, organizational linkage between the Council and CMS center can facilitate GME policy reforms and program oversight.

• Could be funded with existing Medicare GME monies.

• Potential political interference.

• Creates further bureaucracy in a very large federal agency.

Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
×
Expand MedPAC

• Increase appropriations to MedPAC to support a dedicated and ongoing focus on GME policy

• MedPAC has deep knowledge of Medicare and significant technical its members); it has produced numerous reports related to GME payment policy.

• GME is not a primary MedPAC focus as it accounts for less than 2 percent of Medicare expenditures.

• As a congressional agency, MedPAC cannot direct the activities of an executive branch agency.

• Subject to annual changes in discretionary appropriations.

Create an independent GME congressional agency

• Create an independent, congressional GME advisory agency to advise and oversee GME reform efforts

• Political independence

• Congressional agencies cannot have direct authority over CMS GME policies or operations.

• Cannot be funded with Medicare GME funds.

• Would require new funding source and be subject to annual changes in discretionary appropriations.

Create a public/private GME advisory group

• Create a new organization that is jointly sponsored by a public agency and interested private organizations.

• Might balance conflicting public and private interests.

• Would require new funding source

• Would require a private-sector “champion” to facilitate private-sector support.

Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
×

GME Policy Council

Thus, the committee recommends the creation of a GME Policy Council in the Office of the Secretary of HHS. The Council should have robust resources (from the Transformation Fund), skilled staff, high visibility, and protections from conflicts of interest. The Council members should be selected to ensure necessary expertise and vetted to protect against bias and conflict of interest. The committee suggests that Congress direct the Secretary to appoint no more than 12 members to the Council with staggered 6-year terms. With MedPAC’s composition as a guide, this size is appropriate. MedPAC has 17 commissioners and an estimated budget of $11.5 million; its mandate encompasses all Medicare policy. In contrast, Medicare GME payments account for less than 2 percent of the total Medicare budget.

The majority of Policy Council members should be “non-stakeholders” with broad expertise related to physician and health professions education, workforce policy, health services research, health care financing, and consumer and patient perspectives. The VA and the Department of Defense should each assign an ex officio liaison to the Council. The Secretary should also consider providing an ex officio position for a representative of a GME accreditation organization.

The Policy Council should be charged with broad responsibility for the reform of Medicare GME financing and ongoing program oversight and evaluation. This will entail multiple challenging tasks. At the outset, the Council should develop a strategic plan for program oversight and evaluation, implementation of new GME payment rules, and demonstrations of new GME payment models and performance metrics. In the longer term, the Council should be charged with prioritizing the allocation of GME funds across identified domains, such as specialty or subspecialty, geographic location, training site, or types of sponsoring organizations (e.g., teaching hospitals, hospital consortiums, educational institutions, clinics, teaching health centers [THCs], or local or regional health care workforce agencies). The Council should also provide advice on future increases or decreases in the amount of Medicare funding and the number of Medicare-supported training slots.

Public reporting will be integral to the Policy Council’s credibility and accountability. The Council should report annually to the Secretary, Congress, and the public. To help minimize inappropriate political interference, the reports should be issued simultaneously to Congress, the Secretary, and the public. The committee urges Congress to require MedPAC to review and comment on the Council’s reports in a timely manner. Early on, the Council should advise the CMS GME Center (described below) on which data the Center should routinely collect from GME sponsoring organiza-

Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
×

tions to produce the reports. The Council’s reports should be produced in collaboration with the GME Center and, over time, provide information on the outcomes of GME funding, including the results of the GME Center’s demonstration programs. As noted earlier, a number of topics should be explored by the Council and the Center in collaboration. These include, for example, the financial impact of residency training programs on teaching institutions, how GME public funds are used for educational purposes, the extent to which residents are trained in community-based settings, the specialties and demographic characteristics of funded trainees, the practice locations of recent trainees, whether recent trainees accept Medicare and Medicaid patients once they enter practice, and the quality of care delivered by these physicians.

Finally, the Policy Council should also have the capacity and authority to facilitate meaningful dialogue and negotiation among key stakeholders (both public and private). The Council should provide such a forum to encourage compatible, non-duplicative GME accreditation, certification, and regulatory standards and processes as well as regional and national workforce planning and cooperative and coordinated research.

CMS GME Center

The second organizational piece of the recommended infrastructure is a GME Center in CMS to manage the GME Operational and Transformation Funds (see Recommendation 3). This would entail numerous administrative and policy-related responsibilities, including implementation of new GME reporting requirements, technical support to new and existing GME sponsoring organizations, conduct of pilots and demonstrations, and scaling up of successful pilots. The committee viewed the role of the Center as similar to that of the CMS Federal Coordinated Health Care Office (FCHCO) in that it would provide focused attention to a challenging problem and also provide the authority to coordinate across programs. The FCHCO was established to attend to the long-term, difficult-to-resolve concerns about the high costs and poor quality of care provided to the Medicare–Medicaid dual eligible population.2 The Affordable Care Act, which created the Office, gave it the authority to integrate care under both Medicaid and Medicare and to improve coordination across federal agencies, states, and stakeholders.

________________

2 See http://www.cms.gov/About-CMS/Agency-Information/CMSLeadership/Office_FCHCO.html.

Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
×

Establish a Two-Part Medicare GME Fund

RECOMMENDATION 3: Create one Medicare graduate medical education (GME) fund with two subsidiary funds:

  1. 3a. A GME Operational Fund to distribute ongoing support for residency training positions that are currently approved and funded.
  2. 3b. A GME Transformation Fund to finance initiatives to develop and evaluate innovative GME programs, to determine and validate appropriate GME performance measures, to pilot alternative GME payment methods, and to award new Medicare-funded GME training positions in priority disciplines and geographic areas.

The committee recommends allocating Medicare GME funds to two distinct subsidiary funds:

  • A GME Operational Fund to distribute PRA payments to sponsoring organizations for approved Medicare-eligible training slots (see Recommendation 4). As Figure 5-1 illustrates, this fund would finance ongoing residency training activities sponsored by teaching hospitals, GME consortiums, medical schools and universities, freestanding children’s hospitals, accountable care organizations, integrated health care delivery systems, community-based health centers, regional workforce consortiums, and other qualified entities that are accredited by the relevant organization.3
  • A Transformation Fund to finance new training slots (including pediatric residents currently supported by the CHGME program and other priority slots identified by the GME Policy Council), to create and maintain the new infrastructure (GME Policy Council and CMS GME Center), to ensure adequate technical support for new and existing sponsoring organizations, to sponsor development of GME performance metrics, to solicit and fund large-scale GME payment demonstrations and innovation pilots, and to support other priorities identified by the GME Policy Council. The committee expects that the Transformation Fund will provide the most important single dynamic force for change. Box 5-3 describes recommended principles for the fund’s organization and ongoing operations. All GME sponsor organizations should be eligible to

________________

3 See Chapter 4 for information on current program accreditation.

Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
×

image

FIGURE 5-1 Proposed Medicare graduate medical education funding flow.

compete for innovation grants and additional funding for new training positions.

Allocations to the Operational and Transformation Funds

Recommendation 1 specified that total Medicare GME funding should remain at the current level (in an agreed-on base year). The initial allocation to the Operational Fund should provide funding for the then-current number of Medicare-supported GME positions and be further supplemented by

Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
×

BOX 5–3
Catalyzing Innovation in GME: Parameters for the Institute of Medicine (IOM) Committee’s Proposed Transformation Fund

One of the key elements of the IOM committee’s recommendations is the creation of a graduate medical education (GME) Transformation Fund to finance demonstrations of innovative GME payment methods and other interventions to produce a physician workforce in sync with local, regional, and national health needs. All GME sponsor organizations should be eligible to compete for innovation grants. The committee recommends that the fund’s organization and ongoing operations be based on the following principles.

  • Goal of the program: to support physician and other health professional education toward achievement of the “triple aim,” that is, improving the individual experience of care, improving the health of populations, and reducing the per-capita costs of care
  • Four operational principles
  • – Speed and efficiency
  • – Measurability and evaluation
  • – Sustainability
  • – Scalability
  • Identifying priority topics
  • – Investigator- and program-initiated
  • – Focus on national-, regional-, and state-level issues
  • Potential questions for early Requests for Proposals
  • – What are feasible and valid measures of training success?
  • – What new models of financing might better achieve the triple aim?
  • – Voucher systems?
  • – Differential per-resident amounts?
  • – Allowing institutions to bill third parties for certain residents’ services?
  • – What interventions work best to increase the racial and ethnic diversity of the physician workforce? To improve physicians’ cultural competence?
  • – What models of interprofessional training—including physician assistants, advanced practice registered nurses, and other clinicians—better prepare physicians for team-based practice and care delivery in community settings?
  • – Should GME funds be used for advanced training in other disciplines, for example, physician assistants and advanced practice registered nurses?
  • – How might training or training funding expand across the physician education continuum (from undergraduate to GME to continuing medical education) to maximize efficiency?
  • – How might GME training programs be streamlined, for example, reducing training time through earlier specialization or other mechanisms?
  • “Innovation innovation,” that is, attention to scalability in projects to learn what is required to achieve innovation in real-world programs
Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
×

image

FIGURE 5-2 Allocation of Medicare graduate medical education funds to the Operational and Transformation Funds over time (by percentage).

monies from the Transformation Fund in order to fold funding for residents from CHGME and THC programs into the Medicare GME program. These training positions should receive the same PRA as others.

Figure 5-2 illustrates the committee’s recommended allocation of Medicare GME monies to the Operational and Transformation Funds during the transition to the new payment system. It will take time to build the capacity for GME transformation activities and for teaching institutions to adjust to the new funding arrangements described below in Recommendation 4.

As illustrated in Figure 5-2, the committee suggests that the Operational Fund allocation begin at 90 percent of the total Medicare GME fund, decrease to 70 percent over roughly 3 years and remain at that level for several years, and then return to 90 percent by the 10th year. The Transformation Fund should be allocated the balance of the funds—thus starting at 10 percent of the total, moving up to 30 percent as GME pilots and research activities gear up, and then returning to the 10 percent allocation as successful pilots and research establish the basis for broad application of GME improvement initiatives, including additional slots.

Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
×

Modernize Medicare GME Payment Methodology

RECOMMENDATION 4: Modernize Medicare graduate medical education (GME) payment methodology.

  1. 4a. Replace the separate indirect medical education and direct GME funding streams with one payment to organizations sponsoring GME programs, based on a national per-resident amount (PRA) (with a geographic adjustment).
  2. 4b. Set the PRA to equal the total value of the GME Operational Fund divided by the current number of full-time equivalent Medicare-funded training slots.
  3. 4c. Redirect the funding stream so that GME operational funds are distributed directly to GME sponsoring organizations.
  4. 4d. Implement performance-based payments using information from Transformation Fund pilot payments.

The purchasing power of Medicare GME funding provides a significant opportunity for strategic investment in the physician workforce. The separate IME and DGME funding streams, however, present a formidable obstacle to taking advantage of this opportunity. Continuing separate IME and DGME funding streams would hamper efforts to collect and report standardized data, to link payments with program outcomes, to reduce geographic inequities in GME payments, and to minimize administrative burden. Separate funding streams create unnecessary complexity, and there is no current rationale for linking GME funding to Medicare patient volume because the care delivered by GME trainees and graduates extends across the population. Finally, maintaining the links between historic allocations of DGME costs and training slots, approved circa 1996, with future payments only prolongs the current inequities in the distribution of GME monies.

Thus, the committee agreed that Medicare’s current GME payment mechanisms should be replaced with a method that provides a pathway to performance-based GME financing. As noted earlier, the committee is well aware that this recommendation will be disruptive for teaching hospitals and other sponsors of residency programs. This transition should be phased in and carefully planned under the guidance of the GME Policy Council, in consultation with the CMS GME Center and GME stakeholders. The Council should ensure that its blueprint for the transition includes a rigorous strategy for evaluating its impact and making adjustments as needed.

Table 5-3 describes the advantage of these changes and their likely impact on Medicare GME payment methodology.

Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
×

TABLE 5-3 Key Features, Advantages, and Impacts of the Proposed Graduate Medical Education (GME) Payment Methodology

Features of the Proposed GME Payment Methodology

Advantages Over the Current Medicare GME Payment Methodology

Anticipated Impact

National per-resident amount (with inflation and geographic adjustments)
  • Removes inequities due to historic cost data and makeup of patient population (e.g., non-elderly).
  • Includes all physician residents regardless of training site (including, e.g., children’s hospitals, rehabilitation facilities, cancer centers, and psychiatric hospitals).
  • Increase in aggregate GME funding for previously disadvantaged residency programs, such as those in training institutions with fewer Medicare patients, and/or with lower density of residents.
Single payment to sponsoring organizations
  • Simplifies funds distribution.
  • Decrease in aggregate GME funding for some institutions.
Funds are distributed to sponsoring organizations (e.g., accountable care organizations, community-based health centers, consortiums, teaching hospitals, etc.)
  • Provides a structure for accountability by linking funding to authority for GME programs.
  • Reduces barriers to training physicians in ambulatory settings and other community-based sites where medical care is provided.
  • Disrupts funding arrangements for training sites that receive rotating residents but do not sponsor GME programs.
  • Sponsoring organizations will renegotiate affiliations.
  • New types of institutions and groups of institutions will have the opportunity to become sponsoring organizations.
GME Transformation Fund
  • Provides dedicated funding for innovation in GME financing, new approaches to training, and performance measurement.
  • Provides opportunity to fund new training slots where needed.
  • Provides an incentive for innovation and an opportunity for incremental funding via funding of pilot projects.
  • As dollars are reallocated to the Transformation Fund, the “guaranteed” level of GME funding, distributed through the per-resident amount, will decrease gradually.
Transition to performance-based payment • Allows for redistribution of funding to align with achievement of explicit goals.
  • GME sponsors will have strong financial incentives to improve targeted outcomes.
  • GME funding will be leveraged to meet national, regional, and state needs.
  • Greater transparency and accountability.
Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
×

Phased Implementation

As noted above, the committee recommends a 10-year time line for the incremental phase-in of the new payment methodology. Timing will be an important consideration. A noteworthy point is that Medicare’s PPS payment reforms, for example, were implemented over a 4-year period (Mayes and Berenson, 2006) and the transition to RBRVS physician payments was over 5 years (Iglehart, 1990). Planning for and implementation of Recommendations 4a (replacing the IME and DGME separate funding streams with a national PRA), 4b (setting a national PRA), and 4c (redirecting payments to sponsoring organizations) should begin quickly. Implementation of a performance-based payment system is a longer-range goal.

The Policy Council should weigh the pros and cons of aligning a phased implementation of Recommendation 4c (redirecting payments to sponsoring organizations) with turnover in residents (e.g., applying the new model to incoming classes of residents) versus an across-the-board change on a specific date. In either case, sufficient time will be needed to allow for program sponsors and “non-sponsor” teaching sites to renegotiate the terms of their financial arrangements before the allocation of federal GME funding is limited to program sponsors.

The timing of the change in funds flow will have implications for the transition to the national PRA. If the latter coincides with incoming classes, it may be appropriate to pay program sponsors for incoming residents based on the national PRA while retaining the old methodology for already enrolled residents. On the other hand, if the changes are made on a specific date, there must be some mechanism to allow institutions sustaining a significant funding cut to have sufficient advance notice and/or a gradual phase-in of reduced payment. For example, a blended rate, reflecting an increasing proportion of new to old payment methodology, could be employed. During the RBRVS transition, fees for most physician services were a blend of the new system and historical charges (Iglehart, 1990).

The committee recommends that, in the first year, children’s hospitals and THCs should be eligible to participate in the Medicare GME program at the same national PRA. The GME Policy Council should determine whether other types of training sites (e.g., cancer, psychiatric, and long-term care hospitals) should be folded into the program at a later date (with funds from the Transformation Fund). The Council should also provide advice on future increases or decreases in the amount of Medicare GME funding and the number of Medicare-supported training slots.

Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
×

Funds Flow

The committee recommends that fiduciary control over Medicare GME payments be given to program sponsors who, in turn, can be held accountable for producing desired outcomes. Under Recommendation 4c, Medicare GME funds will flow to program sponsors based on their total number of Medicare-funded slots instead of to teaching hospitals based on the time residents spend at their institutions and on Medicare inpatient discharges. This change in funds flow will have little impact on the many teaching hospitals that already sponsor residency programs, but it will have a major impact on teaching hospitals hosting residents sponsored by another institution.

National Per-Resident Amount

Transitioning to a uniform, single PRA payment (geographically adjusted) creates the potential for transparency, accountability, program oversight, and evaluation. It also enables a more equitable distribution of GME funds because, unlike the current system, the PRA will be equivalent across institutions except for the geographic adjustment.

As noted above, the Operational Fund should be the source of PRA payments. The PRA should be calculated with a simple division of the operational funds by the total number of current Medicare-funded training slots (in the agreed-on base year). Under current payment rules, trainees in their initial residency period (i.e., the minimum time required for board eligibility or 5 years, whichever is shorter) are counted as 1 FTE; other residents and fellows are counted (for DGME purposes) as 0.5 FTE. This approach should be maintained, at least initially, under the new system. The PRA should not be adjusted to account for a training site’s Medicare caseload. Residents in freestanding children’s hospitals and THCs should receive the same PRA (with supplemental funds from the Transformation Fund).

The aggregate amount of GME monies distributed via the PRA should be equivalent to the value of the Operational Fund. As Figure 5-2 shows, the committee recommends that, during the initial years of transition, an increasing portion of operational funds be transferred to the Transformation Fund for its developmental and innovation activities. Later in the 10-year period, as successful pilots are implemented on a broader scale and performance payment methods are in place, most of the transformation funds should be absorbed back into the Operational Fund.

Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
×

Eligible Training Slots

The current freeze on funded slots should be eliminated and the Council should establish criteria that define eligibility, both for the establishment of new slots and—eventually—for continued funding of existing slots. These criteria might specify specialties or subspecialties, certain geographic locations, or types of training sites. All sponsoring organizations should be able to compete for funded slots. Ultimately, continued funding should be granted only to training programs that meet specified performance objectives.

Performance-Based Payment

Effective implementation of a value-driven, performance-based financing system will require a coherent, integrated measurement system that is purposeful and efficient (IOM, 2006b).

Few ready-to-use performance metrics could be used for GME payment purposes. The objective of the measures should not be to interfere with accreditation processes. The focus should be on outcomes related to physicians’ preparation for practice in a high-quality, continually improving health care system. Developing and piloting of possible measures should be a high priority for both the GME Policy Council and CMS GME Center. The process should be objective and evidence based. This report identified a variety of outcomes that could be targeted and tracked longitudinally. These outcomes include

  • Competence in care coordination, team-based care, culturally competent care, cost-effective care, and quality improvement;
  • Key clinical competencies (e.g., management of common chronic conditions, ability to perform common office-based procedures) as relevant to certain specialties;
  • Increased numbers of physicians in the specialties and geographic locations where they are needed;
  • Expanded training in community-based settings (e.g., ambulatory care offices and clinics, long-term care facilities, and patient-centered medical homes);
  • Increase in GME graduates choosing to practice in rural clinical settings and underserved urban areas; and
  • Greater racial, ethnic, and economic diversity of physician trainees.

As MedPAC has recommended, the GME Policy Council should consult with a range of organizations as it develops its criteria for evaluating performance, including ACGME, AOA, specialty boards, training pro-

Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
×

grams, health care providers, payers, and patient and consumer groups (MedPAC, 2010).

Financial Impact

Because many important details of the payment reforms are yet to be determined, a detailed impact analysis is not feasible. However, the committee assessed the likely financial impact based on the broad outline of its recommended Medicare payment reforms, that is, funding GME at current levels (adjusted for inflation), one national PRA assuming the current number of funded training slots, and the changing allocation of funds to the operational and transformation funds. These impacts are described below (Appendix F provides additional analyses).

  • The reforms will redistribute funds in several ways, and some of the redistributions may work in opposite directions (see Table F-3 in Appendix F).
  • The hospital-specific impact of the new, uniform PRA will be influenced by: (1) whether the hospital’s current DGME PRA is above or below the national average, and (2) whether the hospital’s Medicare share is above or below the national average.
  • The impact of transitioning away from current IME payments will depend on a complex set of factors, including the hospitals’ Medicare case mix, teaching intensity (ratio of residents to beds) relative to number of residents, and number of Medicare discharges.
  • The largest redistribution relates to the delinking of GME payments from the hospital’s Medicare caseload. Residents in hospitals with a relatively large number of Medicare discharges or high Medicare share will have reduced GME funding relative to hospitals with a smaller number of Medicare discharges or Medicare share. Phasing out the IME adjustment will benefit larger teaching programs that have lower resident-to-bed ratios because the ratios are a factor in IME adjustment calculation. Many of these are safety net hospitals, which tend to have relatively smaller Medicare patient caseloads; on average, these institutions are likely to receive a greater share of GME funding than under current rules.

Medicaid GME

RECOMMENDATION 5: Medicaid graduate medical education (GME) funding should remain at the state’s discretion. However, Congress should mandate the same level of transparency and accountability

Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
×

in Medicaid GME as it will require under the changes in Medicare GME herein proposed.

Information on Medicaid GME programs is scarce, and on Medicaid funds flow, it is especially opaque. The committee was not able to conduct an in-depth assessment of Medicaid GME. Nevertheless, given that it is a multibillion-dollar public investment ($3.9 billion in 2012), the public has the right to expect basic transparency and accountability in Medicaid GME funding. As Chapter 3 describes, there is little evidence that states use Medicaid GME funds to achieve policy objectives (despite concerns about physician shortages) (Henderson, 2013; Spero et al., 2013). In a series of recent interviews with Medicaid officials in 14 states, Spero and colleagues (2013) found that teaching hospitals were free to choose how to use Medicaid GME funds, and few states coordinate GME decisions regarding the number, location, or specialty of new residency positions. The committee suggests that the GME Policy Council consider the extent to which it might advise the CMS Center for Medicaid and CHIP Services4 and the state Medicaid programs on introducing transparency in their GME programs.

SUMMARY

In conclusion, continued Medicare support of GME should be contingent on its demonstrated value and contribution to the nation’s health needs. Under the current terms of GME financing, there is a striking absence of transparency and accountability for producing the types of physicians that today’s health care system requires. The committee recognizes that reforming GME and its governance and financing cannot—on its own—produce a high-value, high-performance health care system. However, appropriate preparation of the physician workforce is an essential component of this transformation. The recommendations presented in this chapter provide a roadmap to this end.

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________________

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Suggested Citation:"5 Recommendations for the Reform of GME Financing and Governance." Institute of Medicine. 2014. Graduate Medical Education That Meets the Nation's Health Needs. Washington, DC: The National Academies Press. doi: 10.17226/18754.
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Today's physician education system produces trained doctors with strong scientific underpinnings in biological and physical sciences as well as supervised practical experience in delivering care. Significant financial public support underlies the graduate-level training of the nation's physicians. Two federal programs--Medicare and Medicaid--distribute billions each year to support teaching hospitals and other training sites that provide graduate medical education.

Graduate Medical Education That Meets the Nation's Health Needs is an independent review of the goals, governance, and financing of the graduate medical education system. This report focuses on the extent to which the current system supports or creates barriers to producing a physician workforce ready to provide high-quality, patient-centered, and affordable health care and identifies opportunities to maximize the leverage of federal funding toward these goals. Graduate Medical Education examines the residency pipeline, geographic distribution of generalist and specialist clinicians, types of training sites, and roles of teaching and academic health centers.

The recommendations of Graduate Medical Education will contribute to the production of a better prepared physician workforce, innovative graduate medical education programs, transparency and accountability in programs, and stronger planning and oversight of the use of public funds to support training. Teaching hospitals, funders, policy makers, institutions, and health care organizations will use this report as a resource to assess and improve the graduate medical education system in the United States.

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