January 22, 2013
The latest flu outbreak offers a good lesson for policymakers as they address the federal debt limit, the re-imposed sequester, and the expiration of the continuing resolution that is funding the government until March 27. Research activities at medical schools and teaching hospitals contribute to the development of flu vaccines every year, an important, successful measure that saves lives. However, this year, despite access to inoculations, 47 states have reported widespread outbreaks during “the worst flu season we’ve had since 2009.” Emergency rooms are packed with patients because, like most preventive measures, flu vaccines are not 100 percent effective. Hospitals have responded by doing what they do best—addressing health emergencies and taking care of patients, no matter how sick or how vulnerable.
Federal support is critical for the missions of medical schools and teaching hospitals. That’s why all the recent talk about Congress’ next steps in the fiscal drama is so concerning. While the recent legislation contained a one-year patch for the “doc fix,” half of the cost to avert the nearly 27 percent cut in Medicare payments to physicians was funded through cuts to hospitals. That means the government will reduce payments to the teaching hospitals where our 100,000 physicians practice, potentially hurting our ability to provide care. And, most important, the legislation fails to address the sequester (with its potentially devastating reductions to medical research supported by the National Institutes of Health and other federal agencies).
In the lengthy list of deficit reduction proposals floating around Capitol Hill, many have targeted Medicare graduate medical education (GME) funding as a source for savings—proposals ranging from $9.5 billion to upwards of $65 billion in GME cuts. Additionally, the House has voted once already to reduce drastically payments to hospital outpatient departments (HOPDs) for evaluation and management (E/M) services. Most of both HOPD and GME cuts will fall on teaching hospitals that train most of the next generation of health professionals and care for the majority of patients with complex and chronic diseases in our communities.
Medicare pays its share for GME costs through direct medical education payments that partially cover Medicare’s share of physician training expenses at teaching hospitals, and indirect medical education payments that reimburse teaching hospitals for providing unique (and costly) clinical services unavailable elsewhere in the community.
Proposals like Simpson-Bowles cut Medicare GME support by 60 percent, which will result in fewer doctors and reduced access to services provided almost exclusively by teaching hospitals, such as trauma centers, poison control centers, and geriatrics clinics. All of this will happen as Americans are living longer with chronic diseases and 10,000 baby boomers continue turning 65 daily, only increasing the demand for physicians of all specialties. Any one of us, or our families, could be one car accident away from needing a trauma center.
Currently, Medicare pays different rates for services provided in HOPDs and those offered in a physician’s office. Medicare established these rules recognizing this distinction. HOPD E/M payments cover the increased costs associated with integrated inpatient and outpatient services, as well as the additional services provided at teaching hospitals. These services include translators, social workers, nutrition counseling, and transportation that are all part of a patient-centered continuum of care. The costs are significant, particularly at teaching hospitals, which also incur higher expenses associated with caring for patients who are more likely to be sicker, poorer, and disabled. Notably, training in the outpatient setting is a critical part of a residency program.
If Congress reduces Medicare E/M payments to HOPDs by $1 billion a year, which some have proposed, this cut will fall disproportionately on teaching hospitals. As AAMC President and CEO Darrell G. Kirch, M.D., wrote in a December 12 letter to Congress, “[HOPD] cuts to teaching hospitals will exceed $738 million annually, including nearly $454 million from major teaching hospitals, which account for only 6 percent of all U.S. hospitals.” MedPAC agreed.
Our nation’s teaching hospitals are the safety net providers to the uninsured and underinsured, maintain and offer critical standby services, train more than two-thirds of all physicians, and perform life-saving research and medical innovation. Yet a disproportionate percentage of the proposed cuts to GME and HOPDs would hit the fewer than 300 of these hospitals that are picking up the greatest portion of Medicare providers’ tabs. At a time of rising demand when it is imperative that our nation provide the physicians and services necessary to ensure access to health care, these cuts are likely to result in vital services ending and clinics closing. Clearly, such cuts will not just be to providers, but will have a tremendous impact on patients.
Looking for information on policy issues important to medical schools and teaching hospitals? Second Opinion Podcasts, narrated by the AAMC's Chief Public Policy Officer Atul Grover, M.D., Ph.D., are now available, with the first three installments examining Medicare funding for teaching hospitals, the danger of cuts to this funding, and the importance of preserving hospital outpatient department payments.
For past issues of Second Opinion, visit www.aamc.org/advocacy/